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ESCO Technologies Inc. Reports Operating Results (10-K)

November 30, 2009 | About:
10qk

10qk

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ESCO Technologies Inc. (ESE) filed Annual Report for the period ended 2009-09-30.

Nexus Energy Software, a subsidiary of ESCO Technologies Inc., enables the vision of what energy information can accomplish for the twenty first Century Utility by transforming both energy company and customer views of energy. Nexus' leading, proven-at-scale solutions support customer interactions via self-service and the contact center, while enhancing operating functions with analytic applications that integrate meter, customer, and asset data. Nexus' ENERGYprism, Energy Vision and Nexus MDMS product lines are in use at over eighty five energy companies worldwide, supporting millions of interactions and transactions each year, Esco Technologies Inc. has a market cap of $874.9 million; its shares were traded at around $33.27 with a P/E ratio of 16.23 and P/S ratio of 1.41.

Highlight of Business Operations:

Aclara RF provides, through its STAR® network, wireless radio frequency (RF) data communications systems to gas, water and electric utilities for advanced metering infrastructure (AMI) applications. The STAR® network provides accurate and timely billing, high/low consumption reporting, and non-revenue water loss detection. In November 2005, Aclara RF entered into a contract with Pacific Gas & Electric (PG&E) to provide its communications system for the gas meter portion of PG&Es AMI Project, and also gave PG&E the option to purchase Aclara RFs fixed network systems for the electric portion of the Project. The total anticipated contract revenue through the full five-year gas portion deployment is approximately $225 million, of which $190 million had been recorded through September 30, 2009. Items are purchased only upon issuance of purchase orders at the election of PG&E, and the contract is subject to certain contingencies and uncertainties. Total revenue received by Aclara RF in fiscal 2009 from the gas meter portion of this contract was $98 million. In fiscal 2009, PG&E notified Aclara RF that no further electric meter products would be purchased under this contract. For further discussion of this contract and certain related contingencies and uncertainties, see Item 1A Risk Factors and Managements Discussion and Analysis Pacific Gas & Electric appearing in the 2009 Annual Report. Revenues from STAR® network products, which may be considered a class of similar products, accounted for approximately 25%, 17% and 11% of the Companys total revenue in fiscal years 2009, 2008 and 2007, respectively.

Total Company backlog at September 30, 2009 was $299.4 million, representing an increase of $14.9 million (5.2%) from the beginning of the fiscal year backlog of $284.5 million. The backlog of firm orders at September 30, 2009 and September 30, 2008, respectively, was: $132.4 million and $143.2 million for Utility Solutions; $54.2 million and $69.8 million for Test; and $112.8 million and $71.5 million for Filtration. As of September 30, 2009, it is estimated that domestic customers accounted for approximately 76% of the Companys total firm orders, and international customers accounted for approximately 24%. Of the Companys total backlog of orders at September 30, 2009, approximately 88% is expected to be completed in the fiscal year ending September 30, 2010.

The Company performs research and development at its own expense, and also engages in research and development funded by customers. For the fiscal years ended September 30, 2009, 2008 and 2007, total Company-sponsored research and development expenses were approximately $32.0 million, $33.0 million and $23.5 million, respectively. Total customer-sponsored research and development expenses were approximately $2.9 million, $5.3 million and $3.7 million for the fiscal years ended September 30, 2009, 2008 and 2007, respectively. All of the foregoing expense amounts exclude certain engineering costs primarily associated with product line extensions, modifications and maintenance, which amounted to approximately $14.4 million, $8.6 million and $7.8 million for the fiscal years ended September 30, 2009, 2008 and 2007, respectively.

The Company maintains a $330 million five-year revolving credit facility with a $50 million increase option. The facility is available for direct borrowings and/or the issuance of letters of credit, and is provided by a group of sixteen banks, led by National City Bank as agent, with a maturity of November 30, 2012. The facility is secured by the unlimited guaranty of the Companys material domestic subsidiaries and a 65% pledge of the material foreign subsidiaries share equity. See Managements Discussion and Analysis Bank Credit Facility in the 2009 Annual Report, and Note 9 of the Notes to Consolidated Financial Statements in the 2009 Annual Report, which information is herein incorporated by reference.

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