Esco Technologies Inc 10-Q for FY2024 Q2

Esco Technologies Inc (ESE)

10-Q 2024-05-10 For: 2024-03-31

Added on April 04, 2026

About this 10-Q

Esco Technologies Inc filed this 10-Q on May 10, 2024, covering the quarter ended March 31, 2024 (FY2024 Q2).

Headline figures

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $249.13M; up 8.7% from $229.14M a year earlier
Net income: $23.22M; up 29.9% from net income of $17.88M a year earlier
Diluted EPS: $0.90; up 30.4% from $0.69 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

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)



Title of each class	Trading Symbol(s)	Name of each exchange 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, 2024
Common stock, $.01 par value per share		25,751,055


	Three Months Ended
	March 31,
	2024		2023
Net sales	$	249,129	229,136
Costs and expenses:
Cost of sales		152,347	142,296
Selling, general and administrative expenses		55,097	53,877
Amortization of intangible assets		8,572	7,030
Interest expense, net		3,226	2,269
Other expenses, net		666	314
Total costs and expenses		219,908	205,786

Earnings before income taxes		29,221	23,350
Income tax expense		6,002	5,472
Net earnings	$	23,219	17,878

Earnings per share:
Basic - Net earnings		0.90	0.69

Diluted - Net earnings	$	0.90	0.69



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024


☐	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,
	2024		2023

Net sales	$	467,443		434,637
Costs and expenses:
Cost of sales		286,498		268,679
Selling, general and administrative expenses		109,065		105,179
Amortization of intangible assets		16,440		13,891
Interest expense, net		5,893		3,927
Other expenses, net		872		712
Total costs and expenses		418,768		392,388

Earnings before income taxes		48,675		42,249
Income tax expense		10,287		9,644
Net earnings	$	38,388		32,605

Earnings per share:
Basic — Net earnings	$	1.49		1.26

Diluted — Net earnings	$	1.49		1.26


	March 31,		September 30,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	59,436		41,866
Accounts receivable, net of allowance for credit losses of $2,260 and $2,264, respectively		187,535		198,557
Contract assets		139,303		138,633
Inventories		211,338		184,067
Other current assets		24,310		17,972
Total current assets		621,922		581,095
Property, plant and equipment, net of accumulated depreciation of $185,799 and $174,698, respectively		161,811		155,484
Intangible assets, net of accumulated amortization of $221,321 and $204,881, respectively		414,872		392,124
Goodwill		535,661		503,177
Operating lease assets		38,322		39,839
Other assets		11,603		11,495
Total assets	$	1,784,191		1,683,214

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	20,000		20,000
Accounts payable		81,961		86,973
Contract liabilities		107,357		112,277
Accrued salaries		34,637		43,814
Accrued other expenses		44,975		51,587
Total current liabilities		288,930		314,651
Deferred tax liabilities		80,648		75,531
Non-current operating lease liabilities		35,444		36,554
Other liabilities		41,759		43,336
Long-term debt		171,000		82,000
Total liabilities		617,781		552,072
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 30,807,826 and 30,781,699 shares, respectively		308		308
Additional paid-in capital		308,065		304,850
Retained earnings		1,023,578		989,315
Accumulated other comprehensive loss, net of tax		(19,300)		(23,969)
		1,312,651		1,270,504
Less treasury stock, at cost: 5,048,645 and 4,995,414 common shares, respectively		(146,241)		(139,362)
Total shareholders’ equity		1,166,410		1,131,142
Total liabilities and shareholders’ equity	$	1,784,191		1,683,214


	Three Months		Six Months
	Ended March 31,		Ended March 31,
	2024	2023	2024	2023
Weighted Average Shares Outstanding — Basic	25,792	25,800	25,794	25,831
Dilutive Restricted Shares	55	95	52	88
Adjusted Shares — Diluted	25,847	25,895	25,846	25,919


	March 31,		September 30,
(In thousands)	2024		2023
Finished goods	$	38,857	34,577
Work in process		54,889	42,178
Raw materials		117,592	107,312
Total inventories	$	211,338	184,067


	March 31,		September 30,
(Dollars in thousands)	2024		2023
Goodwill	$	535,661	503,177

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,516	2,516
Less: accumulated amortization		1,287	1,218
Net	$	1,229	1,298

Capitalized software
Gross carrying amount	$	128,042	121,883
Less: accumulated amortization		86,622	80,774
Net	$	41,420	41,109

Customer relationships
Gross carrying amount	$	327,695	296,927
Less: accumulated amortization		122,542	113,311
Net	$	205,153	183,616

Other
Gross carrying amount	$	15,144	14,232
Less: accumulated amortization		10,870	9,578
Net	$	4,274	4,654
Intangible assets with indefinite lives:
Trade names	$	162,796	161,447


					Aerospace
(Dollars in millions)	USG		Test		& Defense	Total
Balance as of September 30, 2023	$	353.6		34.0	115.6	503.2
Acquisition activity		—		30.3	—	30.3
Foreign currency translation		1.4		0.8	—	2.2
Balance as of March 31, 2024	$	355.0		65.1	115.6	535.7


	Three Months Ended March 31,		Six Months Ended March 31,
	2024	2023	2024	2023
Common stock
Beginning balance	308	307	308	307
Stock plans	—	1	—	1
Ending balance	308	308	308	308

Additional paid-in-capital
Beginning balance	305,283	300,697	304,850	301,553
Stock plans	2,782	3,487	3,215	2,631
Ending balance	308,065	304,184	308,065	304,184

Retained earnings
Beginning balance	1,002,420	917,682	989,315	905,022
Net earnings common stockholders	23,219	17,878	38,388	32,605
Dividends paid	(2,061)	(2,061)	(4,125)	(4,128)
Ending balance	1,023,578	933,499	1,023,578	933,499

Accumulated other comprehensive income (loss)
Beginning balance	(14,555)	(20,251)	(23,969)	(31,764)
Foreign currency translation	(4,745)	2,233	4,669	13,746
Ending balance	(19,300)	(18,018)	(19,300)	(18,018)

Treasury stock
Beginning balance	(139,362)	(132,037)	(139,362)	(126,961)
Share repurchases	(6,879)	(7,141)	(6,879)	(12,217)
Ending balance	(146,241)	(139,178)	(146,241)	(139,178)

Total equity	1,166,410	1,080,795	1,166,410	1,080,795


Three months ended March 31, 2024	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	49,382	$	85,220	$	34,537	$	169,139
Government		65,319		2,089		12,582		79,990
Total revenues	$	114,701	$	87,309	$	47,119	$	249,129

Geographic location:
United States	$	92,161	$	55,763	$	27,543	$	175,467
International		22,540		31,546		19,576		73,662
Total revenues	$	114,701	$	87,309	$	47,119	$	249,129

Revenue recognition method:
Point in time	$	53,463	$	70,285	$	10,301	$	134,049
Over time		61,238		17,024		36,818		115,080
Total revenues	$	114,701	$	87,309	$	47,119	$	249,129


	Six Months Ended
	March 31,
	2024		2023
Cash flows from operating activities:
Net earnings	$	38,388	32,605
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation and amortization		27,555	24,910
Stock compensation expense		4,144	5,309
Changes in assets and liabilities		(47,869)	(67,140)
Effect of deferred taxes		(2,981)	(1,145)
Net cash provided (used) by operating activities		19,237	(5,461)
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(56,179)	(17,901)
Additions to capitalized software and other		(5,912)	(5,918)
Capital expenditures		(16,301)	(10,305)
Net cash used by investing activities		(78,392)	(34,124)
Cash flows from financing activities:
Proceeds from long-term debt and short-term borrowings		154,000	68,000
Principal payments on long-term debt and short-term borrowings		(65,000)	(60,000)
Purchases of common stock into treasury		(7,189)	(12,217)
Dividends paid		(4,125)	(4,128)
Other		(1,432)	(2,374)
Net cash provided (used) by financing activities		76,254	(10,719)
Effect of exchange rate changes on cash and cash equivalents		471	801
Net increase (decrease) in cash and cash equivalents		17,570	(49,503)
Cash and cash equivalents, beginning of period		41,866	97,724
Cash and cash equivalents, end of period	$	59,436	48,221

Supplemental cash flow information:
Interest paid	$	5,097	3,384
Income taxes paid (including state and foreign)		18,228	13,346


	Three Months			Six Months
	Ended March 31,			Ended March 31,
(In thousands)	2024		2023	2024	2023
NET SALES
Aerospace & Defense	$	114,701	98,982	209,434	181,965
USG		87,309	79,161	170,293	150,206
Test		47,119	50,993	87,716	102,466
Consolidated totals	$	249,129	229,136	467,443	434,637

EBIT
Aerospace & Defense	$	23,377	18,795	40,040	31,331
USG		17,575	14,061	35,200	30,192
Test		5,542	7,226	7,321	12,637
Corporate (loss)		(14,047)	(14,463)	(27,993)	(27,984)
Consolidated EBIT		32,447	25,619	54,568	46,176
Less: Interest expense		(3,226)	(2,269)	(5,893)	(3,927)
Earnings before income taxes	$	29,221	23,350	48,675	42,249


	March 31, 2024		March 31, 2023
Weighted-average remaining lease term
Operating leases	10.8	years	11.5	years
Finance leases	11.1	years	11.5	years
Weighted-average discount rate
Operating leases	4.55	%	4.40	%
Finance leases	4.68	%	4.61	%


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2024 (excluding the six months ended March 31, 2024)	$	3,389	1,090
2025		6,014	2,233
2026		4,729	2,297
2027		4,479	2,357
2028 and thereafter		33,206	16,470
Total minimum lease payments		51,817	24,447
Less: amounts representing interest		11,540	5,795
Present value of net minimum lease payments	$	40,277	18,652
Less: current portion of lease obligations		4,833	1,375
Non-current portion of lease obligations		35,444	17,277

ROU assets	$	38,322	14,427


Six months ended March 31, 2024	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	86,591	$	166,689	$	69,615	$	322,895
Government		122,843		3,604		18,101		144,548
Total revenues	$	209,434	$	170,293	$	87,716	$	467,443

Geographic location:
United States	$	172,062	$	111,725	$	49,795	$	333,582
International		37,372		58,568		37,921		133,861
Total revenues	$	209,434	$	170,293	$	87,716	$	467,443

Revenue recognition method:
Point in time	$	92,928	$	136,989	$	18,280	$	248,197
Over time		116,506		33,304		69,436		219,246
Total revenues	$	209,434	$	170,293	$	87,716	$	467,443


Three months ended March 31, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	48,228	$	78,110	$	43,188	$	169,526
Government		50,754		1,051		7,805		59,610
Total revenues	$	98,982	$	79,161	$	50,993	$	229,136

Geographic location:
United States	$	82,516	$	53,020	$	27,504	$	163,040
International		16,466		26,141		23,489		66,096
Total revenues	$	98,982	$	79,161	$	50,993	$	229,136

Revenue recognition method:
Point in time	$	47,255	$	64,080	$	11,968	$	123,303
Over time		51,727		15,081		39,025		105,833
Total revenues	$	98,982	$	79,161	$	50,993	$	229,136


Six months ended March 31, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	84,968	$	148,273	$	89,180	$	322,421
Government		96,997		1,933		13,286		112,216
Total revenues	$	181,965	$	150,206	$	102,466	$	434,637

Geographic location:
United States	$	151,450	$	99,399	$	55,007	$	305,856
International		30,515		50,807		47,459		128,781
Total revenues	$	181,965	$	150,206	$	102,466	$	434,637

Revenue recognition method:
Point in time	$	80,859	$	120,111	$	21,069	$	222,039
Over time		101,106		30,095		81,397		212,598
Total revenues	$	181,965	$	150,206	$	102,466	$	434,637


				Total Number of	Approximate Dollar
				Shares Purchased as	Value of Shares that
	Total Number	Average		Part of Publicly	May Yet Be
	of Shares	Price Paid		Announced Plans	Purchased Under the
Period	Purchased	per Share		or Programs	Plans or Programs
January 1-31, 2024	6,901	$	99.90	6,901	$	166.9 million
February 1-29, 2024	20,072	$	98.86	20,072	$	164.9 million
March 1-31, 2024	45,371	$	99.50	45,371	$	160.4 million
Total	72,344	$	99.37	72,344	$	160.4 million

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 22, 2022

4.2	Amended and Restated Credit Agreement dated August 30, 2023	Exhibit 10.1 to the Company’s Form 8-K filed September 6, 2023

10.1	Form of Director Share Award Agreement (Non-Employee Director) (FY2024)	Filed herewith

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 10, 2024


To:		(“you”)
From:	Human Resources and Compensation Committee of the ESCO Technologies Inc. (“Company”) Board of Directors (the “Committee”)
Subject:	Equity Award under the Company’s Sub-Plan for Compensation of Non-Employee Directors Under the 2018 Omnibus Incentive Plan (the “Plan”)

ESCO TECHNOLOGIES INC.	DIRECTOR

ESCO Officer	(insert director name)

	Executed and agreed to	, 20
Date


	/s/ Bryan H. Sayler
	Bryan H. Sayler
	President and Chief Executive Officer