8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

November 17, 2022

ESCO TECHNOLOGIES INC.

(Exact Name of Registrant as Specified in Charter)

Missouri	1-10596	43-1554045
(State or Other	(Commission	(I.R.S. Employer
Jurisdiction of Incorporation)	File Number)	Identification No.)
9900A Clayton Road, St. Louis, Missouri	63124-1186
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(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including

area code: 314-213-7200

Securities registered pursuant to section 12(b) of the Act:

		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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨   Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2 (b))

¨   Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.113d-4 (c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02	Results of Operations and Financial Condition

Today, November 17, 2022, ESCO Technologies Inc. (the Registrant, or the “Company”) is issuing a press release (furnished as Exhibit 99.1 to this report) announcing its financial and operating results for the fourth quarter and fiscal year ended September 30, 2022. See Item 7.01, Regulation FD Disclosure, below.

Item 7.01	Regulation FD Disclosure

Today, November 17, 2022, the Company is issuing a press release (attached as Exhibit 99.1) announcing its financial and operating results for the fourth quarter and fiscal year ended September 30, 2022. The Company will conduct a related Webcast conference call today at 4:00 p.m. Central Time. The press release will be posted on the Company’s web site located at http://www.escotechnologies.com. It can be viewed through the “Investor News” page of the web site under the “Investor Center” tab, although the Company reserves the right to discontinue that availability at any time.

Item 9.01	Financial Statements and Exhibits

(d)       Exhibits

Exhibit No.	Description of Exhibit
99.1	Press Release issued November 17, 2022
104	Cover Page Inline Interactive Data File

Other Matters

The information in this report furnished pursuant to Item 2.02 and Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 as amended (“Exchange Act”) or otherwise subject to the liabilities of that section, unless the Company incorporates it by reference into a filing under the Securities Act of 1933 as amended or the Exchange Act.

Any references to the Company’s web site address included in this Form 8-K and the press release are intended only as inactive textual references and not as active links to its web site. Information contained on the Company’s web site does not constitute part of this Form 8-K or the press release.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 17, 2022

ESCO TECHNOLOGIES INC.
By:	/s/ Christopher L. Tucker
	David M. Schatz
	Senior Vice President and Chief Financial Officer

Exhibit 99.1

NEWS FROM

For more information contact:

Kate Lowrey - VP of Investor Relations

(314) 213-7277 / klowrey@escotechnologies.com

ESCO ANNOUNCES RECORD FOURTH QUARTER AND FISCAL 2022 RESULTS

- Q4 GAAP EPS $1.19 / Adjusted EPS $1.21-

- FY 2022 Sales increase 20% to $858 Million-

- $135 Million in Cash Flow from Operationsin FY 2022 -

ST. LOUIS, November 17, 2022 – ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the fourth quarter (Q4 2022) and fiscal year (FY 2022) ended September 30, 2022.

Operating Highlights

·	Q4 2022 GAAP EPS increased<br> $0.41 per share (53 percent) to $1.19 per share compared to $0.78 per share in Q4 2021. Q4<br> 2022 Adjusted EPS increased $0.36 per share (42 percent) to $1.21 per share compared to $0.85<br> per share in Q4 2021.
·	FY 2022 GAAP EPS increased<br> $0.74 per share (31 percent) to $3.16 per share compared to $2.42 per share in FY 2021. FY<br> 2022 Adjusted EPS increased $0.62 per share (24 percent) to $3.21 per share compared to $2.59<br> per share in FY 2021.
·	Q4 2022 sales increased<br> $51 million (25 percent) to $256 million compared to $205 million in Q4 2021. Organic sales<br> increased $38 million (19 percent) and recent acquisitions added $13 million (6 percent)<br> of revenue growth in the quarter.
·	FY 2022 sales increased<br> $142 million (20 percent) to $858 million. Organic sales increased $90 million (13 percent)<br> and recent acquisitions added $52 million (7 percent) of revenue growth for the full year.
·	Q4 2022 entered orders<br> decreased $14 million (5 percent) compared to the prior year period to $245 million (book-to-bill<br> of 0.95x). Full year 2022 entered orders increased $164 million (21 percent) to $961 million<br> (book-to-bill of 1.12x) and resulted in record year-end backlog of $695 million.
·	Net cash provided<br> by operating activities was $94 million in Q4 and $135 million for the full year, resulting<br> in an increase of $12 million (10 percent) over the prior year.
·	Net debt (total borrowings<br> less cash on hand) was $55 million, resulting in a leverage ratio of 0.78x and $589 million<br> in available liquidity on September 30, 2022.

FY 2022 was a record year for sales, Adjusted EBIT, Adjusted EPS, cash flow from operations, entered orders, and year-end backlog. Entered orders were strong across our end-markets, with all three business segments reporting a book-to-bill greater than 1.1x. Overall, entered orders increased 21 percent compared to the prior year and drove record year-end backlog of $695 million. Cash flow from operations was $135 million with a 108 percent free cash flow conversion rate. Recovery in key end-markets combined with solid orders momentum drove meaningful growth and improved operating results during the year.

Vic Richey, Chairman and Chief Executive Officer, commented, “Given the continuing economic disruptions and global headwinds throughout the year, I am very pleased that we were able to deliver outstanding results from both a growth and profitability perspective. Despite considerable challenges, we were able to exceed our commitments as communicated at the start of the year. ESCO is an industry leader that serves healthy end-markets, and through the tremendous efforts of our employees we were able to deliver results we are all very proud of in 2022.”

Segment Performance

Aerospace & Defense (A&D)

·	Q4 2022 sales increased<br> $24 million (30 percent) to $104 million from $80 million in Q4 2021. Q4 sales growth was<br> the result of strong demand across our commercial and defense aerospace, Navy, and space<br> platforms. FY 2022 sales increased $37 million (12 percent) to $351 million, largely driven<br> by commercial aerospace, which increased $30 million (32 percent) to $123 million. Higher<br> Navy and space sales were partially offset by lower industrial sales compared to the prior<br> year.
·	Q4 2022 EBIT increased<br> $8.7 million to $23.3 million from $14.6 million in Q4 2021. Adjusted EBIT increased $8.9<br> million in Q4 2022 to $23.6 million (22.7 percent margin) from $14.7 million (18.3 percent<br> margin) in Q4 2021. FY 2022 EBIT increased $11.9 million to $68.4 million from $56.5 million<br> in FY 2021. FY 2022 Adjusted EBIT increased $12.0 million to $69.0 million (19.6 percent<br> margin) from $57.0 million (18.1 percent margin) in FY 2021. Margin increases for the quarter<br> and year were driven by higher volumes and price increases, partially offset by inflationary<br> pressures.
·	Entered Orders increased<br> $9 million to $97 million in Q4 2022. For the full year entered orders increased $55 million<br> (16 percent) to $392 million (book-to-bill of 1.12). The orders strength was primarily driven<br> by the continuing recovery of commercial aerospace and resulted in record year-end backlog<br> of $408 million.

Utility Solutions Group (USG)

·	Q4 sales increased $22<br> million (37 percent) to $83 million from $61 million in Q4 2021. Organic sales increased<br> $12 million (21 percent) and recent acquisitions Phenix and Altanova contributed $10 million<br> in revenue. FY 2022 sales increased $75 million (37 percent) to $278 million from $203 million<br> in FY 2021. Doble organic sales increased $20 million (12 percent), NRG sales increased $8<br> million (24 percent), and Phenix and Altanova added $47 million, The organic sales<br>growth was driven by increased electric utility spending and strong demand across our renewables product lines.
·	Q4 2022 EBIT increased<br> $6.5 million to $19.8 million from $13.3 million in Q4 2021. Adjusted EBIT increased $4.9<br> million in Q4 2022 to $19.8 million (23.7 percent margin) from $14.9 million (24.3 percent<br> margin) in Q4 2021. FY 2022 EBIT increased $16.7 million to $57.6 million from $40.9 million<br> in FY 2021. FY 2022 Adjusted EBIT increased $15.7 million to $58.1 million (20.9 percent<br> margin) from $42.4 million (20.9 percent margin) in FY 2021. Adjusted EBIT increases for<br> the quarter and year were largely driven by higher volumes and price increases, partially<br> offset by inflationary pressures, increased travel and conference costs.
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·	Entered Orders decreased<br> $8 million to $88 million in Q4 2022. Orders for the quarter were lower due to the timing<br> of orders booked related to the backlog acquired with the Phenix and Altanova transactions<br> in Q4 2021. For the full year entered orders increased $71 million to $315 million (book-to-bill<br> of 1.13) and resulted in year-end backlog of $128 million. Orders strength was driven by<br> contributions from Altanova and Phenix, increased electric utility spending and continuing<br> growth in the demand for renewables.

Test

·	Q4 2022 sales increased<br> $5 million (8 percent) to $69 million from $64 million in Q4 2021, primarily due to increased<br> medical and industrial shielding and power filter demand. FY 2022 sales increased $30 million<br> (15 percent) to $228 million, driven by increased test and measurement projects, medical<br> and industrial shielding, and power filter demand.
·	Q4 2022 EBIT increased<br> $1.9 million to $11.8 million (17.0 percent margin) from $9.9 million (15.3 percent margin)<br> in Q4 2021. FY 2022 EBIT increased $5.0 million to $32.6 million (14.3 percent margin) from<br> $27.6 million (14.0 percent margin) in FY 2021. The increase in profitability was driven<br> by leverage on higher sales and price increases, partially offset by material cost and wage<br> inflation.
·	Entered Orders decreased<br> $14 million to $59 million in Q4 2022. Orders were lower during the quarter primarily due<br> to the timing of large power filter orders in Q4 2021. For the full year entered orders increased<br> $38 million to $253 million (book-to-bill of 1.11) and resulted in record year-end backlog<br> of $159 million. The orders strength was driven by medical shielding and global demand for<br> test and measurement projects.

Share Repurchase Program

The Company did not repurchase any shares of stock during Q4 2022. During FY 2022 the Company repurchased approximately 257,500 shares for $20 million.

Dividend Payment

The next quarterly cash dividend of $0.08 per share will be paid on January 20, 2023 to stockholders of record on January 5, 2023.

2023 Annual Meeting

The 2023 Annual Meeting of the Company’s Shareholders will be held on February 3, 2023.

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Business Outlook – FY 2023

Management expects continued growth in sales, Adjusted EBIT, and Adjusted EBITDA across each of the Company’s business segments in 2023.

Management’s expectations for growth in 2023 compared to 2022:

·	Net sales are expected<br> to grow 6 to 8 percent and be in the range of $910 to $930 million on a consolidated basis,<br> with A&D growing 10 to 13 percent, USG growing 5 to 7 percent, and Test growing 3 to<br> 5 percent.
·	Adjusted EBIT is expected<br> to increase approximately 10 to 15 percent with Adjusted EBIT margins increasing to 13.5<br> to 14.0 percent of sales.
·	Adjusted EBITDA is expected<br> to increase approximately 7 to 12 percent with Adjusted EBITDA margins increasing to 19.0<br> to 19.5 percent of sales.
·	Interest expense is expected<br> to increase approximately $4.3 million to over $9 million (due to higher interest rates)<br> excluding the impact of any future acquisitions.
·	The effective income tax<br> rate is expected to be in the range of 22.5 to 23.5 percent in 2023.
·	Management projects 2023<br> Adjusted EPS to increase 7.5 to 12 percent and be in the range of $3.45 to $3.60 per share.<br> This projection reflects margin expansion on the anticipated sales growth, partially offset<br> by increased interest expense.
·	Management expects flat<br> to slightly up Adjusted EPS of $0.46 - $0.52 in Q1 2023 compared to the prior year. Consistent<br> with prior years, revenues and Adjusted EPS are expected to grow sequentially throughout<br> the year.

Management Transition

As previously announced, Vic Richey will be retiring from his roles as CEO and President at the end of the calendar year. Mr. Richey will continue as Executive Chairman of the Board during a transition period as current USG President Bryan Sayler assumes the roles of ESCO CEO and President. Richey commented “It’s been a pleasure to work at ESCO for 37 years and an honor to serve as CEO for the past 20 years. We have accomplished a lot during this time, and I am very thankful to our employees who have shown extreme dedication and effort over the years. I’d also like to thank our Board of Directors for their ongoing support of the Company as we worked to create what ESCO is today. I’m very excited about the future of the Company. Bryan has over 25 years of leadership experience at ESCO and is uniquely qualified to lead the company moving forward.” Mr. Sayler is currently transitioning from his position as President of the USG segment and will assume the positions of CEO and President of ESCO on January 1, 2023. “As I step into my new role at ESCO, I’m excited for the opportunity to lead this vibrant organization as we continue to build upon the strong foundation established under Vic’s leadership,” said Sayler.

Conference Call

The Company will host a conference call today, November 17, at 4:00 p.m. Central Time, to discuss the Company’s Q4 and full year 2022 results. A live audio webcast and an accompanying slide presentation will be available on ESCO’s investor website at https://investor.escotechnologies.com. For those unable to participate, a webcast replay will be available after the call on ESCO’s investor website.

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Forward-Looking Statements

Statements in this press release regarding the timing and magnitude of recovery in the Company’s end markets, the continuing impacts of COVID-19 on the Company’s results, sales, Adjusted EBIT, Adjusted EBITDA, Adjusted EPS, cash flow, results of cost reduction efforts, margins, growth, the financial success of the Company, the strength of its end markets, the outlook for the A&D, Test and USG segments, the ability to increase shareholder value, the timing and success of acquisition efforts, internal investments in new products and solutions, the impacts of inflation, 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 them except as may be required by applicable laws or regulations. 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 those described in Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021; the availability and acceptance of viable COVID-19 vaccines by enough of the U.S. and world’s population to curtail the pandemic; the continuing impact of the COVID-19 pandemic and the effects of known or unknown COVID-19 variants including labor shortages, facility closures, shelter in place policies or quarantines, material shortages, transportation delays, termination or delays of Company contracts, and the inability of our suppliers or customers to perform; the impacts of Executive Order 14042 and other vaccine mandates on our employees and businesses; the impacts of natural disasters on the Company’s operations and those of the Company’s customers and suppliers; the timing and content of future contract awards or customer orders; the appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts or orders; weakening of economic conditions in served markets; the success of the Company’s competitors; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; the success of the Company’s acquisition efforts; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; changes in the costs and availability of certain raw materials; labor disputes; changes in U.S. tax laws and regulations; other changes in laws and regulations including but not limited to changes in accounting standards and foreign taxation; changes in interest rates; costs relating to environmental matters arising from current or former facilities; uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration; and the integration of recently acquired businesses.

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Non-GAAP Financial Measures

The financial measures EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS are presented in this press release. The Company defines “EBIT” as earnings before interest and taxes, “EBITDA” as earnings before interest, taxes, depreciation and amortization, “Adjusted EBIT” and “Adjusted EBITDA” as excluding the net impact of the items described in the attached Reconciliation of Non-GAAP Financials Measures, and “Adjusted EPS” as GAAP earnings per share excluding the net impact of the items described and reconciled in the attached Reconciliation of Non-GAAP Financial Measures.

EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, Management believes EBIT, Adjusted EBIT, EBITDA, and Adjusted EBITDA are useful in assessing the operational profitability of the Company’s business segments because they exclude interest, taxes, depreciation, and amortization, 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 presentation of EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS provides important supplemental information 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 is a global provider of highly engineered products and solutions serving diverse end-markets. It manufactures filtration and fluid control products for the aviation, Navy, space, and process markets worldwide and composite-based products and solutions for Navy, defense, and industrial customers. ESCO is the industry leader in RF shielding and EMC test products; and provides diagnostic instruments, software and services to industrial power users and the electric utility and renewable energy industries. Headquartered in St. Louis, Missouri, ESCO and its subsidiaries have offices and manufacturing facilities worldwide. For more information on ESCO and its subsidiaries, visit 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<br> Ended<br> September 30,<br> 2022			Three Months<br> Ended<br> September 30,<br> 2021
Net Sales	$	256,498			205,478
Cost and Expenses:
Cost of sales		154,323			128,260
Selling, general and administrative expenses		53,054			44,906
Amortization of intangible assets		6,553			6,100
Interest expense		1,767			802
Other (income) expenses, net		373			371
Total costs and expenses		216,070			180,439
Earnings before income taxes		40,428			25,039
Income tax expense		9,388			4,674
Net earnings	$	31,040			20,365
Diluted EPS:
Diluted - GAAP
Net earnings	$	1.19			0.78
Diluted - As Adjusted Basis
Net earnings	$	1.21	(1)		0.85	(2)
Diluted average common shares O/S:		25,990			26,232
(1)	Q4 2022 Adjusted EPS excludes $0.02 per share of after-tax severance<br>charges at VACCO and NRG and Corporate management transition costs.
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(2)	Q4 2021 Adjusted EPS excludes $0.07 per share of after-tax charges<br>mainly consisting of purchase accounting adjustments related to the Phenix & Altanova acquisitions, acquisition costs at Corporate,<br>and restructuring costs primarily within the USG segment.
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share amounts)

	Year Ended<br> September 30,<br> 2022			Year Ended<br> September 30,<br> 2021
Net Sales	$	857,502			715,440
Cost and Expenses:
Cost of sales		525,457			445,045
Selling, general and administrative expenses		195,127			167,534
Amortization of intangible assets		25,936			20,829
Interest expense		4,851			2,255
Other (income) expenses, net		(304	)		(894	)
Total costs and expenses		751,067			634,769
Earnings before income taxes		106,435			80,671
Income tax expense		24,115			17,175
Net earnings	$	82,320			63,496
Diluted EPS:
Diluted - GAAP
Net earnings	$	3.16			2.42
Diluted - As Adjusted Basis
Net earnings	$	3.21	(1)		2.59	(2)
Diluted average common shares O/S:		26,067			26,225
(1)	FY 2022 Adjusted EPS excludes $0.05 per share of after-tax charges<br>associated with the Altanova & Neco acquisition inventory step-up charges, severance charges at VACCO and NRG, Corporate acquisition<br>costs and management transition costs.
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(2)	FY 2021 Adjusted EPS excludes $0.17 per share of after-tax charges<br>mainly consisting of management transition and acquisition costs at Corporate, restructuring costs primarily within the USG segment,<br>and purchase accounting adjustments related to the Phenix & Altanova acquisitions, partially offset by the final settlement from<br>the sale of the Doble Watertown facility.

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Business Segment Information (Unaudited)

(Dollars in thousands)

	GAAP						As Adjusted
	Q4 2022			Q4 2021			Q4 2022			Q4 2021
Net Sales
Aerospace & Defense	$	103,742			80,105			103,742			80,105
USG		83,490			61,107			83,490			61,107
Test		69,266			64,266			69,266			64,266
Totals	$	256,498			205,478			256,498			205,478
EBIT
Aerospace & Defense	$	23,310			14,557			23,590			14,657
USG		19,764			13,264			19,813			14,874
Test		11,779			9,855			11,779			9,855
Corporate		(12,658	)		(11,835	)		(12,428	)		(11,181	)
Consolidated EBIT		42,195			25,841			42,754			28,205
Less: Interest expense		(1,767	)		(802	)		(1,767	)		(802	)
Less: Income tax expense		(9,388	)		(4,674	)		(9,517	)		(5,218	)
Net earnings	$	31,040			20,365			31,470			22,185

Note 1: Adjusted net earnings of $31.5 million in Q4 2022 exclude $0.4 million (or $0.02 per share) of after-tax severance charges at VACCO and NRG, and Corporate management transition costs.

Note 2: Adjusted net earnings of $22.2 million in Q4 2021 exclude $1.8 million (or $0.07 per share) of after-tax charges mainly consisting of purchase accounting adjustments related to the Phenix & Altanova acquisitions, and acquisition costs at Corporate.

							Adjusted			Adjusted
EBITDA Reconciliation to Net earnings:	Q4 2022			Q4 2021			Q4 2022			Q4 2021
Consolidated EBITDA	$	54,291			37,631			54,850			39,995
Less: Depr & Amort		(12,096	)		(11,790	)		(12,096	)		(11,790	)
Consolidated EBIT		42,195			25,841			42,754			28,205
Less: Interest expense		(1,767	)		(802	)		(1,767	)		(802	)
Less: Income tax expense		(9,388	)		(4,674	)		(9,517	)		(5,218	)
Net earnings	$	31,040			20,365			31,470			22,185

SCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Business Segment Information (Unaudited)

(Dollars in thousands)

	GAAP						As Adjusted
	FY 2022			FY 2021			FY 2022			FY 2021
Net Sales
Aerospace & Defense	$	351,413			314,824			351,413			314,824
USG		278,367			202,908			278,367			202,908
Test		227,722			197,708			227,722			197,708
Totals	$	857,502			715,440			857,502			715,440
EBIT
Aerospace & Defense	$	68,352			56,536			68,967			57,021
USG		57,604			40,948			58,120			42,427
Test		32,592			27,636			32,592			27,636
Corporate		(47,262	)		(42,194	)		(46,727	)		(38,167	)
Consolidated EBIT		111,286			82,926			112,952			88,917
Less: Interest expense		(4,851	)		(2,255	)		(4,851	)		(2,255	)
Less: Income tax		(24,115	)		(17,175	)		(24,499	)		(18,553	)
Net earnings	$	82,320			63,496			83,602			68,109

Note 1: Adjusted net earnings of $83.6 million in FY 2022 exclude $1.3 million (or $0.05 per share) of after-tax charges associated with the Altanova & Neco acquisition inventory step-up charges, severance charges at VACCO and NRG, and Corporate acquisition and management transition costs.

Note 2: Adjusted net earnings of $68.1 million in FY 2021 exclude $4.6 million ($0.17 per share) of after-tax charges mainly consisting of management transition and acquisition costs at Corporate, restructuring costs primarily within the USG segment, and purchase accounting adjustments related to the Phenix & Altanova acquisitions, partially offset by the final settlement from the sale of the Doble Watertown facility.

							Adjusted			Adjusted
EBITDA Reconciliation to Net earnings:	FY 2022			FY 2021			FY 2022			FY 2021
Consolidated EBITDA	$	159,629			124,975			161,295			130,966
Less: Depr & Amort		(48,343	)		(42,049	)		(48,343	)		(42,049	)
Consolidated EBIT		111,286			82,926			112,952			88,917
Less: Interest expense		(4,851	)		(2,255	)		(4,851	)		(2,255	)
Less: Income tax expense		(24,115	)		(17,175	)		(24,499	)		(18,553	)
Net earnings	$	82,320			63,496			83,602			68,109

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

	September 30,<br> 2022		September 30,<br> 2021
Assets
Cash and cash equivalents	$	97,724		56,232
Accounts receivable, net		164,645		146,341
Contract assets		125,154		93,771
Inventories		162,403		147,148
Other current assets		22,696		22,662
Total current assets		572,622		466,154
Property, plant and equipment, net		155,973		154,265
Intangible assets, net		394,464		409,250
Goodwill		492,709		504,853
Operating lease assets		29,150		31,846
Other assets		9,538		10,977
	$	1,654,456		1,577,345
Liabilities and Shareholders' Equity
Current maturities of long-term debt	$	20,000		20,000
Accounts payable		78,746		56,669
Contract liabilities		125,009		106,045
Other current liabilities		94,374		92,281
Total current liabilities		318,129		274,995
Deferred tax liabilities		82,023		73,560
Non-current operating lease liabilities		24,853		28,032
Other liabilities		48,294		47,062
Long-term debt		133,000		134,000
Shareholders' equity		1,048,157		1,019,696
	$	1,654,456		1,577,345

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)

	Year Ended<br> September 30,<br> 2022			Year Ended<br> September 30,<br> 2021
Cash flows from operating activities:
Net earnings	$	82,320			63,496
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		48,343			42,049
Stock compensation expense		7,320			6,914
Changes in assets and liabilities		(11,654	)		15,671
Gain on sale of building and land		0			(1,950	)
Effect of deferred taxes		8,946			(3,041	)
Net cash provided by operating activities		135,275			123,139
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(10,906	)		(168,903	)
Capital expenditures		(32,101	)		(26,705	)
Additions to capitalized software		(12,912	)		(8,783	)
Proceeds from sale of building and land		0			1,950
Net cash used by investing activities		(55,919	)		(202,441	)
Cash flows from financing activities:
Proceeds from long-term debt		116,000			216,000
Principal payments on long-term debt and short-term borrowings		(117,000	)		(124,368	)
Dividends paid		(8,268	)		(8,336	)
Purchases of common stock into treasury		(19,878	)		0
Other		(2,976	)		(1,823	)
Net cash (used) provided by financing activities		(32,122	)		81,473
Effect of exchange rate changes on cash and cash equivalents		(5,742	)		1,501
Net increase in cash and cash equivalents		41,492			3,672
Cash and cash equivalents, beginning of period		56,232			52,560
Cash and cash equivalents, end of period	$	97,724			56,232

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Other Selected Financial Data (Unaudited)

(Dollars in thousands)

Backlog And Entered Orders - Q4 2022	Aerospace & Defense			USG			Test			Total
Beginning Backlog - 7/1/22	$	414,521			123,850			168,429			706,800
Entered Orders		97,490			87,796			59,434			244,720
Sales		(103,742	)		(83,490	)		(69,266	)		(256,498	)
Ending Backlog - 9/30/22	$	408,269			128,156			158,597			695,022
Backlog And Entered Orders - FY 2022	Aerospace & Defense			USG			Test			Total
---	---	---	---	---	---	---	---	---	---	---	---	---
Beginning Backlog - 10/1/21	$	367,216			91,631			133,176			592,023
Entered Orders		392,466			314,892			253,143			960,501
Sales		(351,413	)		(278,367	)		(227,722	)		(857,502	)
Ending Backlog - 9/30/22	$	408,269			128,156			158,597			695,022

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (Unaudited)

EPS – Adjusted Basis Reconciliation – Q4 2022
EPS – GAAP Basis – Q4 2022	1.19
Adjustments (defined below)	0.02
EPS – As Adjusted Basis – Q4 2022	1.21
Adjustments exclude 0.02 per share consisting of after-tax severance charges at VACCO and NRG and Corporate management transition costs.
The 0.02 of EPS adjustments per share consists of 0.6 million of pre-tax charges offset by 0.2 million of tax benefit for net impact of 0.4 million.
EPS – Adjusted Basis Reconciliation – FY 2022
EPS – GAAP Basis – FY 2022	3.16
Adjustments (defined below)	0.05
EPS – As Adjusted Basis – FY 2022	3.21
Adjustments exclude 0.05 per share consisting of Altanova & Neco acquisition inventory step-up charges, severance charges at VACCO and NRG, Corporate acquisition costs and management transition costs.
The 0.05 of EPS adjustments per share consists of 1.7 million of pre-tax charges offset by 0.4 million of tax benefit for net impact of 1.3 million
EPS – Adjusted Basis Reconciliation – Q4 2021
EPS GAAP Basis – Q4 2021	0.78
Adjustments (defined below)	0.07
EPS – As Adjusted Basis – Q4 2021	0.85
Adjustments exclude 0.07 per share consisting of purchase accounting adjustments, acquisition costs at Corporate, and restructuring costs primarily within the USG segment.
The 0.07 of EPS adjustments per share consists of 2.3 million of pre-tax charges offset by 0.5 million of tax benefit for net impact of 1.8 million.
EPS – Adjusted Basis Reconciliation – FY 2021
EPS – GAAP Basis – FY 2021	2.42
Adjustments (defined below)	0.17
EPS – As Adjusted Basis – FY 2021	2.59
Adjustments exclude 0.17 per share consisting of management transition and acquisition costs, restructuring costs primarily within the USG segment, and purchase accounting adjustments partially offset by the settlement from sale of Doble Watertown facility.
The 0.17 of EPS adjustments per share consists of 6.0 million of pre-tax charges offset by 1.4 million of tax benefit for net impact of 4.6 million.

All values are in US Dollars.