ESCO TECHNOLOGIES INC - Quarter Report: 2010 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(MARK
ONE)
|
(X)
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31,
2010
|
OR
|
( )
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM ______ TO
______
|
|
|
COMMISSION
FILE NUMBER 1-10596
|
ESCO
TECHNOLOGIES INC.
(Exact
name of registrant as specified in its charter)
|
MISSOURI
(State
or other jurisdiction of
incorporation
or organization)
|
43-1554045
(I.R.S.
Employer
Identification
No.)
|
|
9900A
CLAYTON ROAD
ST.
LOUIS, MISSOURI
(Address
of principal executive offices)
|
63124-1186
(Zip
Code)
|
(314)
213-7200
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
|
Yes
|
X
|
No
|
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
|
Yes
|
No
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer
|
X
|
Accelerated
filer
|
||||
|
Non-
accelerated filer
|
Smaller
reporting company
|
|||||
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
|
Yes
|
No
|
X
|
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
|
Class
|
Outstanding
at April 30, 2010
|
|
|
Common
stock, $.01 par value per share
|
26,446,248
shares
|
PART
I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars
in thousands, except per share amounts)
|
|
Three
Months Ended
March 31,
|
|
|
2010
|
2009
|
||||||
|
Net
sales
|
$ | 129,281 | 154,156 | |||||
|
Costs
and expenses:
|
||||||||
|
Cost
of sales
|
79,399 | 92,226 | ||||||
|
Selling,
general and administrative expenses
|
36,809 | 38,237 | ||||||
|
Amortization
of intangible assets
|
2,887 | 4,985 | ||||||
|
Interest
expense, net
|
755 | 1,756 | ||||||
|
Other
expenses, net
|
288 | 357 | ||||||
|
Total costs and
expenses
|
120,138 | 137,561 | ||||||
|
Earnings
before income taxes
|
9,143 | 16,595 | ||||||
|
Income
tax expense
|
3,177 | 5,990 | ||||||
|
Net
earnings from continuing operations
|
5,966 | 10,605 | ||||||
|
Loss
from discontinued operations, net of tax benefit of $101
|
- | (177 | ) | |||||
|
Loss
on sale from discontinued operations, net of tax benefit of
$905
|
- | (32 | ) | |||||
|
Net
loss from discontinued operations
|
- | (209 | ) | |||||
|
Net
earnings
|
$ | 5,966 | 10,396 | |||||
|
Earnings
per share:
|
||||||||
|
Basic – Continuing
operations
|
$ | 0.23 | 0.41 | |||||
|
-
Discontinued operations
|
0.00 | (0.01 | ) | |||||
|
-
Net earnings
|
$ | 0.23 | 0.40 | |||||
|
Diluted
– Continuing operations
|
$ | 0.22 | 0.40 | |||||
|
-
Discontinued operations
|
0.00 | (0.01 | ) | |||||
|
-
Net earnings
|
$ | 0.22 | 0.39 | |||||
See
accompanying notes to consolidated financial statements.
ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars
in thousands, except per share amounts)
|
|
Six
Months Ended
March 31,
|
|
|
2010
|
2009
|
||||||
|
Net
sales
|
$ | 241,986 | 301,513 | |||||
|
Costs
and expenses:
|
||||||||
|
Cost
of sales
|
146,835 | 184,842 | ||||||
|
Selling,
general and administrative expenses
|
76,017 | 77,519 | ||||||
|
Amortization
of intangible assets
|
5,771 | 9,587 | ||||||
|
Interest
expense, net
|
2,237 | 4,374 | ||||||
|
Other
expenses, net
|
1,311 | 244 | ||||||
|
Total costs and
expenses
|
232,171 | 276,566 | ||||||
|
Earnings
before income taxes
|
9,815 | 24,947 | ||||||
|
Income
tax expense
|
3,412 | 8,502 | ||||||
|
Net
earnings from continuing operations
|
6,403 | 16,445 | ||||||
|
Loss
from discontinued operations, net of tax benefit of $112
|
- | (197 | ) | |||||
|
Loss
on sale from discontinued operations, net of tax benefit of
$905
|
- | (32 | ) | |||||
|
Net
loss from discontinued operations
|
- | (229 | ) | |||||
|
Net
earnings
|
$ | 6,403 | 16,216 | |||||
|
Earnings
per share:
|
||||||||
|
Basic – Continuing
operations
|
$ | 0.24 | 0.63 | |||||
|
-
Discontinued operations
|
0.00 | (0.01 | ) | |||||
|
-
Net earnings
|
$ | 0.24 | 0.62 | |||||
|
Diluted
– Continuing operations
|
$ | 0.24 | 0.62 | |||||
|
-
Discontinued operations
|
0.00 | (0.01 | ) | |||||
|
-
Net earnings
|
$ | 0.24 | 0.61 | |||||
See
accompanying notes to consolidated financial statements.
ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Dollars
in thousands)
|
|
March
31,
2010
|
September
30, 2009
|
||||||
|
ASSETS
|
(Unaudited)
|
|||||||
|
Current
assets:
|
||||||||
|
Cash and cash
equivalents
|
$ | 22,925 | 44,630 | |||||
|
Accounts receivable,
net
|
94,432 | 108,620 | ||||||
|
Costs
and estimated earnings on long-term contracts, less progress billings of
$5,103 and $19,861, respectively
|
6,378 | 10,758 | ||||||
|
Inventories
|
89,302 | 82,020 | ||||||
|
Current portion of deferred tax
assets
|
21,594 | 20,417 | ||||||
|
Other current
assets
|
20,068 | 13,750 | ||||||
|
Total current
assets
|
254,699 | 280,195 | ||||||
|
Property,
plant and equipment, net
|
70,422 | 69,543 | ||||||
|
Goodwill
|
330,326 | 330,719 | ||||||
|
Intangible
assets, net
|
219,518 | 221,600 | ||||||
|
Other
assets
|
21,887 | 21,630 | ||||||
|
Total
assets
|
$ | 896,852 | 923,687 | |||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Short-term
borrowings and current portion of long-term debt
|
$ | 50,000 | 50,000 | |||||
|
Accounts
payable
|
29,051 | 47,218 | ||||||
|
Advance payments on long-term
contracts, less costs incurred of $16,244 and $17,484,
respectively
|
6,700 | 2,840 | ||||||
|
Accrued
salaries
|
17,291 | 20,465 | ||||||
|
Current portion of deferred
revenue
|
21,645 | 20,215 | ||||||
|
Accrued other
expenses
|
21,839 | 23,247 | ||||||
|
Total current
liabilities
|
146,526 | 163,985 | ||||||
|
Pension
obligations
|
26,048 | 27,483 | ||||||
|
Deferred
tax liabilities
|
78,326 | 78,471 | ||||||
|
Other
liabilities
|
5,457 | 5,941 | ||||||
|
Long-term
debt, less current portion
|
120,363 | 130,467 | ||||||
|
Total liabilities
|
376,720 | 406,347 | ||||||
|
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 29,789,234 and 29,771,103
shares, respectively
|
298 | 298 | ||||||
|
Additional paid-in
capital
|
267,878 | 265,794 | ||||||
|
Retained
earnings
|
325,066 | 322,878 | ||||||
|
Accumulated other comprehensive
loss, net of tax
|
(13,241 | ) | (11,598 | ) | ||||
| 580,001 | 577,372 | |||||||
|
Less treasury stock, at cost:
3,346,986 and 3,357,046 common shares, respectively
|
(59,869 | ) | (60,032 | ) | ||||
|
Total shareholders'
equity
|
520,132 | 517,340 | ||||||
|
Total
liabilities and shareholders’ equity
|
$ | 896,852 | 923,687 | |||||
See
accompanying notes to consolidated financial statements.
ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars
in thousands)
|
|
Six
Months Ended
March
31,
|
|
|
2010
|
2009
|
||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
earnings
|
$ | 6,403 | 16,216 | |||||
|
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
||||||||
|
Net
loss from discontinued operations
|
- | 229 | ||||||
|
Depreciation
and amortization
|
11,157 | 15,108 | ||||||
|
Stock
compensation expense
|
1,900 | 2,097 | ||||||
|
Changes
in current assets and liabilities
|
(15,158 | ) | (11,413 | ) | ||||
|
Effect
of deferred taxes
|
(1,322 | ) | (1,074 | ) | ||||
|
Pension
contributions
|
(968 | ) | (1,388 | ) | ||||
|
Other
|
829 | 146 | ||||||
|
Net
cash provided by operating activities – continuing
operations
|
2,841 | 19,921 | ||||||
|
Net
loss from discontinued operations, net of tax
|
- | (229 | ) | |||||
|
Net
cash provided by discontinued operations
|
- | 39 | ||||||
|
Net
cash used by operating activities – discontinued
operations
|
- | (190 | ) | |||||
|
Net
cash provided by operating activities
|
2,841 | 19,731 | ||||||
|
Cash
flows from investing activities:
|
||||||||
|
Additions
to capitalized software
|
(4,095 | ) | (2,487 | ) | ||||
|
Capital
expenditures
|
(7,074 | ) | (3,116 | ) | ||||
|
Net
cash used by investing activities – continuing operations
|
(11,169 | ) | (5,603 | ) | ||||
|
Proceeds
from divestiture of business, net –
discontinued operations
|
- | 3,100 | ||||||
|
Net
cash provided by investing activities – discontinued
operations
|
- | 3,100 | ||||||
|
Net
cash used by investing activities
|
(11,169 | ) | (2,503 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Proceeds
from long-term debt
|
8,000 | 27,000 | ||||||
|
Principal
payments on long-term debt
|
(18,104 | ) | (45,146 | ) | ||||
|
Dividends
paid
|
(2,115 | ) | - | |||||
|
Proceeds
from exercise of stock options
|
412 | 1,164 | ||||||
|
Other
|
655 | 592 | ||||||
|
Net
cash used by financing activities
|
(11,152 | ) | (16,390 | ) | ||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(2,225 | ) | (2,905 | ) | ||||
|
Net
decrease in cash and cash equivalents
|
(21,705 | ) | (2,067 | ) | ||||
|
Cash
and cash equivalents, beginning of period
|
44,630 | 28,667 | ||||||
|
Cash
and cash equivalents, end of period
|
$ | 22,925 | 26,600 | |||||
See
accompanying notes to consolidated financial statements.
ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
1.
|
BASIS
OF PRESENTATION
|
The
accompanying consolidated financial statements, in the opinion of management,
include all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation of the results for the interim periods presented. The
consolidated financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all the disclosures
required for annual financial statements by accounting principles generally
accepted in the United States of America (GAAP). For further information, refer
to the consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2009.
The
Company’s business is typically not impacted by seasonality; however, the
results for the three and six-month periods ended March 31, 2010 are not
necessarily indicative of the results for the entire 2010 fiscal
year. References to the second quarters of 2010 and 2009 represent
the fiscal quarters ended March 31, 2010 and 2009, respectively.
In
preparing the financial statements, the Company uses estimates and assumptions
that may affect reported amounts and disclosures. The Company
regularly evaluates the estimates and assumptions related to the allowance for
doubtful trade receivables, inventory obsolescence, warranty reserves, value of
equity-based awards, goodwill and purchased intangible asset valuations, asset
impairments, employee benefit plan liabilities, income tax liabilities and
assets and related valuation allowances, uncertain tax positions, and litigation
and other loss contingencies. Actual results could differ from those
estimates.
|
2.
|
DIVESTITURE
- 2009
|
|
|
During
the second quarter of fiscal 2009, the Company completed the sale of the
business and most of the assets of Comtrak Technologies, LLC (Comtrak) for
$3.1 million, net, of cash and the business is reflected as a discontinued
operation in the financial statements and related
notes. Comtrak’s operations were previously included within the
Company’s Utility Solutions Group segment and net sales were $1.6 million
and $3.4 million for the three and six-month periods ended March 31, 2009,
respectively.
|
|
3.
|
EARNINGS
PER SHARE (EPS)
|
Basic EPS
is calculated using the weighted average number of common shares outstanding
during the period. Diluted EPS is calculated using the weighted average number
of common shares outstanding during the period plus shares issuable upon the
assumed exercise of dilutive common share options and vesting of
performance-accelerated restricted shares (restricted shares) by using the
treasury stock method. The number of shares used in the calculation of earnings
per share for each period presented is as follows (in thousands):
|
Three
Months Ended
March 31,
|
Six
Months Ended
March 31,
|
|||
|
2010
|
2009
|
2010
|
2009
|
|
|
Weighted
Average Shares Outstanding - Basic
|
26,440
|
26,177
|
26,432
|
26,143
|
|
Dilutive
Options and Restricted Shares
|
262
|
293
|
273
|
301
|
|
Adjusted
Shares - Diluted
|
26,702
|
26,470
|
26,705
|
26,444
|
Options
to purchase 573,394 shares of common stock at prices ranging from $32.55 -
$54.88 and options to purchase 609,091 shares of common stock at prices ranging
from $35.69 - $54.88 were outstanding during the three-month periods ended March
31, 2010 and 2009, respectively, but were not included in the computation of
diluted EPS because the options' exercise prices were greater than the average
market price of the common shares. The options expire at various periods through
2014. Approximately 248,000 and 218,000 restricted shares were excluded from the
computation of diluted EPS for the three-month period ended March 31, 2010 and
2009, respectively, based upon the application of the treasury stock
method.
|
4.
|
SHARE-BASED
COMPENSATION
|
The
Company provides compensation benefits to certain key employees under several
share-based plans providing for employee stock options and/or
performance-accelerated restricted shares (restricted shares), and to
non-employee directors under a non-employee directors compensation
plan.
Stock
Option Plans
The fair
value of each option award is estimated as of the date of grant using the
Black-Scholes option pricing model. Expected volatility is based on
historical volatility of the Company’s stock calculated over the expected term
of the option. The risk-free rate for the expected term of the option
is based on the U.S. Treasury yield curve in effect at the date of
grant. The fair value of each option grant was calculated using the
following weighted-average assumptions for grants in the six-month period ended
March 31, 2010: expected dividend yield of .9%; expected volatility of 48.1%;
risk-free interest rate of 1.9%; and the expected term of 3.9
years. Pretax compensation expense related to the stock option awards
was $0.1 million and $0.2 million for the three and six-month periods ended
March 31, 2010, respectively, and $0.3 million and $0.8 million for the
respective prior year periods.
Information
regarding stock options awarded under the option plans is as
follows:
|
|
Shares
|
Weighted
Avg.
Price
|
Aggregate Intrinsic Value
(in millions)
|
Weighted
Avg. Remaining Contractual Life
|
|||||||||
|
Outstanding
at October 1, 2009
|
891,826 | $ | 33.63 | ||||||||||
|
Granted
|
2,000 | $ | 32.55 | ||||||||||
|
Exercised
|
(20,400 | ) | $ | 18.80 | $ | 0.4 | |||||||
|
Cancelled
|
(42,597 | ) | $ | 40.61 | |||||||||
|
Outstanding
at March 31, 2010
|
830,829 | $ | 33.64 | $ | 5.0 |
1.7 years
|
|||||||
|
Exercisable
at March 31, 2010
|
742,600 | $ | 33.20 | $ | 5.0 | ||||||||
The
weighted-average grant-date fair value of options granted during the six-month
periods ended March 31, 2010 and 2009 was $11.90 and $12.09,
respectively.
Performance-accelerated
Restricted Share Awards
Pretax
compensation expense related to the restricted share awards was $0.6 million and
$1.4 million for the three and six-month periods ended March 31, 2010,
respectively, and $0.6 million and $1.1 million for the respective prior year
periods.
The
following summary presents information regarding outstanding restricted share
awards as of March 31, 2010 and changes during the six-month period then
ended:
|
|
Shares
|
Weighted
Avg. Price
|
||||||
|
Nonvested
at October 1, 2009
|
300,354 | $ | 39.94 | |||||
|
Granted
|
80,102 | $ | 38.16 | |||||
|
Cancelled
|
(28,500 | ) | $ | 40.42 | ||||
|
Nonvested
at March 31, 2010
|
351,956 | $ | 39.50 | |||||
Non-Employee
Directors Plan
Pretax
compensation expense related to the non-employee director grants was $0.1
million and $0.3 million for the three and six-month periods ended March 31,
2010, respectively, and $0.2 million and $0.4 million for the respective prior
year periods.
The total
share-based compensation cost that has been recognized in results of operations
and included within selling, general and administrative expenses (SG&A) was
$0.9 million and $1.9 million for the three and six-month periods ended March
31, 2010, respectively, and $1.1 million and $2.1 million for the three and
six-month periods ended March 31, 2009, respectively. The total
income tax benefit recognized in results of operations for share-based
compensation arrangements was $0.3 million and $0.8 million for the three and
six-month periods ended March 31, 2010, respectively, and $0.3 million and $0.7
million for the three and six-month periods ended March 31, 2009,
respectively. As of March 31, 2010, there was $8.6 million of total
unrecognized compensation cost related to share-based compensation
arrangements. That cost is expected to be recognized over a remaining
weighted-average period of 2.1 years.
5. INVENTORIES
Inventories
from continuing operations consist of the following:
|
(In
thousands)
|
March
31,
2010
|
September
30, 2009
|
||||||
|
Finished
goods
|
$ | 42,123 | 38,153 | |||||
|
Work
in process, including long-term contracts
|
17,440 | 16,433 | ||||||
|
Raw
materials
|
29,739 | 27,434 | ||||||
|
Total inventories
|
$ | 89,302 | 82,020 | |||||
6. COMPREHENSIVE
INCOME
Comprehensive
income for the three-month periods ended March 31, 2010 and 2009 was $4.1
million and $8.3 million, respectively. Comprehensive income for the
six-month periods ended March 31, 2010 and 2009 was $4.8 million and $11.1
million, respectively. For the six-month period ended March 31, 2010,
the Company’s comprehensive income was negatively impacted by foreign currency
translation adjustments of $2.2 million and favorably impacted by interest rate
swap gains of $0.6 million. For the six-month period ended March 31,
2009, the Company’s comprehensive income was negatively impacted by foreign
currency translation adjustments and interest rate swap gains totaling $5.1
million.
|
7.
|
BUSINESS
SEGMENT INFORMATION
|
The
Company is organized based on the products and services that it offers. Under
this organizational structure, the Company has three reporting segments: Utility
Solutions Group (USG), RF Shielding and Test (Test) and Filtration/Fluid Flow
(Filtration). The USG segment’s operations consist
of: Aclara Power-Line Systems Inc. (Aclara PLS), Aclara RF Systems
Inc. (Aclara RF), Aclara Software Inc., and Doble Engineering Company (Doble).
The Aclara Group is a proven supplier of special purpose fixed-network
communications systems for electric, gas and water utilities, including hardware
and software to support advanced metering applications. Doble
provides high-end, intelligent diagnostic test solutions for the electric power
delivery industry and is a leading supplier of partial discharge testing
instruments used to assess the integrity of high voltage power delivery
equipment. Test segment operations represent the EMC Group,
consisting primarily of ETS-Lindgren L.P. (ETS) and Lindgren R.F. Enclosures,
Inc. (Lindgren). The EMC Group is an industry leader in providing its
customers with the ability to identify, measure and contain magnetic,
electromagnetic and acoustic energy. The Filtration segment’s
operations consist of: PTI Technologies Inc. (PTI), VACCO Industries (VACCO) and
TekPackaging LLC. The companies within this segment primarily design
and manufacture specialty filtration products including hydraulic filter
elements used in commercial aerospace applications, unique filter mechanisms
used in micro propulsion devices for satellites and custom designed filters for
manned and unmanned aircraft.
Management
evaluates and measures the performance of its operating segments based on “Net
Sales” and “EBIT”, which are detailed in the table below. EBIT is
defined as earnings from continuing operations before interest and taxes. The
table below is presented on the basis of continuing operations and excludes
discontinued operations.
|
(In
thousands)
|
Three
Months ended
March 31,
|
Six
Months ended
March 31,
|
||||||||||||||
|
NET SALES
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
USG
|
$ | 72,009 | 94,065 | 133,232 | 182,266 | |||||||||||
|
Test
|
31,580 | 33,713 | 58,567 | 69,202 | ||||||||||||
|
Filtration
|
25,692 | 26,378 | 50,187 | 50,045 | ||||||||||||
|
Consolidated
totals
|
$ | 129,281 | 154,156 | 241,986 | 301,513 | |||||||||||
|
EBIT
|
||||||||||||||||
|
USG
|
$ | 10,621 | 16,138 | 15,191 | 26,693 | |||||||||||
|
Test
|
2,096 | 3,748 | 2,796 | 6,982 | ||||||||||||
|
Filtration
|
2,989 | 4,227 | 5,347 | 7,090 | ||||||||||||
|
Corporate
(loss)
|
(5,808 | ) | (5,762 | ) | (11,282 | ) | (11,444 | ) | ||||||||
|
Consolidated
EBIT
|
9,898 | 18,351 | 12,052 | 29,321 | ||||||||||||
|
Less:
Interest expense
|
(755 | ) | (1,756 | ) | (2,237 | ) | (4,374 | ) | ||||||||
|
Earnings
before income taxes
|
$ | 9,143 | 16,595 | 9,815 | 24,947 | |||||||||||
8. DEBT
The
Company’s debt is summarized as follows:
|
(In
thousands)
|
March
31,
2010
|
September
30, 2009
|
||||||
|
Revolving
credit facility, including current portion
|
$ | 170,363 | 180,467 | |||||
|
Current
portion of long-term debt
|
(50,000 | ) | (50,000 | ) | ||||
|
Total
long-term debt, less current portion
|
$ | 120,363 | 130,467 | |||||
At March
31, 2010, the Company had $197.6 million available to borrow comprised of:
approximately $147.6 million available under the credit facility, and a $50.0
million increase option, in addition to $22.9 million cash on
hand. At March 31, 2010, the Company had $170 million of outstanding
borrowings under the credit facility and outstanding letters of credit of $12.4
million. The Company classified $50 million as the current portion on
long-term debt as of March 31, 2010, as the Company intends to repay this amount
within the next twelve months; however, the Company has no contractual
obligation to repay such amount during the next twelve months.
The
credit facility requires, as determined by certain financial ratios, a facility
fee ranging from 15 to 25 basis points per year on the unused
portion. The terms of the facility provide that interest on
borrowings may be calculated at a spread over the London Interbank Offered Rate
(LIBOR) or based on the prime rate, at the Company’s election. The
facility is secured by the unlimited guaranty of the Company’s material domestic
subsidiaries and a 65% pledge of the material foreign subsidiaries’ share
equity. The financial covenants of the credit facility also include a
leverage ratio and an interest coverage ratio.
9. INCOME
TAX EXPENSE
The
second quarter 2010 effective income tax rate for continuing operations was
34.7% compared to 36.1% in the second quarter of 2009. The effective
income tax rate from continuing operations in the first six months of 2010 was
34.8% compared to 34.1% in the prior year period. The income tax
expense in the second quarter and first six months of 2010 was favorably
impacted by a $0.2 million adjustment to foreign tax accruals reducing the
second quarter and year-to-date effective tax rate by 1.7% and 1.6%,
respectively. The income tax expense in the first six months of 2009
was favorably impacted by a $0.7 million, net, research credit for fiscal 2008
reducing the rate for the first six months of 2009 by 2.8%. The
Company estimates the annual effective income tax rate for fiscal 2010 to be
approximately 36%.
There was
no material change in the unrecognized tax benefits of the Company during the
three-month period ended March 31, 2010. The Company anticipates a
$0.2 million reduction in the amount of unrecognized tax benefits in the next
twelve months as a result of a lapse of the applicable statute of
limitations.
10. RETIREMENT
PLANS
A summary
of net periodic benefit expense for the Company’s defined benefit plans for the
three and six-month periods ended March 31, 2010 and 2009 is shown in the
following table. Net periodic benefit cost for each period presented
is comprised of the following:
|
Three
Months Ended
March 31,
|
Six
Months Ended March
31,
|
|||||||||||||||
|
(In
thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Defined
benefit plans
|
||||||||||||||||
|
Interest
cost
|
$ | 976 | 724 | 1,952 | 1,437 | |||||||||||
|
Expected
return on assets
|
(1,035 | ) | (776 | ) | (2,070 | ) | (1,514 | ) | ||||||||
|
Amortization
of:
|
||||||||||||||||
|
Prior
service cost
|
3 | 4 | 6 | 8 | ||||||||||||
|
Actuarial loss
|
226 | 79 | 452 | 131 | ||||||||||||
|
Net
periodic benefit cost
|
$ | 170 | 31 | 340 | 62 | |||||||||||
11. DERIVATIVE
FINANCIAL INSTRUMENTS
Market
risks relating to the Company's operations result primarily from changes in
interest rates and changes in foreign currency exchange rates. The Company is
exposed to market risk related to changes in interest rates and selectively uses
derivative financial instruments, including forward contracts and swaps, to
manage these risks. During the second quarter of 2009, the Company
entered into two $40 million one-year forward interest rate swaps effective
October 5, 2009 to hedge some of its exposure to variability in future
LIBOR-based interest payments on variable rate debt. All derivative
instruments are reported on the balance sheet at fair value. The
derivative instrument is designated as a cash flow hedge and the gain or loss on
the derivative is deferred in accumulated other comprehensive income until
recognized in earnings with the underlying hedged item. As of March
31, 2010, approximately 50% of the Company’s variable debt was not hedged by
interest rate swaps.
The
following is a summary of the notional transaction amounts and fair values for
the Company’s outstanding derivative financial instruments as of March 31,
2010.
|
Average
|
||||||||||||||||
|
(In
thousands)
|
Notional
Amount
|
Receive
Rate
|
Average
Pay Rate
|
Fair Value
|
||||||||||||
|
|
||||||||||||||||
|
Interest
rate swaps
|
$ | 80,000 | 0.23 | % | 1.52 | % | $ | (505 | ) | |||||||
Fair Value of Financial
Instruments
The
Company’s interest rate swaps are classified within Level 2 of the valuation
hierarchy in accordance with FASB ASC 825, as presented below as of March 31,
2010:
|
(In
thousands)
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Interest
rate swaps
|
$ | - | $ | 505 | $ | - | $ | 505 | ||||||||
ITEM
2.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS
OF OPERATIONS
The
following discussion refers to the Company’s results from continuing operations,
except where noted. The business and most of the assets of Comtrak
were sold during the second quarter of fiscal
2009. Accordingly, the Comtrak business is reflected as
discontinued operations in the financial statements and related
notes. References to the second quarters of 2010 and 2009 represent
the fiscal quarters ended March 31, 2010 and 2009, respectively.
NET
SALES
Net sales
decreased $24.9 million to $129.3 million in the second quarter of 2010 from
$154.2 million in the second quarter of 2009 mainly due to a decrease of $22.1
million in net sales from the USG segment. Net sales decreased $59.5
million to $242.0 million for the first six months of 2010 from $301.5 million
in the prior year period mainly due to decreases of $49.1 million in net sales
from the USG segment and $10.6 million from the Test segment.
-Utility Solutions Group
(USG)
Net sales
decreased $22.1 million, or 23.5% to $72.0 million for the second quarter of
2010 from $94.1 million for the second quarter of 2009. Net sales
decreased $49.1 million or 26.9% to $133.2 million for the first six months of
2010 from $182.3 million in the prior year period. The sales decrease
in the second quarter of 2010 as compared to the prior year quarter was mainly
due to a $22.5 million decrease in net sales from Aclara RF primarily due to
lower Advanced Metering Infrastructure (AMI) product deliveries at Pacific Gas
& Electric (PG&E) of approximately $17.0 million as the project nears
completion. The sales decrease in the first six months of 2010 as
compared to the prior year period was due to a $45.0 million decrease in net
sales from Aclara RF primarily due to lower AMI product deliveries at PG&E
of approximately $40.0 million.
-Test
For the
second quarter of 2010, net sales of $31.6 million were $2.1 million, or 6.2%,
lower than the $33.7 million of net sales recorded in the second quarter of
2009. Net sales decreased $10.6 million, or 15.3% to $58.6 million in
the first six months of 2010 from $69.2 million in the first six months of
2009. The sales decrease for the three-month period ended March 31,
2010 as compared to the prior year quarter was mainly due to: a $2.7 million
decrease in net sales from the segment’s U.S. operations driven by decreases in
shipments of large chambers; a $1.1 million decrease in net sales from the
segment’s Asian operations due to a decline in market conditions in Japan
resulting in a decrease in large chamber deliveries; partially offset by a $1.7
million increase in net sales from the segment’s European operations due to an
increase in chamber deliveries at ETS-Finland and a favorable foreign currency
impact of approximately $0.5 million. The sales decrease for the
first six months of 2010 compared to the prior year period was due to: an $8.1
million decrease in net sales from the segment’s U.S. operations; a $4.0 million
decrease in net sales from the segment’s Asian operations; partially offset by a
$1.5 million increase in net sales from the segment’s European operations, all
for the reasons mentioned above.
-Filtration
For the
second quarter of 2010, net sales of $25.7 million were $0.7 million, or 2.7%
lower than the $26.4 million of net sales recorded in the second quarter of
2009. Net sales increased $0.2 million to $50.2 million for the first
six months of 2010 from $50.0 million for the first six months of
2009. The sales decrease during the quarter ended March 31, 2010 as
compared to the prior year quarter was mainly due to a $0.7 million decrease in
net sales at PTI driven by lower shipments of aerospace
assemblies. The sales increase for the first six months of 2010 as
compared to the prior year period was mainly due to: a $0.9 million
increase in net sales at VACCO driven by higher military / defense aircraft
product shipments, partially offset by a $0.8 million decrease at PTI as
mentioned above.
ORDERS
AND BACKLOG
Backlog
was $414.4 million at March 31, 2010 compared with $299.4 million at September
30, 2009. The Company received new orders totaling $218.6 million in
the second quarter of 2010 compared to $156.7 million in the prior year second
quarter. New orders of $141.0 million were received in the second
quarter of 2010 related to USG products, $52.2 million related to Test products,
and $25.3 million related to Filtration products. New orders of
$97.3 million were received in the second quarter of 2009 related to USG
products, $26.0 million related to Test products, and $33.4 million related to
Filtration products.
The
Company received new orders totaling $357.0 million in the first six months of
2010 compared to $296.2 million in the prior year period. New orders
of $215.3 million were received in the first six months of 2010 related to USG
products, $89.3 million related to Test products, and $52.4 million related to
Filtration products. New orders of $182.2 million were received in
the first six months of 2009 related to USG products, $55.9 million related to
Test products, and $58.1 million related to Filtration products.
The
Company received orders totaling $19.1 million and $27.7 million from PG&E
for AMI gas products during the three and six-month periods ended March 31,
2010, respectively, compared to $24.3 million and $55.3 million for the three
and six-month periods ended March 31, 2009, respectively. As of March 31, 2010,
total gas project-to-date orders from PG&E for AMI gas products were
approximately 4.1 million units, or $226 million.
In
January 2010, Aclara RF received a $13.0 million order from the San Francisco
Public Utilities Commission related to its AMI water project. In
addition, during the second quarter of 2010, Aclara RF received $22.4 million in
orders related to the New York City AMI water project.
SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
Selling,
general and administrative (SG&A) expenses for the second quarter of 2010
were $36.8 million (28.5% of net sales), compared with $38.2 million (24.8% of
net sales) for the prior year quarter. For the first six months of
2010, SG&A expenses were $76.0 million (31.4% of net sales) compared with
$77.5 million (25.7% of net sales) for the prior year period. There
were no significant fluctuations in SG&A expenses across the segments in the
second quarter and first six months of 2010 as compared to the prior year
periods.
AMORTIZATION
OF INTANGIBLE ASSETS
Amortization
of intangible assets was $2.9 million and $5.8 million for the three and
six-month periods ended March 31, 2010, respectively, compared to $5.0 million
and $9.6 million for the respective prior year periods. Amortization
of intangible assets for the three and six-month periods ended March 31, 2010
included $1.2 million and $2.3 million, respectively, of amortization of
acquired intangible assets related to recent acquisitions compared to $1.2
million and $2.4 million for the respective prior year periods. The
amortization of these acquired intangible assets is included in Corporate’s
operating results; see “EBIT – Corporate”. During the three and
six-month periods ended March 31, 2010, the Company recorded $1.1 million and
$2.2 million, respectively, of amortization related to Aclara PLS TWACS NG™
software compared to $3.1 million and $6.0 million for the respective prior year
periods. The remaining amortization expenses consist of other
identifiable intangible assets (primarily software, patents and
licenses). Beginning in the first quarter of 2010, the Company
re-evaluated the economic useful life of its TWACS NG capitalized software and
concluded the remaining TWACS NG asset value has an expected remaining useful
life of ten years resulting in a $4.0 million decrease in amortization of its
TWACS NG software in the first six months of 2010.
OTHER
EXPENSES (INCOME), NET
Other
expenses, net, were $0.3 million and $1.3 million for the three and six-month
periods ended March 31, 2010, respectively, compared to $0.4 million and $0.2
million for the respective prior year periods. The principal
component of other expenses, net, for the first six months of 2010 was
approximately $1.0 million of severance expenses. There were no
individually significant items in other expenses, net, for the three-month
period ended March 31, 2010 and the three and six-month periods ended March 31,
2009.
EBIT
The
Company evaluates the performance of its operating segments based on EBIT,
defined below. EBIT was $9.9 million (7.7% of net sales) for the
second quarter of 2010 and $18.4 million (11.9% of net sales) for the second
quarter of 2009. For the first six months of 2010, EBIT was $12.1
million (5.0% of net sales) compared with $29.3 million (9.7% of net sales) for
the prior year period.
This Form
10-Q contains the financial measure “EBIT”, which is not calculated in
accordance with GAAP. EBIT provides investors and Management with an alternative
method for assessing the Company’s operating results. The Company
defines “EBIT” as earnings from continuing operations before interest and
taxes. Management evaluates the performance of its operating segments
based on EBIT and believes that EBIT is useful to investors to demonstrate the
operational profitability of the Company’s business segments by excluding
interest and taxes, which are generally accounted for across the entire Company
on a consolidated basis. EBIT is also one of the measures Management
uses to determine resource allocations within the Company and incentive
compensation. The following table presents a reconciliation of EBIT to net
earnings from continuing operations.
|
(In
thousands)
|
Three
Months ended
March 31,
|
Six
Months ended
March
31,
|
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Consolidated
EBIT
|
$ | 9,898 | 18,351 | 12,052 | 29,321 | |||||||||||
|
Less:
Interest expense, net
|
(755 | ) | (1,756 | ) | (2,237 | ) | (4,374 | ) | ||||||||
|
Less:
Income tax expense
|
(3,177 | ) | (5,990 | ) | (3,412 | ) | (8,502 | ) | ||||||||
|
Net
earnings from continuing operations
|
$ | 5,966 | 10,605 | 6,403 | 16,445 | |||||||||||
-Utility Solutions
Group
EBIT in
the second quarter of 2010 was $10.6 million (14.7% of net sales) compared to
$16.1 million (17.2% of net sales) in the prior year quarter. For the
first six months of 2010, EBIT was $15.2 million (11.4% of net sales) compared
to $26.7 million (14.6% of net sales) in the prior year period. The
$5.5 million decrease in EBIT in the second quarter of 2010 as compared to the
prior year quarter and the $11.5 million decrease in EBIT in the first six
months of 2010 as compared to the prior year period was primarily driven by
lower sales volumes, mainly related to the PG&E gas AMI
deployment.
-Test
EBIT in
the second quarter of 2010 was $2.1 million (6.6% of net sales) as compared to
$3.7 million (11.1% of net sales) in the prior year quarter. For the
first six months of 2010, EBIT was $2.8 million (4.8% of net sales) compared to
$7.0 million (10.1% of net sales) in the prior year period. EBIT
decreased $1.6 million and $4.2 million over the prior year quarter and
six-month period, respectively, mainly due to lower sales volumes and a slight
increase in the segment’s SG&A expenses to support the international
marketplace.
-Filtration
EBIT was
$3.0 million (11.7% of net sales) and $4.2 million (15.9% of net sales) in the
second quarters of 2010 and 2009, respectively, and $5.3 million (10.6% of net
sales) and $7.1 million (14.2% of net sales) in the first six months of 2010 and
2009, respectively. For the second quarter of 2010 as compared to the
prior year quarter, EBIT decreased $1.2 million mainly due to lower aerospace
shipments at PTI. For the first six months of 2010 as compared to the prior year
period, EBIT decreased $1.8 million due to lower aerospace shipments at PTI and
changes in product mix at VACCO.
-Corporate
Corporate
costs included in EBIT were $5.8 million and $11.3 million for the three and
six-month periods ended March 31, 2010, respectively, compared to $5.8 million
and $11.4 million for the respective prior year periods. In the first
six months of 2010, Corporate costs included $1.9 million of pretax stock
compensation expense and $2.3 million of pretax amortization of acquired
intangible assets. In the first six months of 2009, Corporate costs
included $2.1 million of pretax stock compensation expense and $2.4 million of
pretax amortization of acquired intangible assets. There were no
significant fluctuations in Corporate costs in the second quarter and first six
months of 2010 as compared to the respective prior year periods.
INTEREST
EXPENSE, NET
Interest
expense was $0.8 million and $2.2 million for the three and six-month periods
ended March 31, 2010, respectively, and $1.8 million and $4.4 million for the
three and six-month periods ended March 31, 2009. The decrease
in interest expense in the second quarter and the first six months of 2010 as
compared to the prior year periods is due to lower interest rates and lower
average outstanding borrowings under the Company’s revolving credit
facility.
INCOME
TAX EXPENSE
The
second quarter 2010 effective income tax rate for continuing operations was
34.7% compared to 36.1% in the second quarter of 2009. The effective
income tax rate from continuing operations in the first six months of 2010 was
34.8% compared to 34.1% in the prior year period. The income tax
expense in the second quarter and first six months of 2010 was favorably
impacted by a $0.2 million adjustment to foreign tax accruals reducing the
second quarter and year-to-date effective tax rate by 1.7% and 1.6%,
respectively. The income tax expense in the first six months of 2009
was favorably impacted by a $0.7 million, net, research credit for fiscal 2008
reducing the rate for the first six months of 2009 by 2.8%. The
Company estimates the annual effective income tax rate for fiscal 2010 to be
approximately 36%.
There was
no material change in the unrecognized tax benefits of the Company during the
three-month period ended March 31, 2010. The Company anticipates a
$0.2 million reduction in the amount of unrecognized tax benefits in the next
twelve months as a result of a lapse of the applicable statute of
limitations.
CAPITAL
RESOURCES AND LIQUIDITY
Working
capital (current assets less current liabilities) decreased to $108.2 million at
March 31, 2010 from $116.2 million at September 30, 2009. Accounts receivable
decreased by $14.2 million in the first six months of 2010, of which $12.2
million related to the USG segment and $3.2 million related to the Filtration
segment, both driven by timing and volume of sales and increased cash
collections. Inventories increased by
$7.3 million in the first six months of 2010 primarily related to an
increase of $5.4 million in the USG segment and $2.0 million in the Test segment
to meet forecasted sales for the remainder of 2010. Accounts payable
decreased by $18.2 million in the first six months of 2010 mainly related to a
$16.2 million decrease in the USG segment due to the timing of payments to
suppliers.
Capital
expenditures were $7.1 million and $3.1 million in the first six months of
fiscal 2010 and 2009, respectively. The increase in the first six
months of 2010 as compared to the prior year period is mainly due to a $3.4
million increase in manufacturing equipment and software within the Filtration
segment.
Credit
facility
At March
31, 2010, the Company had $197.6 million available to borrow comprised of:
approximately $147.6 million available under the credit facility, and a $50.0
million increase option, in addition to $22.9 million cash on
hand. At March 31, 2010, the Company had $170 million of outstanding
borrowings under the credit facility and outstanding letters of credit of $12.4
million. The Company classified $50 million as the current portion on
long-term debt as of March 31, 2010, as the Company intends to repay this amount
within the next twelve months; however, the Company has no contractual
obligation to repay such amount during the next twelve months. Cash
flow from operations and borrowings under the Company’s bank credit facility are
expected to meet the Company’s capital requirements and operational needs for
the foreseeable future. On January 12, 2010, the Company entered into
an amendment to the credit agreement, with retroactive effect to November 12,
2009, to permit the Company to declare and pay dividends.
Dividends
The first
quarterly dividend of $0.08 per share was paid on January 19, 2010 to
stockholders of record as of January 4, 2010 totaling $2.1 million. The next
quarterly dividend of $0.08 per share was paid on April 20, 2010 to stockholders
of record on April 5, 2010 totaling $2.1 million.
CRITICAL
ACCOUNTING POLICIES
Management
has evaluated the accounting policies used in the preparation of the Company’s
financial statements and related notes and believes those policies to be
reasonable and appropriate. Certain of these accounting policies
require the application of significant judgment by Management in selecting
appropriate assumptions for calculating financial estimates. By their
nature, these judgments are subject to an inherent degree of
uncertainty. These judgments are based on historical experience,
trends in the industry, information provided by customers and information
available from other outside sources, as appropriate. The most
significant areas involving Management judgments and estimates may be found in
the Critical Accounting Policies section of Management’s Discussion and Analysis
and in Note 1 to the Consolidated Financial Statements contained in the
Company’s Annual Report on Form 10-K for the fiscal year ended September 30,
2009.
OTHER
MATTERS
Contingencies
As a
normal incident of the business in which the Company is engaged, various claims,
charges and litigation are asserted or commenced against the
Company. In the opinion of Management, final judgments, if any, which
might be rendered against the Company in connection with such claims, charges
and litigation are adequately reserved, covered by insurance, or would not have
a material adverse effect on its financial statements.
FORWARD
LOOKING STATEMENTS
Statements
in this report that are not strictly historical are "forward looking" statements
within the meaning of the safe harbor provisions of the federal securities laws.
Forward looking statements include, but are not limited to, those relating to
the estimates or projections made in connection with the Company’s accounting
policies, timing and amount of repayment of debt, annual effective tax rate, the
reduction in the amount of unrecognized tax benefits over the next twelve
months, outcome of current claims and litigation, future cash flow, capital
requirements and operational needs for the foreseeable
future. Investors are cautioned that such statements are only
predictions, and speak only as of the date of this report. 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, 2009, the effect of the American
Recovery and Reinvestment Act of 2009, actions by PG&E impacting PG&E’s
gas AMI project, the Company’s successful performance of large AMI contracts;
weakening of economic conditions in served markets; changes in customer demands
or customer insolvencies; competition; intellectual property rights; material
changes in the costs of certain raw materials including steel and copper;
delivery delays or defaults by customers; termination for convenience of
customer contracts; timing and magnitude of future contract awards; performance
issues with key suppliers, customers and subcontractors; collective bargaining
and labor disputes; changes in laws and regulations including changes in
accounting standards and taxation requirements; costs relating to environmental
matters; litigation uncertainty; and the Company’s successful execution of
internal operating plans and integration of newly acquired
businesses.
ITEM
3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market
risks relating to the Company's operations result primarily from changes in
interest rates and changes in foreign currency exchange rates. The Company is
exposed to market risk related to changes in interest rates and selectively uses
derivative financial instruments, including forward contracts and swaps, to
manage these risks. During the second quarter of 2009, the Company
entered into two $40 million one-year forward interest rate swaps effective
October 5, 2009 to hedge some of its exposure to variability in future
LIBOR-based interest payments on variable rate debt. All derivative
instruments are reported on the balance sheet at fair value. The
derivative instrument is designated as a cash flow hedge and the gain or loss on
the derivative is deferred in accumulated other comprehensive income until
recognized in earnings with the underlying hedged item.
As of
March 31, 2010, approximately 50% of the Company’s variable debt was not hedged
by interest rate swaps. The Company has determined that the market
risk relating to interest rates with respect to its variable debt that is not
hedged is not material. Based on a sensitivity analysis as of March
31, 2010, we estimate that if market interest rates averaged one percentage
point higher, the effect would be less than 2% of net earnings for the fiscal
year ended September 30, 2010.
The
following is a summary of the notional transaction amounts and fair values for
the Company’s outstanding derivative financial instruments as of March 31,
2010:
|
Average
|
||||||||||||||||
|
(In
thousands)
|
Notional
Amount
|
Receive
Rate
|
Average
Pay Rate
|
Fair Value
|
||||||||||||
|
|
||||||||||||||||
|
Interest
rate swaps
|
$ | 80,000 | 0.23 | % | 1.52 | % | $ | (505 | ) | |||||||
In
addition, during the second quarter of 2010, the Company paid 67.5 basis points
spread on its outstanding debt. Refer to the Company’s
Annual Report on Form 10-K for the fiscal year ended September 30, 2009 for
further discussion about market risk.
ITEM
4. CONTROLS
AND PROCEDURES
The
Company carried out an evaluation, under the supervision and with the
participation of Management, including the Company’s Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures as of the end of the period covered
by this report. Based upon that evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were effective as of that
date. Disclosure controls and procedures are controls and procedures
that are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Securities Exchange Act of 1934 (the
“Exchange Act”) is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and
forms. There has been no change in the Company’s internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART
II. OTHER
INFORMATION
ITEM
5. OTHER
INFORMATION
The
Annual Meeting of the Company’s shareholders was held on Thursday, February 4,
2010. The voting for directors was as follows:
|
For
|
Withheld
|
Broker Non-Votes
|
||||
|
V.L.
Richey, Jr.
|
20,484,893
|
2,279,400
|
1,316,319
|
|||
|
J.M.
Stolze
|
20,162,710
|
2,601,583
|
1,316,319
|
The terms
of J.M. McConnell, L.W. Solley, D.C. Trauscht and J.D. Woods as directors
continued after the meeting.
The
voting to ratify the Company’s appointment of KPMG LLP as the independent
registered public accounting firm for the fiscal year ending September 30, 2010
was as follows:
|
For
|
Against
|
Abstain
|
Broker Non-Votes
|
||||
|
23,633,325
|
438,708
|
8,579
|
0
|
ITEM
6. EXHIBITS
a) Exhibits
|
Exhibit
Number
|
|
3.1
|
Restated
Articles of Incorporation
|
Incorporated
by reference to Form 10-K for the fiscal year ended September 30, 1999, at
Exhibit 3(a)
|
|
3.2
|
Amended
Certificate of Designation, Preferences and Rights of Series A
Participating Cumulative Preferred Stock of the Registrant
|
Incorporated
by reference to Form 10-Q for the fiscal quarter ended March 31, 2000, at
Exhibit 4(e)
|
|
3.3
|
Articles
of Merger effective July 10, 2000
|
Incorporated
by reference to Form 10-Q for the fiscal quarter ended June 30, 2000, at
Exhibit 3(c)
|
|
3.4
|
Bylaws,
as amended and restated as of July 10, 2000
|
Incorporated
by reference to Form 10-K for the fiscal year ended September 30, 2003, at
Exhibit 3.4
|
|
3.5
|
Amendment
to Bylaws effective as of February 2, 2007
|
Incorporated
by reference to Form 10-Q for the fiscal quarter ended December 31, 2006,
at Exhibit 3.5
|
|
3.6
|
Amendment
to Bylaws effective as of November 9, 2007
|
Incorporated
by reference to Current Report on Form 8-K dated November 12, 2007 at
Exhibit 3.1
|
|
*4.1
|
Specimen
revised Common Stock Certificate
|
|
4.2
|
Credit
Agreement dated as of November 30, 2007 among the Registrant, National
City Bank and the lenders from time to time parties
thereto
|
Incorporated
by reference to Current Report on Form 8-K dated November 30, 2007, at
Exhibit 4.1
|
|
4.3
|
Amendment
No. 1 to the Agreement listed at 4.2 above, with retroactive effect to
November 12, 2009 among the Registrant, the lenders from time to time
parties thereto, and PNC Bank, National Association (successor to National
City Bank)
|
Incorporated
by reference to Current Report on Form 8-K dated January 12, 2010, at
Exhibit 4.1
|
|
*31.1
|
Certification
of Chief Executive Officer relating to Form 10-Q for period ended March
31, 2010
|
|
*31.2
|
Certification
of Chief Financial Officer relating to Form 10-Q for period ended March
31, 2010
|
|
|
*32
|
Certification
of Chief Executive Officer and Chief Financial Officer relating to Form
10-Q for period ended March 31, 2010
|
* Denotes
filed or furnished herewith.
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 thereunto
duly authorized.
|
ESCO
TECHNOLOGIES INC.
|
|
|
/s/ Gary E. Muenster
Gary
E. Muenster
Executive
Vice President and Chief Financial Officer
(As
duly authorized officer and principal accounting
officer
of the registrant)
|
Dated: May
7, 2010