Esco Technologies Inc 10-Q for FY2022 Q3

About this 10-Q

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Esco Technologies Inc (ESE)

10-Q 2022-08-09 For: 2022-06-30

Added on April 04, 2026

Esco Technologies Inc filed this 10-Q on August 9, 2022, covering the quarter ended June 30, 2022 (FY2022 Q3).

ESCO TECHNOLOGIES INC.

AGREED TO AND ACCEPTED:

Vice President

Participant

Date Signed:

Date Signed:

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $219.07M; up 20.8% from $181.39M a year earlier
Net income: $23.17M; up 55.4% from net income of $14.91M a year earlier
Diluted EPS: $0.89; up 56.1% from $0.57 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, 2022
Common stock, $.01 par value per share		25,852,570


	Three Months Ended
	June 30,
	2022		2021

Net sales	$	219,066	181,394
Costs and expenses:
Cost of sales		134,454	113,610
Selling, general and administrative expenses		47,479	42,882
Amortization of intangible assets		6,406	4,864
Interest expense, net		1,331	480
Other (income) expenses, net		(106)	615
Total costs and expenses		189,564	162,451

Earnings before income taxes		29,502	18,943
Income tax expense		6,329	4,034
Net earnings	$	23,173	14,909

Earnings per share:
Basic -
Net earnings		0.90	0.57

Diluted -
Net earnings	$	0.89	0.57


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022


☐	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,
	2022		2021

Net sales	$	601,004		509,962
Costs and expenses:
Cost of sales		371,134		316,785
Selling, general and administrative expenses		142,073		122,628
Amortization of intangible assets		19,383		14,729
Interest expense, net		3,084		1,453
Other income, net		(677)		(1,265)
Total costs and expenses		534,997		454,330

Earnings before income taxes		66,007		55,632
Income tax expense		14,727		12,501
Net earnings	$	51,280		43,131

Earnings per share:
Basic — Net earnings	$	1.98		1.66

Diluted — Net earnings	$	1.97		1.65


	June 30,		September 30,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	61,019		56,232
Accounts receivable, net of allowance for doubtful accounts of $3,328 and $3,445, respectively		168,720		146,341
Contract assets		115,840		93,771
Inventories, net		178,168		147,148
Other current assets		29,718		22,662
Total current assets		553,465		466,154
Property, plant and equipment, net of accumulated depreciation of $161,177 and $147,551, respectively		155,961		154,265
Intangible assets, net of accumulated amortization of $169,274 and $149,892, respectively		401,337		409,250
Goodwill		503,439		504,853
Operating lease assets		28,922		31,846
Other assets		9,562		10,977
Total assets	$	1,652,686		1,577,345

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and short-term borrowings	$	20,000		20,000
Accounts payable		70,748		56,669
Contract liabilities		117,863		106,045
Accrued salaries		35,256		39,768
Accrued other expenses		48,228		52,513
Total current liabilities		292,095		274,995
Deferred tax liabilities		82,580		73,560
Non-current operating lease liabilities		25,209		28,032
Other liabilities		41,920		47,062
Long-term debt		181,000		134,000
Total liabilities		622,804		557,649
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 30,707,567 and 30,666,173 shares, respectively		307		307
Additional paid-in capital		299,863		297,644
Retained earnings		876,050		830,989
Accumulated other comprehensive loss, net of tax		(19,377)		(2,161)
		1,156,843		1,126,779
Less treasury stock, at cost: 4,854,997 and 4,604,741 common shares, respectively		(126,961)		(107,083)
Total shareholders’ equity		1,029,882		1,019,696
Total liabilities and shareholders’ equity	$	1,652,686		1,577,345


	Three Months		Nine Months
	Ended June 30,		Ended June 30,
	2022	2021	2022	2021
Weighted Average Shares Outstanding — Basic	25,856	26,045	25,959	26,040
Dilutive Restricted Shares	94	169	91	159
Weighted Average Shares Outstanding — Diluted	25,950	26,214	26,050	26,199


	June 30,		September 30,
(In thousands)	2022		2021
Finished goods	$	39,904	32,998
Work in process		43,408	34,201
Raw materials		94,856	79,949
Total inventories, net	$	178,168	147,148


	June 30,		September 30,
(Dollars in thousands)	2022		2021
Goodwill	$	503,439	504,853

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,246	2,131
Less: accumulated amortization		1,059	972
Net	$	1,187	1,159

Capitalized software
Gross carrying amount	$	103,030	93,671
Less: accumulated amortization		68,643	63,740
Net	$	34,387	29,931

Customer relationships
Gross carrying amount	$	290,133	288,530
Less: accumulated amortization		92,943	80,882
Net	$	197,190	207,648

Other
Gross carrying amount	$	13,885	13,080
Less: accumulated amortization		6,629	4,301
Net	$	7,256	8,779
Intangible assets with indefinite lives:
Trade names	$	161,317	161,733


					Aerospace
(Dollars in millions)	USG		Test		& Defense	Total
Balance as of September 30, 2021		366.5		34.1	104.3	504.9
Acquisition activity and adjustments		—		—	5.7	5.7
Foreign currency translation		(7.2)		—	—	(7.2)
Balance as of June 30, 2022	$	359.3		34.1	110.0	503.4


	Three Months Ended June 30,		Nine Months Ended June 30,
	2022	2021	2022	2021

Common stock
Beginning balance	307	306	307	306
Stock plans	—	1	—	1
Ending balance	307	307	307	307

Additional paid-in-capital
Beginning balance	298,353	295,796	297,644	293,682
Stock plans	1,510	782	2,219	2,896
Ending balance	299,863	296,578	299,863	296,578

Retained earnings
Beginning balance	854,946	799,884	830,989	775,829
Net earnings common stockholders	23,173	14,909	51,280	43,131
Dividends paid	(2,069)	(2,084)	(6,219)	(6,251)
Ending balance	876,050	812,709	876,050	812,709

Accumulated other comprehensive income (loss)
Beginning balance	(7,472)	1,808	(2,161)	(3,657)
Foreign currency translation	(11,905)	535	(17,216)	6,000
Ending balance	(19,377)	2,343	(19,377)	2,343

Treasury stock
Beginning balance	(124,961)	(107,134)	(107,083)	(107,134)
Issued under stock plans /(repurchased)	(2,000)	51	(19,878)	51
Ending balance	(126,961)	(107,083)	(126,961)	(107,083)

Total equity	1,029,882	1,004,854	1,029,882	1,004,854


Three Months Ended June 30, 2022	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	38,918	$	65,610	$	54,449	$	158,977
U.S. Government		53,688		1,591		4,810		60,089
Total revenues	$	92,606	$	67,201	$	59,259	$	219,066
				65
Geographic location:
United States	$	79,536	$	41,822	$	34,662	$	156,020
International		13,070		25,379		24,597		63,046
Total revenues	$	92,606	$	67,201	$	59,259	$	219,066

Revenue recognition method:
Point in time	$	35,238	$	53,656	$	15,827	$	104,721
Over time		57,368		13,545		43,432		114,345
Total revenues	$	92,606	$	67,201	$	59,259	$	219,066


	Nine Months Ended
	June 30,
	2022		2021
Cash flows from operating activities:
Net earnings	$	51,280	43,131
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		36,247	30,259
Stock compensation expense		5,318	5,386
Changes in assets and liabilities		(60,172)	2,520
Gain on sale of building and land		—	(1,950)
Effect of deferred taxes		9,020	(3,946)
Net cash provided by operating activities		41,693	75,400
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(15,592)	(6,684)
Proceeds from sale of building and land		—	1,950
Additions to capitalized software		(9,359)	(6,500)
Capital expenditures		(25,893)	(17,887)
Net cash used by investing activities		(50,844)	(29,121)
Cash flows from financing activities:
Proceeds from long-term debt and short-term borrowings		111,000	80,000
Principal payments on long-term debt and short-term borrowings		(64,000)	(94,368)
Purchases of common stock into treasury		(19,878)	—
Dividends paid		(6,219)	(6,251)
Other		(2,787)	(1,672)
Net cash provided (used) by financing activities		18,116	(22,291)
Effect of exchange rate changes on cash and cash equivalents		(4,178)	1,811
Net increase in cash and cash equivalents		4,787	25,799
Cash and cash equivalents, beginning of period		56,232	52,560
Cash and cash equivalents, end of period	$	61,019	78,359

Supplemental cash flow information:
Interest paid	$	1,685	316
Income taxes paid (including state and foreign)		5,574	21,982


	Three Months			Nine Months
	Ended June 30,			Ended June 30,
(In thousands)	2022		2021	2022	2021
NET SALES
Aerospace & Defense	$	92,606	85,576	247,671	234,720
USG		67,201	47,704	194,877	141,799
Test		59,259	48,114	158,456	133,443
Consolidated totals	$	219,066	181,394	601,004	509,962

EBIT
Aerospace & Defense	$	20,738	16,714	45,042	41,980
USG		13,135	8,227	37,840	27,683
Test		8,354	6,751	20,813	17,781
Corporate (loss)		(11,394)	(12,269)	(34,604)	(30,359)
Consolidated EBIT		30,833	19,423	69,091	57,085
Less: Interest expense		(1,331)	(480)	(3,084)	(1,453)
Earnings before income taxes	$	29,502	18,943	66,007	55,632


	June 30, 2022		June 30, 2021
Weighted-average remaining lease term
Operating leases	9.8	years	10.3	years
Finance leases	12.3	years	11.9	years
Weighted-average discount rate
Operating leases	3.11	%	3.12	%
Finance leases	4.59	%	4.31	%


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2022 (excluding the nine months ended June 30, 2022)	$	1,316	552
2023		5,126	2,256
2024		4,330	2,315
2025		3,751	2,370
2026 and thereafter		20,251	21,431
Total minimum lease payments		34,774	28,924
Less: amounts representing interest		4,999	7,429
Present value of net minimum lease payments	$	29,775	21,495
Less: current portion of lease obligations		4,566	1,304
Non-current portion of lease obligations		25,209	20,191

ROU assets	$	28,922	17,736


Nine months ended June 30, 2022	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	100,407	$	191,832	$	147,390	$	439,629
U.S. Government		147,264		3,045		11,066		161,375
Total revenues	$	247,671	$	194,877	$	158,456	$	601,004

Geographic location:
United States	$	212,849	$	122,021	$	88,708	$	423,578
International		34,822		72,856		69,748		177,426
Total revenues	$	247,671	$	194,877	$	158,456	$	601,004

Revenue recognition method:
Point in time	$	99,464	$	155,693	$	43,488	$	298,645
Over time		148,207		39,184		114,968		302,359
Total revenues	$	247,671	$	194,877	$	158,456	$	601,004


Three months ended June 30, 2021	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	34,708	$	46,735	$	42,063	$	123,506
U.S. Government		50,868		969		6,051		57,888
Total revenues	$	85,576	$	47,704	$	48,114	$	181,394

Geographic location:
United States	$	75,701	$	32,111	$	27,719	$	135,531
International		9,875		15,593		20,395		45,863
Total revenues	$	85,576	$	47,704	$	48,114	$	181,394

Revenue recognition method:
Point in time	$	37,513	$	35,242	$	9,673	$	82,428
Over time		48,063		12,462		38,441		98,966
Total revenues	$	85,576	$	47,704	$	48,114	$	181,394


Nine months ended June 30, 2021	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	95,712	$	139,149	$	118,089	$	352,950
U.S. Government		139,008		2,650		15,354		157,012
Total revenues	$	234,720	$	141,799	$	133,443	$	509,962

Geographic location:
United States	$	205,527	$	96,601	$	73,950	$	376,078
International		29,193		45,198		59,493		133,884
Total revenues	$	234,720	$	141,799	$	133,443	$	509,962

Revenue recognition method:
Point in time	$	103,492	$	105,173	$	27,789	$	236,454
Over time		131,228		36,626		105,654		273,508
Total revenues	$	234,720	$	141,799	$	133,443	$	509,962


	Nine Months		Nine Months
	Ended		Ended
	June 30,		June 30,
(Dollars in thousands)	2022		2021
Finance lease cost
Amortization of right-of-use assets	$	1,179	$	1,477
Interest on lease liabilities		734		929
Operating lease cost		4,709		4,347
Total lease costs	$	6,622	$	6,753


				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, 2022	28,452	$	70.27	28,452	$	180.0 million
May 1-31, 2022	—	$	N/A	—	$	180.0 million
June 1-30, 2022	—	$	N/A	—	$	180.0 million
Total	28,452	$	70.27	28,452	$	180.0 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 19, 2019

10.1	Form of Restricted Share Unit Awards to Executive Officers under 2018 Omnibus Incentive Plan (2022)	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, 2022


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