ESCO Announces Second Quarter Results

ST. LOUIS, May 3, 2011 /PRNewswire/ -- ESCO Technologies Inc. (NYSE: ESE) today reported its operating results for the second quarter ended March 31, 2011.

Second Quarter 2011 Highlights

• Net sales were $167 million, an increase of $38 million, or 29 percent, over Q2 2010 net sales of $129 million;
• Utility Solutions Group (USG) net sales were $85 million, an increase of $13 million, or 18 percent over Q2 2010 net sales of $72 million (Aclara sales increased $7 million, and Doble sales increased $6 million);
• Filtration net sales increased $14 million, or 54 percent over Q2 2010, with Crissair contributing $7 million of the increase;
• Test net sales increased $11 million, or 33 percent over Q2 2010;
• EBIT dollars increased $12 million, or 120 percent over Q2 2010, and EBIT margins as a percent of sales increased meaningfully across all three operating segments;
• EPS was $0.49 per share, or 123 percent over Q2 2010 EPS of $0.22 per share;
• Net cash provided by operating activities increased to $17 million, compared to a use of cash from operating activities of $2 million in Q2 2010;
• Entered orders were $167 million resulting in a book-to-bill ratio of 1.0x and firm order backlog of $387 million at March 31, 2011.

Chairman's Commentary – Second Quarter

Vic Richey, Chairman and Chief Executive Officer, commented, "I am pleased to announce another strong quarter as we exceeded our internal EBIT projections across the Company which resulted in higher than expected EPS. The EPS increase was driven by Filtration and Test generating higher sales volumes along with a favorable sales mix, and USG reporting higher than expected profit resulting from additional high margin Aclara sales and lower than planned spending on our previously discussed Smart Grid initiatives. Our investments in these Smart Grid initiatives are expected to increase significantly in the second half of the year.

"Second quarter sales increased $38 million with all three segments showing meaningful growth year-over-year. I was pleased to see the sales increase being relatively balanced across the Company, which I believe demonstrates the success of our multi-segment growth strategy.

"EBIT increased nearly $12 million in the second quarter, reflecting solid operating performance across the company, which in turn drove EBIT margins significantly higher in all three segments.  

"Compared to the record level of entered orders in the second quarter of fiscal 2010, I am comfortable with the $167 million in orders received in Q2 of 2011, as well as the resulting $387 million of backlog. The $26 million increase in backlog from the start of the fiscal year was driven by the significant orders received in Test and USG, both domestically and internationally.

"I'm very satisfied with the first six months of fiscal 2011 as we exceeded our internal operating goals across all segments of the business. Our Utility Solutions Group continues its solid performance, and our ongoing investments in new products and advanced technologies continue to solidify our market position in the fast-growing Smart Grid area. As I've noted before, we are fully committed to expanding our product offering and related solutions and being recognized as a leading provider of next generation technologies for the Smart Grid."

Business Outlook

Statements contained in the preceding and following paragraphs are based on current expectations. Statements that are not strictly historical are considered forward-looking, and actual results may differ materially.

Dividend Payment

The next quarterly cash dividend of $0.08 per share will be paid on July 20 to stockholders of record on July 6.

Fiscal Year 2011

Management's expectations for sales and EPS growth for 2011 remain consistent with the Outlook communicated in the November 11, 2010 and February 3, 2011 earnings releases.

Additionally, as a result of the timing of previously communicated USG Smart Grid spending, along with earlier than planned customer deliveries which resulted in higher sales and profits in the first half of fiscal 2011 than originally planned, Management expects third quarter EPS to be lower than second quarter EPS. Fourth quarter EPS is expected to be higher than third quarter, and full year EPS remains consistent with Management's earlier expectations.

Chairman's Commentary – Longer-Term

Mr. Richey concluded, "While I continue to remain positive about our near-term outlook, recently, I have become more excited about our significant growth prospects over the next three to five years. To support this view, in April, we completed our formal strategic planning meetings and reviewed our short-term and specific long-term growth opportunities across all operating units. As a result, I am more optimistic today about the size and number of specific, identifiable growth opportunities across the Company that should manifest themselves into orders and sales over the next several years.

"We expect our mid-term growth projections will be led by the largest AMI gas project in North America, supplemented by our international AMI opportunities, and complemented by our expected domestic growth across all three operating segments.

"Our COOP, Gas and Water AMI business opportunities remain very strong, and our market-leading position at Doble should allow us to expand our domestic success to our targeted international opportunities.

"I remain very optimistic about our current business prospects, including our new product roadmap in USG where we are investing heavily in 2011. I believe this significant investment will pay us back over the next couple of years with meaningful growth opportunities, both domestically and internationally.

"Our commitment remains the same − to achieve our long-term goal of increasing shareholder value."

Conference Call

The Company will host a conference call today, May 3, at 4 p.m. Central Time, to discuss the Company's second quarter and year-to-date fiscal 2011 operating results. A live audio webcast will be available on the Company's web site at www.escotechnologies.com. Please access the web site at least 15 minutes prior to the call to register, download and install any necessary audio software. A replay of the conference call will be available for seven days on the Company's web site noted above or by phone (dial 1-888-203-1112 and enter the pass code 7282066).

Forward-Looking Statements

Statements in this press release regarding the amount and timing of the Company's expected 2011 and beyond revenues, EBIT margins, EPS, sales, investments, the likelihood, timing and revenue associated with the anticipated SoCalGas AMI contract, the size, number and timing of growth opportunities in the future, new product development, success in capturing international and domestic USG opportunities, development and success of new products and technologies, 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. 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: the risk factors described in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2010; the success of negotiations between SoCalGas and the Company; changes in requirements of SoCalGas; SoCalGas' ability to successfully negotiate appropriate terms and conditions with other subcontractors and project participants; financial constraints impacting SoCalGas; the receipt of necessary regulatory approvals pertaining to the SoCalGas project; the impact of the Japan earthquake; the success of the Company's competitors; changes in Federal or State energy laws; the Company's successful performance of its AMI contracts; site readiness issues with Test segment customers; weakening of economic conditions in served markets; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; unforeseen charges impacting corporate operating expenses; the performance of the Company's international operations; material changes in the costs and availability of certain raw materials including steel and copper; worldwide availability of electronic components; termination for convenience of customer contracts; timing and magnitude of future contract awards; containment of engineering and development costs; performance issues with key customers, suppliers and subcontractors; labor disputes; changes in laws and regulations including but not limited to changes in accounting standards and taxation requirements; costs relating to environmental matters; uncertainty of disputes in litigation or arbitration; and the Company's successful execution of internal operating plans.

ESCO, headquartered in St. Louis, is a proven supplier of special purpose utility solutions for electric, gas, and water utilities, including hardware and software to support advanced metering applications and fully automated intelligent instrumentation. In addition, the Company provides engineered filtration products to the aviation, space, and process markets worldwide and is the industry leader in RF shielding and EMC test products. Further information regarding ESCO and its subsidiaries is available on the Company's web site at www.escotechnologies.com.

- tables attached -

SOURCE ESCO Technologies Inc.

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