Nov. 12, 2009 (PR Newswire) -- ST. LOUIS, Nov. 12 /PRNewswire-FirstCall/ -- ESCO Technologies Inc. (NYSE: ESE) today reported its operating results for the fourth quarter and fiscal year ended September 30, 2009, and announced that its Board of Directors has voted to initiate a quarterly cash dividend payable at an annual rate of $0.32 per share. The first quarterly dividend of $0.08 per share will be paid on January 19, 2010 to stockholders of record as of January 4, 2010.
Vic Richey, Chairman and Chief Executive Officer, commented, "The announcement today of the initiation of a cash dividend reflects the confidence that the Board of Directors and Management have in our long-term growth opportunities and financial strength. We are pleased to return a portion of our profits to our shareholders, while at the same time, maintaining our emphasis on investing in new products that will support our growth, meeting our anticipated capital requirements, and paying down our remaining debt."
2009 Highlights
-- EPS from Continuing Operations was $0.82 in the fourth quarter and $1.86
for the year.
-- Favorable settlement of uncertain tax positions in the 2009 fourth
quarter positively affected EPS for the quarter and the full year by
$0.19.
-- Cash from operations was $40.5 million in the quarter, and $77.6 million
for the year.
-- As a result of the strong cash flow, net debt outstanding decreased 34
percent to $130.6 million at September 30, 2009, reflecting a leverage
ratio of 1.86x.
-- Entered orders of $180.2 million were recorded in the fourth quarter and
$634.0 million for the year, which resulted in book-to-bill ratios
greater than 1.0x, respectively.
-- Firm order backlog increased during the quarter and the fiscal year to
an all-time high.
Operating Results
The following table presents EPS for the fourth quarters and fiscal years ended September 30:
Fourth Quarter: 2009 2008
--------------- ---- ----
EPS - Continuing Operations $0.82 0.75
EPS - Discontinued Operations $0.00 0.18
----- ----
EPS $0.82 0.93
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Total Year:
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EPS - Continuing Operations $1.86 1.81
EPS - Discontinued Operations $0.00 (0.03)
----- ----
EPS $1.86 1.78
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EPS is presented from "Continuing Operations" and "Discontinued Operations." Discontinued Operations represent the results of Comtrak which was sold in March 2009 and Filtertek which was sold in November 2007 (first quarter of fiscal 2008).
Effective Tax Rate
In September 2009, U.S. tax authorities completed their regular examination of certain previously filed tax returns. The completion of this examination substantiated the Company's positions on previously uncertain tax areas and enabled Management to reassess its measurement of the related tax liabilities. The closure of this examination resulted in a $5.0 million favorable adjustment to the 2009 fourth quarter tax provision, which significantly reduced the effective tax rate for the quarter and the year. Included in the examination results was the confirmation of the Company's tax position for the deduction of losses realized on the disposition of a portion of the MicroSep business in 2004.
The effective tax rates were 8.5 percent and 35.1 percent in the fourth quarters of 2009 and 2008, respectively, and 22.0 percent and 33.3 percent for the fiscal years 2009 and 2008, respectively. The favorable tax rates in all of the comparable periods noted were the result of varying degrees of income tax benefits and credits realized in the respective periods.
Cash Flow
Cash flow from operating activities generated $40.5 million during the 2009 fourth quarter and $77.6 million for the full year. As a result of this strong cash flow, net debt outstanding was reduced to $130.6 million at September 30, 2009 reflecting a favorable leverage ratio of 1.86x.
Entered Orders
Entered orders in the 2009 fourth quarter were $180.2 million, reflecting a book-to-bill ratio of 106 percent, and for the full year, entered orders were $634.0 million, or 102 percent of sales.
Order Highlights Include:
-- Fourth quarter Aclara RF AMI gas products with PG&E were $6.5 million,
bringing total PG&E gas project orders to 3.5 million units and $199
million to date.
-- Aclara RF AMI water products with New York City were $4.9 million in the
fourth quarter, bringing the total project to 493,000 units and $39.1
million to date.
-- Aclara PLS AMI products in the fourth quarter were $35.2 million,
bringing total year orders to $123.8 million, up from $121.6 million in
2008.
-- Aclara PLS orders from COOPs and Munis were $87.9 million in 2009
compared to $82.1 million in 2008. Fiscal 2009 includes $5.4 million of
load control / demand response devices.
-- VACCO multi-year fluid flow product orders for the Navy's Virginia Class
submarine were $32.2 million during the fourth quarter.
-- TekPackaging orders for Thermoscan® ear thermometer probe covers were
$11.7 million during the fourth quarter.
Chairman's Commentary
Mr. Richey further commented, "I am extremely pleased with our 2009 operating results. Given the state of today's challenging global economy, being able to generate nearly $78 million of cash flow from operations, and to increase our firm order backlog to an all time high was very satisfying. This positive outcome was due to the extraordinary efforts of our dedicated Management teams across the organization. As a result of these efforts and in spite of softness in several of our end markets, we were able to achieve the majority of our internal operating goals.
"Our Aclara group continues to gain momentum, and our ongoing investments in new products and advanced technologies continue to solidify our market position in the fast growing Smart Grid area. The recent announcement of our development of the Aclara Smart Communications Network solution, which is a revolutionary, high-bandwidth, high-speed, wide area network for utility customers, is further evidence of our commitment to expand our position as a leading provider of next generation technologies for the Smart Grid.
"Like others in the AMI market, during 2009 we experienced delays of some expected orders and sales as a result of the uncertainty surrounding the government's Stimulus Program. Several of our customers who participated in the Grant Program delayed placing orders and taking deliveries until the DOE announced the selection results. The customers' goal was to maximize the impact of the available grant money, and with this uncertainty now resolved, we fully expect to see a meaningful amount of progress. Based on the grant recipients identified, and with our participation in many of these projects being finalized, our confidence in the future remains high.
"Strategically, we are maintaining our focus on creating significant growth, and we will continue to focus our R&D and engineering spending toward new product development initiatives in the domestic AMI / Smart Grid area, as well as expanding our position in the international AMI market.
"We are making substantial progress with a number of large AMI projects and customers in our international pipeline, and we are enthused with our near-term order prospects in South America, Mexico and Asia. As these international projects begin to deploy Aclara products, we expect they will be a significant contributor to our multi-year growth outlook.
"While I am very enthusiastic about the significant number of opportunities in front of us currently, the ongoing uncertainties of today's economy, the delays associated with the Stimulus Program, and the timing of other customers finalizing their AMI deployment schedules have caused us to have a more conservative perspective as we address fiscal 2010. As discussed in the Business Outlook section of this release, we are taking a cautious approach to our near-term outlook and expectations to reflect these uncertainties.
"I am confident that given our new products currently being introduced, the strength and size of our domestic and international business prospects, and acquisition opportunities that are currently under review, we are well positioned for the future."
Sales
Fourth quarter sales were $169.4 million in 2009 compared to $192.5 million in 2008, and total year sales were $619.1 million in 2009 compared to $613.6 million in 2008. As noted in earlier releases, fiscal year 2008 sales included $31.3 million of revenue recognized that had been deferred from prior periods related to Aclara PLS deliveries to PG&E. Excluding the PG&E deferred revenue recognized in 2008, fiscal 2009 sales increased $36.8 million, or 6.3 percent.
Utility Solutions Group (USG) fourth quarter sales decreased $11.3 million in 2009 compared to the 2008 fourth quarter, but increased $21.3 million for the full year. Absent the $31.3 million PG&E / PLS deferred revenue in 2008 noted above, fiscal 2009 sales increased $52.6 million, or 16.4 percent from the prior year. The USG sales increase for the total year was primarily driven by significantly higher deliveries of fixed network RF AMI gas products to PG&E; continued increases in AMI water product deliveries; and higher sales at Aclara Software. Additionally, having Doble for 12 months in 2009 versus 10 months in 2008 contributed an additional $9.9 million of sales.
Test sales in 2009 decreased in the fourth quarter and full year primarily due to the timing of large chamber deliveries to the international wireless and electronics end-markets.
Filtration sales in 2009 decreased in the fourth quarter and total year as sales increases in the defense aerospace and space product lines at VACCO were offset by lower commercial aerospace product deliveries at PTI.
Earnings Before Interest and Taxes (EBIT)
On a segment basis, items that impacted EBIT dollars and EBIT as a percent of sales ("EBIT margin") during the fourth quarter and fiscal year 2009 included the following:
In the USG segment, EBIT for the 2009 fourth quarter was $22.6 million compared to 2008's fourth quarter EBIT of $24.4 million (which includes $6.5 million of profit related to the fourth quarter PG&E / PLS sales deferral noted above). USG's EBIT was impacted by the significant increases in sales of RF AMI products and Aclara Software, offset by lower sales of PLS AMI products (PG&E related) and lower Doble hardware sales.
