Esco Technologies Inc 10-Q for FY2024 Q3

Esco Technologies Inc (ESE)

10-Q 2024-08-09 For: 2024-06-30

Added on April 04, 2026

About this 10-Q

Esco Technologies Inc filed this 10-Q on August 9, 2024, covering the quarter ended June 30, 2024 (FY2024 Q3).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $260.78M; up 4.8% from $248.75M a year earlier
Net income: $29.23M; up 4.6% from net income of $27.94M a year earlier
Diluted EPS: $1.13; up 4.6% from $1.08 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)



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 July 31, 2024
Common stock, $.01 par value per share		25,752,712


	Three Months Ended
	June 30,
	2024		2023
Net sales	$	260,783	248,749
Costs and expenses:
Cost of sales		157,435	147,274
Selling, general and administrative expenses		54,955	55,376
Amortization of intangible assets		8,145	7,132
Interest expense, net		3,335	2,495
Other expenses (income), net		(259)	966
Total costs and expenses		223,611	213,243

Earnings before income taxes		37,172	35,506
Income tax expense		7,942	7,563
Net earnings	$	29,230	27,943

Earnings per share:
Basic - Net earnings		1.14	1.08

Diluted - Net earnings	$	1.13	1.08



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024


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


	Nine Months Ended
	June 30,
	2024		2023

Net sales	$	728,226		683,386
Costs and expenses:
Cost of sales		443,933		415,953
Selling, general and administrative expenses		164,020		160,555
Amortization of intangible assets		24,585		21,023
Interest expense, net		9,228		6,422
Other expenses, net		613		1,678
Total costs and expenses		642,379		605,631

Earnings before income taxes		85,847		77,755
Income tax expense		18,229		17,207
Net earnings	$	67,618		60,548

Earnings per share:
Basic — Net earnings	$	2.62		2.35

Diluted — Net earnings	$	2.62		2.34


	June 30,		September 30,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	63,042		41,866
Accounts receivable, net of allowance for credit losses of $2,387 and $2,264, respectively		213,592		198,557
Contract assets		134,637		138,633
Inventories		219,312		184,067
Other current assets		22,312		17,972
Total current assets		652,895		581,095
Property, plant and equipment, net of accumulated depreciation of $190,738 and $174,698, respectively		164,749		155,484
Intangible assets, net of accumulated amortization of $229,467 and $204,881, respectively		408,981		392,124
Goodwill		535,372		503,177
Operating lease assets		37,716		39,839
Other assets		11,342		11,495
Total assets	$	1,811,055		1,683,214

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	20,000		20,000
Accounts payable		83,411		86,973
Contract liabilities		113,653		112,277
Accrued salaries		42,662		43,814
Accrued other expenses		51,481		51,587
Total current liabilities		311,207		314,651
Deferred tax liabilities		77,570		75,531
Non-current operating lease liabilities		35,148		36,554
Other liabilities		40,444		43,336
Long-term debt		153,000		82,000
Total liabilities		617,369		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 30,809,483 and 30,781,699 shares, respectively		308		308
Additional paid-in capital		309,982		304,850
Retained earnings		1,050,748		989,315
Accumulated other comprehensive loss, net of tax		(20,301)		(23,969)
		1,340,737		1,270,504
Less treasury stock, at cost: 5,056,771 and 4,995,414 common shares, respectively		(147,051)		(139,362)
Total shareholders’ equity		1,193,686		1,131,142
Total liabilities and shareholders’ equity	$	1,811,055		1,683,214


	Three Months		Nine Months
	Ended June 30,		Ended June 30,
	2024	2023	2024	2023
Weighted Average Shares Outstanding — Basic	25,753	25,757	25,781	25,808
Dilutive Restricted and Performance Shares	87	70	63	82
Adjusted Shares — Diluted	25,840	25,827	25,844	25,890


	June 30,		September 30,
(In thousands)	2024		2023
Finished goods	$	41,955	34,577
Work in process		59,837	42,178
Raw materials		117,520	107,312
Total inventories	$	219,312	184,067


	June 30,		September 30,
(Dollars in thousands)	2024		2023
Goodwill	$	535,372	503,177

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,551	2,516
Less: accumulated amortization		1,322	1,218
Net	$	1,229	1,298

Capitalized software
Gross carrying amount	$	130,648	121,883
Less: accumulated amortization		89,737	80,774
Net	$	40,911	41,109

Customer relationships
Gross carrying amount	$	327,537	296,927
Less: accumulated amortization		127,322	113,311
Net	$	200,215	183,616

Other
Gross carrying amount	$	15,122	14,232
Less: accumulated amortization		11,085	9,578
Net	$	4,037	4,654
Intangible assets with indefinite lives:
Trade names	$	162,589	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		—		30.5	—	30.5
Foreign currency translation		0.9		0.8	—	1.7
Balance as of June 30, 2024	$	354.5		65.3	115.6	535.4


	Three Months Ended June 30,		Nine Months Ended June 30,
	2024	2023	2024	2023
Common stock
Beginning balance	308	308	308	307
Stock plans	—	—	—	1
Ending balance	308	308	308	308

Additional paid-in-capital
Beginning balance	308,065	304,184	304,850	301,553
Stock plans	1,917	1,371	5,132	4,002
Ending balance	309,982	305,555	309,982	305,555

Retained earnings
Beginning balance	1,023,578	933,499	989,315	905,022
Net earnings common stockholders	29,230	27,943	67,618	60,548
Dividends paid	(2,060)	(2,061)	(6,185)	(6,189)
Ending balance	1,050,748	959,381	1,050,748	959,381

Accumulated other comprehensive income (loss)
Beginning balance	(19,300)	(18,018)	(23,969)	(31,764)
Foreign currency translation	(1,001)	(821)	3,668	12,925
Ending balance	(20,301)	(18,839)	(20,301)	(18,839)

Treasury stock
Beginning balance	(146,241)	(139,178)	(139,362)	(126,961)
Share repurchases, net	(810)	(184)	(7,689)	(12,401)
Ending balance	(147,051)	(139,362)	(147,051)	(139,362)

Total equity	1,193,686	1,107,043	1,193,686	1,107,043


Three months ended June 30, 2024	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	45,404	$	88,076	$	42,327	$	175,807
Government		69,046		2,201		13,729		84,976
Total revenues	$	114,450	$	90,277	$	56,056	$	260,783

Geographic location:
United States	$	95,265	$	54,063	$	32,575	$	181,903
International		19,185		36,214		23,481		78,880
Total revenues	$	114,450	$	90,277	$	56,056	$	260,783

Revenue recognition method:
Point in time	$	53,148	$	72,985	$	11,426	$	137,559
Over time		61,302		17,292		44,630		123,224
Total revenues	$	114,450	$	90,277	$	56,056	$	260,783


	Nine Months Ended
	June 30,
	2024		2023
Cash flows from operating activities:
Net earnings	$	67,618	60,548
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation and amortization		41,358	37,699
Stock compensation expense		6,369	7,007
Changes in assets and liabilities		(53,839)	(72,346)
Effect of deferred taxes		(6,052)	(3,706)
Net cash provided by operating activities		55,454	29,202
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(56,383)	(17,694)
Additions to capitalized software and other		(8,556)	(9,263)
Capital expenditures		(24,949)	(16,993)
Net cash used by investing activities		(89,888)	(43,950)
Cash flows from financing activities:
Proceeds from long-term debt and short-term borrowings		193,000	88,000
Principal payments on long-term debt and short-term borrowings		(122,000)	(93,000)
Purchases of common stock into treasury		(7,998)	(12,401)
Dividends paid		(6,185)	(6,189)
Other		(1,516)	(2,557)
Net cash provided (used) by financing activities		55,301	(26,147)
Effect of exchange rate changes on cash and cash equivalents		309	(777)
Net increase (decrease) in cash and cash equivalents		21,176	(41,672)
Cash and cash equivalents, beginning of period		41,866	97,724
Cash and cash equivalents, end of period	$	63,042	56,052

Supplemental cash flow information:
Interest paid	$	8,430	5,564
Income taxes paid (including state and foreign)		25,952	18,313


	Three Months			Nine Months
	Ended June 30,			Ended June 30,
(In thousands)	2024		2023	2024	2023
NET SALES
Aerospace & Defense	$	114,450	103,469	323,884	285,434
USG		90,277	89,966	260,570	240,172
Test		56,056	55,314	143,772	157,780
Consolidated totals	$	260,783	248,749	728,226	683,386

EBIT
Aerospace & Defense	$	21,356	21,665	61,396	52,996
USG		22,155	20,351	57,355	50,543
Test		9,292	8,643	16,614	21,280
Corporate (loss)		(12,296)	(12,658)	(40,290)	(40,642)
Consolidated EBIT		40,507	38,001	95,075	84,177
Less: Interest expense		(3,335)	(2,495)	(9,228)	(6,422)
Earnings before income taxes	$	37,172	35,506	85,847	77,755


	June 30, 2024		June 30, 2023
Weighted-average remaining lease term
Operating leases	10.8	years	11.4	years
Finance leases	11.1	years	11.3	years
Weighted-average discount rate
Operating leases	4.56	%	4.42	%
Finance leases	4.69	%	4.62	%


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2024 (excluding the nine months ended June 30, 2024)	$	1,569	547
2025		6,108	2,233
2026		4,865	2,297
2027		4,620	2,357
2028 and thereafter		33,915	16,470
Total minimum lease payments		51,077	23,904
Less: amounts representing interest		11,334	5,582
Present value of net minimum lease payments	$	39,743	18,322
Less: current portion of lease obligations		4,595	1,403
Non-current portion of lease obligations		35,148	16,919

ROU assets	$	37,716	14,055


Nine months ended June 30, 2024	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	131,993	$	254,765	$	111,951	$	498,709
Government		191,891		5,805		31,821		229,517
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226

Geographic location:
United States	$	267,325	$	165,789	$	82,370	$	515,484
International		56,559		94,781		61,402		212,742
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226

Revenue recognition method:
Point in time	$	146,076	$	209,973	$	29,706	$	385,755
Over time		177,808		50,597		114,066		342,471
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226


Three months ended June 30, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	45,574	$	88,442	$	48,407	$	182,423
Government		57,895		1,524		6,907		66,326
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749

Geographic location:
United States	$	86,031	$	55,011	$	32,246	$	173,288
International		17,438		34,955		23,068		75,461
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749

Revenue recognition method:
Point in time	$	48,496	$	74,128	$	11,496	$	134,120
Over time		54,973		15,838		43,818		114,629
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749


Nine months ended June 30, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	128,016	$	236,715	$	137,587	$	502,318
Government		157,418		3,457		20,193		181,068
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386

Geographic location:
United States	$	237,481	$	154,410	$	87,253	$	479,144
International		47,953		85,762		70,527		204,242
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386

Revenue recognition method:
Point in time	$	129,355	$	194,240	$	32,565	$	356,160
Over time		156,079		45,932		125,215		327,226
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386


				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
April 1-30, 2024	8,126	$	99.65	8,126	$	159.6 million
May 1-31, 2024	0	$	N/A	0	$	159.6 million
June 1-30, 2024	0	$	N/A	0	$	159.6 million
Total	8,126	$	99.65	8,126	$	159.6 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	Tenth Amendment and Restatement of Employee Stock Purchase Plan effective May 5, 2024	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: August 9, 2024

Unit	(Effective Date, if Later than the Above Date)

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