Esco Technologies Inc 10-Q for FY2021 Q2

Esco Technologies Inc (ESE)

10-Q 2021-05-07 For: 2021-03-31

Added on April 04, 2026

About this 10-Q

Esco Technologies Inc filed this 10-Q on May 7, 2021, covering the quarter ended March 31, 2021 (FY2021 Q2).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $166.64M; down 7.7% from $180.49M a year earlier
Net income: $16.31M; down 8.5% from net income of $17.82M a year earlier
Diluted EPS: $0.62; down 8.8% from $0.68 a year earlier

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MISSOURI	43-1554045
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

9900A CLAYTON ROAD
ST. LOUIS, MISSOURI	63124-1186
(Address of principal executive offices)	(Zip Code)

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
Common Stock, par value $0.01 per share	ESE	New York Stock Exchange


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

Class		Shares outstanding at April 30, 2021
Common stock, $.01 par value per share		26,040,884


	Three Months Ended
	March 31,
	2021		2020

Net sales	$	166,644	180,492
Costs and expenses:
Cost of sales		103,113	113,242
Selling, general and administrative expenses		38,746	39,982
Amortization of intangible assets		4,917	5,220
Interest expense, net		432	1,320
Other (income) expenses, net		(1,903)	703
Total costs and expenses		145,305	160,467

Earnings before income taxes		21,339	20,025
Income tax expense		5,025	2,203
Net earnings	$	16,314	17,822

Earnings per share:
Basic -
Net earnings		0.63	0.69

Diluted -
Net earnings	$	0.62	0.68


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______


	Six Months Ended
	March 31,
	2021		2020

Net sales	$	329,593		352,220
Costs and expenses:
Cost of sales		201,890		219,969
Selling, general and administrative expenses		79,746		82,087
Amortization of intangible assets		9,865		11,030
Interest expense, net		973		3,741
Other (income) expenses, net		(1,880)		998
Total costs and expenses		290,594		317,825

Earnings before income taxes		38,999		34,395
Income tax expense		8,999		5,809
Earnings from continuing operations		30,000		28,586
Loss from discontinued operations, net of tax expense of $269		—		(601)
Gain on sale of discontinued operations, net of tax expense of $23,734		—		76,614
Earnings from discontinued operations		—		76,013

Net earnings	$	30,000		104,599

Earnings per share:
Basic — Continuing operations	$	1.15		1.10
— Discontinued operations		—		2.93
— Net earnings	$	1.15		4.03

Diluted — Continuing operations	$	1.15		1.09
— Discontinued operations		—		2.91
— Net earnings	$	1.15		4.00


	March 31,		September 30,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	45,653		52,560
Accounts receivable, net		124,580		144,082
Contract assets		95,002		96,746
Inventories, net		145,342		136,189
Other current assets		17,523		17,053
Total current assets		428,100		446,630
Property, plant and equipment, net of accumulated depreciation of $140,784 and $130,534, respectively		143,401		139,870
Intangible assets, net of accumulated amortization of $138,928 and $129,063, respectively		345,261		346,632
Goodwill		411,661		408,063
Operating lease assets		18,929		21,390
Other assets		10,050		10,938
Total assets	$	1,357,402		1,373,523

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and short-term borrowings	$	20,000		22,368
Accounts payable		47,091		50,525
Contract liabilities		106,622		100,551
Accrued salaries		28,740		32,149
Accrued other expenses		44,130		50,436
Total current liabilities		246,583		256,029
Deferred tax liabilities		59,949		60,938
Non-current operating lease liabilities		14,501		16,785
Other liabilities		39,362		38,176
Long-term debt		2,000		40,000
Total liabilities		362,395		411,928
Shareholders’ equity:
Preferred stock, par value $.01 per share, authorized 10,000,000 shares		—		—
Common stock, par value $.01 per share, authorized 50,000,000 shares, issued 30,645,625 and 30,645,625 shares, respectively		306		306
Additional paid-in capital		295,796		293,682
Retained earnings		804,231		778,398
Accumulated other comprehensive income (loss), net of tax		1,808		(3,657)
		1,102,141		1,068,729
Less treasury stock, at cost: 4,607,911 and 4,607,911 common shares, respectively		(107,134)		(107,134)
Total shareholders’ equity		995,007		961,595
Total liabilities and shareholders’ equity	$	1,357,402		1,373,523


	Three Months		Six Months
	Ended March 31,		Ended March 31,
	2021	2020	2021	2020
Weighted Average Shares Outstanding — Basic	26,038	25,988	26,038	25,985
Dilutive Options and Restricted Shares	163	100	154	141
Adjusted Shares — Diluted	26,201	26,088	26,192	26,126


	March 31,		September 30,
(In thousands)	2021		2020
Finished goods	$	29,363	28,471
Work in process		37,905	30,183
Raw materials		78,074	77,535
Total inventories	$	145,342	136,189


	March 31,		September 30,
(Dollars in thousands)	2021		2020
Goodwill	$	411,661	408,063

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,136	2,092
Less: accumulated amortization		915	858
Net	$	1,221	1,234

Capitalized software
Gross carrying amount	$	88,862	84,888
Less: accumulated amortization		60,563	57,302
Net	$	28,299	27,586

Customer relationships
Gross carrying amount	$	229,322	227,178
Less: accumulated amortization		73,864	67,643
Net	$	155,458	159,535

Other
Gross carrying amount	$	5,356	5,156
Less: accumulated amortization		3,586	3,260
Net	$	1,770	1,896
Intangible assets with indefinite lives:
Trade names	$	158,513	156,381


				Aerospace
(Dollars in millions)	USG		Test	& Defense	Total
Balance as of September 30, 2020		271.9	34.1	102.1	408.1
Acquisition activity		—	—	2.5	2.5
Foreign currency translation		1.1	—	—	1.1
Balance as of March 31, 2021	$	273.0	34.1	104.6	411.7


	Three Months Ended March 31,		Six Months Ended March 31,
	2021	2020	2021	2020

Common stock
Beginning balance	306	306	306	306
Stock plans	—	—	—	—
Ending balance	306	306	306	306

Additional paid-in-capital
Beginning balance	294,735	293,056	293,682	292,408
Stock plans	1,061	1,731	2,114	2,379
Ending balance	295,796	294,787	295,796	294,787

Retained earnings
Beginning balance	790,000	769,439	778,398	684,741
Net earnings common stockholders	16,314	17,822	30,000	104,599
Dividends paid	(2,083)	(2,077)	(4,167)	(4,156)
Ending balance	804,231	785,184	804,231	785,184

Accumulated other comprehensive income (loss)
Beginning balance	1,692	(40,051)	(3,657)	(43,974)
Foreign currency translation	116	(6,885)	5,465	(2,962)
Ending balance	1,808	(46,936)	1,808	(46,936)

Treasury stock
Beginning balance	(107,134)	(107,259)	(107,134)	(107,259)
Issued under stock plans	—	125	—	125
Ending balance	(107,134)	(107,134)	(107,134)	(107,134)

Total equity	995,007	926,207	995,007	926,207


(In thousands)	Level 1		Level 2		Level 3	Total
Assets (Liabilities):
Forward contracts	$	—	141	$	—	141


	Three Months			Six Months
	Ended March 31,			Ended March 31,
(In thousands)	2021		2020	2021	2020
NET SALES
Aerospace & Defense	$	83,278	95,124	150,169	172,635
USG		39,555	43,768	94,095	96,602
Test		43,811	41,600	85,329	82,983
Consolidated totals	$	166,644	180,492	329,593	352,220

EBIT
Aerospace & Defense	$	18,196	21,736	27,576	34,249
USG		6,725	4,866	19,456	14,153
Test		5,688	5,651	11,030	10,307
Corporate (loss)		(8,838)	(10,908)	(18,090)	(20,573)
Consolidated EBIT		21,771	21,345	39,972	38,136
Less: Interest expense		(432)	(1,320)	(973)	(3,741)
Earnings before income taxes	$	21,339	20,025	38,999	34,395


Three months ended March 31, 2021	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	33,973	$	38,549	$	39,305	$	111,827
U.S. Government		49,305		1,006		4,506		54,817
Total revenues	$	83,278	$	39,555	$	43,811	$	166,644

Geographic location:
United States	$	73,037	$	27,445	$	22,965	$	123,447
International		10,241		12,110		20,846		43,197
Total revenues	$	83,278	$	39,555	$	43,811	$	166,644

Revenue recognition method:
Point in time	$	37,127	$	27,563	$	9,248	$	73,938
Over time		46,151		11,992		34,563		92,706
Total revenues	$	83,278	$	39,555	$	43,811	$	166,644


Six months ended March 31, 2021	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	62,114	$	92,414	$	76,027	$	230,555
U.S. Government		88,055		1,681		9,302		99,038
Total revenues	$	150,169	$	94,095	$	85,329	$	329,593

Geographic location:
United States	$	130,849	$	64,490	$	46,231	$	241,570
International		19,320		29,605		39,098		88,023
Total revenues	$	150,169	$	94,095	$	85,329	$	329,593

Revenue recognition method:
Point in time	$	64,000	$	69,931	$	18,116	$	152,047
Over time		86,169		24,164		67,213		177,546
Total revenues	$	150,169	$	94,095	$	85,329	$	329,593


Three months ended March 31, 2020	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	51,550	$	43,736	$	33,952	$	129,238
U.S. Government		43,574		32		7,648		51,254
Total revenues	$	95,124	$	43,768	$	41,600	$	180,492

Geographic location:
United States	$	81,458	$	28,706	$	25,121	$	135,285
International		13,666		15,062		16,479		45,207
Total revenues	$	95,124	$	43,768	$	41,600	$	180,492

Revenue recognition method:
Point in time	$	46,610	$	32,209	$	8,009	$	86,828
Over time		48,514		11,559		33,591		93,664
Total revenues	$	95,124	$	43,768	$	41,600	$	180,492


Six months ended March 31, 2020	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	93,417	$	95,971	$	69,194	$	258,582
U.S. Government		79,218		631		13,789		93,638
Total revenues	$	172,635	$	96,602	$	82,983	$	352,220

Geographic location:
United States	$	146,164	$	63,665	$	49,959	$	259,788
International		26,471		32,937		33,024		92,432
Total revenues	$	172,635	$	96,602	$	82,983	$	352,220

Revenue recognition method:
Point in time	$	82,897	$	72,524	$	17,019	$	172,440
Over time		89,738		24,078		65,964		179,780
Total revenues	$	172,635	$	96,602	$	82,983	$	352,220


	Six Months		Six Months
	Ended		Ended
	March 31,		March 31,
(Dollars in thousands)	2021		2020
Finance lease cost
Amortization of right-of-use assets	$	985	$	1,245
Interest on lease liabilities		623		335
Operating lease cost		2,877		2,750
Total lease costs	$	4,485	$	4,330


Weighted-average remaining lease term	March 31, 2021		March 31, 2020
Operating leases	5.76 years		6.37 years
Finance leases	12.2 years		12.7 years
Weighted-average discount rate
Operating leases	3.11	%	3.08	%
Finance leases	4.31	%	4.28	%


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2021 (excluding the six months ended March 31, 2021)	$	2,732		1,473
2022		4,907		3,015
2023		3,984		3,098
2024		2,438		3,181
2025 and thereafter		7,173		28,285
Total minimum lease payments		21,234		39,052
Less: amounts representing interest		1,894		9,625
Present value of net minimum lease payments	$	19,340		29,427
Less: current portion of lease obligations		4,839		2,001
Non-current portion of lease obligations		14,501		27,426

ROU assets	$	18,929		25,182

Exhibit Number	Description	Document Location

3.1(a)	Restated Articles of Incorporation	Exhibit 3(a) to the Company’s Form 10-K for the fiscal year ended September 30, 1999

3.1(b)	Amended Certificate of Designation, Preferences and Rights of Series A Participating Cumulative Preferred Stock of the Registrant	Exhibit 4(e) to the Company’s Form 10-Q for the fiscal quarter ended March 31, 2000

3.1(c)	Articles of Merger effective July 10, 2000	Exhibit 3(c) to the Company’s Form 10-Q for the fiscal quarter ended June 30, 2000

3.1(d)	Amendment of Articles of Incorporation effective February 5, 2018	Exhibit 3.1 to the Company’s Form 8-K filed February 7, 2018

3.2	Bylaws	Exhibit 3.1 to the Company’s Form 8-K filed November 19, 2019

31.1	Certification of Chief Executive Officer	Filed herewith

31.2	Certification of Chief Financial Officer	Filed herewith

32	Certification of Chief Executive Officer and Chief Financial Officer	Filed herewith

101.INS	XBRL Instance Document*	Submitted herewith
101.SCH	XBRL Schema Document*	Submitted herewith
101.CAL	XBRL Calculation Linkbase Document*	Submitted herewith
101.DEF	XBRL Definition Linkbase Document*	Submitted herewith
101.LAB	XBRL Label Linkbase Document*	Submitted herewith
101.PRE	XBRL Presentation Linkbase Document*	Submitted herewith

104	Cover Page Interactive Data File (contained in Exhibit 101)	Submitted herewith

	ESCO TECHNOLOGIES INC.

	/s/ Christopher L. Tucker
	Christopher L. Tucker
	Senior Vice President and Chief Financial Officer
	(As duly authorized officer and principal accounting and
	financial officer of the registrant)

Dated: May 7, 2021


Date: May 7, 2021

	/s/ Victor L. Richey
	Victor L. Richey
	Chairman, Chief Executive Officer and President