ESCO Announces First Quarter 2012 Results
ST. LOUIS, Feb. 7, 2012 /PRNewswire/ -- ESCO Technologies Inc. (NYSE: ESE) today reported its operating results for the first quarter ended December 31, 2011.
Chairman's Commentary
Vic Richey, Chairman and Chief Executive Officer, commented, "First quarter sales, EBIT and EPS all exceeded our original projections anticipated at the start of the year. The most satisfying aspect of the quarter was the significant volume of entered orders across all three segments and the resulting $51 million increase in backlog. The $33 million SoCalGas order, the additional PG&E gas business, and the better-than-expected COOP orders certainly were highlights of the quarter.
"While it was disappointing that we used cash in the quarter, it was primarily timing-related, as a few large customer payments expected in late December weren't received until the first week of January. We are on track with our cash flow projections year-to-date.
"With the PG&E gas, New York City water, and CFE (Mexico) projects winding down throughout 2011, coupled with the incremental SG&A investments we are making, we fully expected first quarter sales and EPS to be lower than the prior year. In spite of the wind-down from these three large contracts, we nearly overcame this headwind with strong sales in Filtration, Test and at Doble.
"Filtration had an exceptional quarter and is nearing a 20 percent EBIT margin, and Doble continues to outperform our expectations coming in with an EBIT margin of nearly 24 percent, in spite of the additional investments in SG&A. I continue to be excited about our prospects for 2012 and remain convinced that our three-segment strategy is the appropriate course of action, and I believe that our first quarter results validate this approach."
First Quarter 2012 Highlights
-- Entered orders were $204 million, resulting in a book-to-bill ratio of
1.33x and a firm order backlog of $394 million (increased $51 million)
at December 31, 2011;
-- Book-to-bill ratios were: Filtration 1.12x, Test 1.16x, and USG 1.56x;
-- Utility Solutions Group (USG) orders were $110 million, and included:
$33 million from Southern California Gas Co. (SoCalGas) bringing
project-to-date orders to $53 million; $6 million from PG&E gas for
additional AMI hardware; and $32 million of additional COOP orders;
-- Filtration net sales were $43 million, an increase of $7 million, or 21
percent over Q1 2011 net sales of $36 million;
-- Test net sales were $39 million, an increase of $7 million, or 23
percent over Q1 2011 net sales of $32 million;
-- USG net sales were $70 million, a decrease of $22 million, or 24
percent, compared to Q1 2011 net sales of $92 million;
-- Within USG, Aclara's net sales decreased $23 million compared to Q1 2011
due to lower volumes at PG&E gas, New York City water, and CFE in
Mexico, partially offset by an increase of $7 million, or 42 percent, in
COOP sales;
-- Also within USG, Doble Q1 2012 sales increased five percent from Q1 2011
to $28 million;
-- Consolidated net sales were $153 million, a decrease of $7 million, or 4
percent, compared to $160 million in Q1 2011 primarily due to Aclara as
noted above;
-- SG&A increased $5 million in Q1 2012 compared to Q1 2011 due to the Test
business acquisition (EMV-Germany) included in Q1 2012; increased new
product development (NPD) costs in Filtration for additional Space
product applications and additional content on Airbus platforms;
additional NPD costs incurred at Aclara for new Smart Grid applications
and advanced networking capabilities; and additional sales, marketing
and engineering costs related to new products and new global market
expansion initiatives; and
-- Q1 2012 EPS was $0.19 per share, compared to $0.40 in Q1 2011.
Business Outlook
Statements contained in the preceding and following paragraphs are based on current expectations. Statements that are not strictly historical are considered forward-looking, and actual results may differ materially.
Dividend Payment
The next quarterly cash dividend of $0.08 per share will be paid on April 20 to stockholders of record on April 6.
Fiscal Years 2012 / 2013
Consistent with the Outlook communicated in the November 8, 2011 earnings release, Management's expectations for fiscal years 2012 and 2013 include the following assumptions:
-- Sales are expected to increase in the low- to mid-single digits in 2012
and are expected to increase more than 15 percent in 2013 over 2012.
-- The 2012 sales growth is muted by a $40 million sales decrease at PG&E
and New York City since the projects are nearly completed, partially
offset by initial sales at SoCalGas, reflecting the initial deployment
of network infrastructure and software.
-- The significant sales growth expected in 2013 will be driven by Aclara
(SoCalGas metering endpoint ramp-up and higher international sales) and
Doble (new and enhanced products and solutions, and incremental
international sales).
-- EPS is expected to grow approximately 5 to 10 percent in fiscal 2012,
and is expected to increase more than 25 percent in 2013 over 2012.
-- The 2012 EPS growth is impacted by lower PG&E and New York City sales
and the initial deployment of lower-margin network infrastructure and
software related to SoCalGas.
-- The anticipated 2013 EPS growth reflects the significant sales and
profit contributions of Aclara and Doble, as well as reasonable profit
growth expected from Filtration and Test.
-- The 2012 effective tax rate is expected to be between 33 and 35 percent.
-- On a quarterly basis, Management expects 2012 revenues and EPS to be
more second half weighted than the quarterly profile reported in fiscal
2011.
Chairman's Commentary - 2012 / 2013
Mr. Richey concluded, "After reviewing our current operating plans for the remainder of the year, I remain confident about our 2012 sales and EPS outlook. Additionally, we remain fully committed to our previous expectations of significant sales and EPS growth for 2013 and beyond. I am enthusiastic about our future as I see meaningful growth opportunities across all three segments.
"My perspective remains the same as in November: We expect our near-term growth projections to be led by the largest AMI gas project in North America, supplemented by our international opportunities at Aclara and Doble, and complemented by our expected domestic growth across all three operating segments.
"Our commitment remains the same - to achieve our long-term goal of increasing shareholder value."
Conference Call
The Company will host a conference call today, February 7, at 4 p.m. Central Time, to discuss the Company's first quarter fiscal 2012 operating results. A live audio webcast will be available on the Company's website at www.escotechnologies.com. Please access the website at least 15 minutes prior to the call to register, download and install any necessary audio software. A replay of the conference call will be available for seven days on the Company's website noted above or by phone (dial 1-888-203-1112 and enter the pass code 6392450).
Forward-Looking Statements
Statements in this press release regarding the amount and timing of the Company's expected 2012 and beyond revenues, EPS, sales, orders, cash flow, investments, the size and success of the SoCalGas AMI project, the size, number and timing of growth opportunities in the future, success in capturing international and domestic opportunities, development and success of new products and technologies, the long-term success of the Company, and any other statements which are not strictly historical are "forward-looking" statements within the meaning of the safe harbor provisions of the federal securities laws. Investors are cautioned that such statements are only predictions and speak only as of the date of this release, and the Company undertakes no duty to update. The Company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment including, but not limited to: the risk factors described in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2011; changes in requirements of SoCalGas; SoCalGas' ability to successfully negotiate appropriate terms and conditions with other subcontractors and project participants; the performance of SoCalGas employees, vendors and other participants in connection with project responsibilities; the Company's successful performance of the SoCalGas agreement; financial constraints impacting SoCalGas; the receipt of necessary regulatory approvals pertaining to the SoCalGas project; the impact that recent flooding in Thailand may have on the availability of components utilized by Aclara; the success of the Company's competitors; changes in federal or state energy laws; the Company's successful performance of its AMI contracts; site readiness issues with Test segment customers; weakening of economic conditions in served markets; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; unforeseen charges impacting corporate operating expenses; the performance of the Company's international operations; material changes in the costs and availability of certain raw materials including steel and copper; worldwide availability of electronic components; termination for convenience of customer contracts; timing and magnitude of future contract awards; containment of engineering and development costs; performance issues with key customers, suppliers and subcontractors; labor disputes; changes in laws and regulations, including but not limited to changes in accounting standards and taxation requirements; costs relating to environmental matters; uncertainty of disputes in litigation or arbitration; and the Company's successful execution of internal operating plans.
Non-GAAP Financial Measures
The financial measures EBIT and EBIT margin are presented in this press release. The Company defines EBIT as earnings before interest and taxes from continuing operations, and EBIT margin as a percent of net sales. EBIT and EBIT margin are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that EBIT and EBIT margin are useful in assessing the operational profitability of the Company's business segments because they exclude interest and taxes, which are generally accounted for across the entire Company on a consolidated basis. EBIT is also one of the measures used by management in determining resource allocations within the Company as well as incentive compensation. The Company believes that the presentation of EBIT and EBIT margin provides important supplemental to investors by facilitating comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. The use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.
ESCO, headquartered in St. Louis, is a proven supplier of special purpose utility solutions for electric, gas, and water utilities, including hardware and software to support advanced metering applications and fully automated intelligent instrumentation. In addition, the Company provides engineered filtration products to the aviation, space, and process markets worldwide and is the industry leader in RF shielding and EMC test products. Further information regarding ESCO and its subsidiaries is available on the Company's website at www.escotechnologies.com.
ESCO TECHNOLOGIES INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Operations
(Unaudited)
(Dollars in thousands, except per
share amounts)
Three Months Three Months
Ended Ended
December 31,
December 31, 2011 2010
----------------- -------------
Net Sales $152,925 159,936
Cost and
Expenses:
Cost of
sales 92,721 97,483
Selling,
general
and
administrative
expenses 48,690 43,645
Amortization
of
intangible
assets 3,153 2,853
Interest
expense 491 774
Other
(income)
expenses,
net (472) (618)
---- ----
Total
costs
and
expenses 144,583 144,137
------- -------
Earnings
before
income
taxes 8,342 15,799
Income
taxes 3,135 4,986
----- -----
Net
earnings $5,207 10,813
====== ======
Earnings
per
share:
Basic
Net
earnings $0.20 0.41
===== ====
Diluted
Net
earnings $0.19 0.40
===== ====
Average
common
shares
O/S:
Basic 26,671 26,540
====== ======
Diluted 26,857 26,816
====== ======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
Three Months Ended
December 31,
------------
2011 2010
---- ----
Net Sales
----------
Utility Solutions Group $70,349 92,189
Test 39,354 32,004
Filtration 43,222 35,743
------ ------
Totals $152,925 159,936
======== =======
EBIT
----
Utility Solutions Group $4,966 15,355
Test 1,947 1,909
Filtration 8,236 5,475
Corporate (6,316) (1) (6,166) (1)
------ ------
Consolidated EBIT 8,833 16,573
Less: Interest expense (491) (774)
---- ----
Earnings before income taxes $8,342 15,799
====== ======
Note: Depreciation and amortization expense was $6.0 million and $5.5
million for the quarters
ended December 31, 2011 and 2010, respectively.
Includes $1.2 million of amortization of acquired
(1) intangible assets.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
December
31, September 30,
2011 2011
---- ----
Assets
------
Cash and cash equivalents $28,626 34,158
Accounts receivable, net 127,077 144,083
Costs and estimated earnings on
long-term contracts 14,545 12,974
Inventories 107,303 96,986
Current portion of deferred tax
assets 20,558 20,630
Other current assets 20,047 19,523
------ ------
Total current assets 318,156 328,354
Property, plant and equipment, net 73,079 73,067
Intangible assets, net 231,291 231,848
Goodwill 361,436 361,864
Other assets 15,965 16,704
------ ------
$999,927 1,011,837
======== =========
Liabilities and Shareholders' Equity
------------------------------------
Short-term borrowings and current
maturities
of long-term debt $129,646 50,000
Accounts payable 44,680 54,037
Current portion of deferred revenue 19,891 24,499
Other current liabilities 70,712 77,301
------ ------
Total current liabilities 264,929 205,837
Deferred tax liabilities 86,361 85,313
Other liabilities 46,051 44,977
Long-term debt - 75,000
Shareholders' equity 602,586 600,710
------- -------
$999,927 1,011,837
======== =========
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months
Ended
December 31, 2011
-----------------
Cash flows from operating activities:
Net earnings $5,207
Adjustments to reconcile net earnings
to net cash used by operating activities:
Depreciation and amortization 6,014
Stock compensation expense 1,139
Changes in current assets and liabilities (11,240)
Effect of deferred taxes 1,120
Change in deferred revenue and costs, net (2,359)
Pension contributions (610)
Other 211
---
Net cash used by operating activities (518)
Cash flows from investing activities:
Capital expenditures (3,087)
Additions to capitalized software (2,946)
------
Net cash used by investing activities (6,033)
Cash flows from financing activities:
Proceeds from debt revolver 21,646
Principal payments on debt revolver (17,000)
Dividends paid (2,134)
Other 63
Net cash provided by financing activities 2,575
-----
Effect of exchange rate changes on cash and
cash equivalents (1,556)
------
Net decrease in cash and cash equivalents (5,532)
Cash and cash equivalents, beginning of
period 34,158
------
Cash and cash equivalents, end of period $28,626
=======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog
And
Entered
Orders
-Q1
FY Utility
2012 Solutions Test Filtration Total
-------- ---------- ---- ---------- -----
Beginning
Backlog
-
10/1/11 $125,352 86,856 130,865 343,073
Entered
Orders 109,697 45,615 48,432 203,744
Sales (70,349) (39,354) (43,222) (152,925)
------- ------- ------- --------
Ending
Backlog
-
12/31/11 $164,700 93,117 136,075 393,892
======== ====== ======= =======
SOURCE ESCO Technologies Inc.