Esco Technologies Inc. · NYSE:ESE
Esco Technologies — Investor Presentation (November 2004)
31 slides from Esco Technologies's investor presentation, Nov 18, 2004
Slide 1: NYSE Symbol: ESE November 2004
NYSE Symbol: ESE November 2004
Slide 2: Forward-Looking Statement
Forward-Looking Statement 2 Statements regarding future events, the development of new products, future growth drivers, increases in shareholder value, future IOU contracts, the success of future acquisitions efforts, the Company’s future results, including sales growth, EBIT, EBIT Margin, EPS estim
Slide 3: Today ESCO is…
Today ESCO is… A Proven Supplier of Special Purpose Communications Systems Primarily for the Electric Utility Industry A Leading Provider of Engineered Filtration Products to the Health Care, Aerospace and Automotive Markets Worldwide The Industry Leader in RF Shielding and EMC Test Products Spun-of
Slide 4: ESCO Products & Applications
ESCO Products & Applications Test Filtration Communications 4
Slide 5: ESCO Business Profile - FY 2003 vs 2004
ESCO Business Profile - FY 2003 vs 2004 Fiscal 2003 Sales = $396.7M Fiscal 2004 Sales = $422.1M 5 Communications Filtration RF Shielding & Test $90.3M 23% $164.1M 41% $142.3M 36% $137.8M 33% $173.9M 41% $110.4M 26%
Slide 6: ESCO Served Markets - FY 2004
ESCO Served Markets - FY 2004 Advanced Metering 31% Health Care 15% Defense Aerospace 14% Electronics 11% Commercial Aerospace 7% Automotive Products 11% Consumer & Appliance 8% Video Security 1% Industrial 2% 6
Slide 7: ESCO Strategy
ESCO Strategy 7 ESCO will increase Shareholder Value through Continued Investment in Ne w Products Selective Acquisitions Ongoing Performance Improvement Actions Supported by A Strong Balance Sheet – AND – Management Team whose Interests are Strongly Aligned with the Shareholders
Slide 8: Financial Goals
Financial Goals Sales $422 ~ $700 EBIT Margin - Operational 14.5% 18% EPS - Operational $2.91 ~ $6.00 See the reconciliation of EBIT as a Non-GAAP Financial Measure in Appendix A "Operational" excludes MicroSep (i.e. Disc Ops) and $1.3M of Puerto Rico exit and severance charges. Base Period '04 Goal
Slide 9: FY 2004 Income Statements
FY 2004 Income Statements Depreciation & Amortization - $11.9M “Operational” excludes MicroSep (i.e. Disc Ops) and $1.3M of Puerto Rico exit and severance charges. GAAP “ Operational “ Net Sales 422.1 $ 422.1 $ EBIT 59.7 61.0 % of Sales 14.1% 14.5% Net Earnings from 37.8 38.8 Continuing Operations N
Slide 10: FY 2004 Segment Performance
Excludes MicroSep and $1.3M of Puerto Rico charges. FY 2004 Segment Performance Net EBIT Sales EBIT Margin Comm $ 137.8 $ 38.4 27.9% Filtration 173.9 23.1 13.3% Test 110.4 11.3 10.2% Other - (11.8) - Totals $ 422.1 $ 61.0 14.5% 10
Slide 11: FY 2004 Entered Orders and Backlog
FY 2004 Entered Orders and Backlog Comm Filtration Test Consol Beginning Backlog 130.4 $ 86.2 $ 46.4 $ 263.0 $ + Entered Orders 116.0 165.4 126.8 408.2 $ - Sales 137.8 173.9 110.4 422.1 $ Ending Backlog 108.6 $ 77.7 $ 62.8 $ 249.1 $ 11 Includes $21.6M of Sales to PPL
Slide 12: Investments in New Products and Technologies
New antennas for measuring EMC in frequency spectrum over 1GHz Needleless access devices Remote Disconnect Switch Interbase (DSI) option on TWACS Investments in New Products and Technologies ® 12 Expenditures on new product development and engineering are typically 7-8% of sales
Slide 13: ESCO Acquisitions
ESCO Acquisitions 13 Acquisition Characteristics: $5M to $50M in Sales Existing Segments Competitors or Line Extensions Drop-in or Core Technology Expansion Focus Communications Direct access to the water and gas markets Filtration and Test Extend product offering
Slide 14: ESCO Performance Improvement Actions
Key Element of ESCO Culture Esco Performance Improvement Actions 14 Recent Initiatives MicroSep Divestiture P.R. Plant – 110,000 sq. ft. reduction, Relocation to Juarez Mexico (Filtertek) European Test Consolidation
Slide 15: Balance Sheet
Balance Sheet Includes Tax Effected NOL of $26.4M, retained from former defense subsidiaries. FREE CASH FLOW SEE THE RECONCILIATION OF NON-GAAP FINANCIAL MEASURES IN APPENDIX A 9/30/2004 72.3 $ Accounts Receivable 77.7 Inventory 46.8 Other Current Assets 36.7 Total Current Assets 233.5 $ Property, P
Slide 16: Shareholder Alignment
Shareholder Alignment 16 Executive Equity Ownership Program Outright Ownership of 3X & 5X Total Cash Compensation Stock Sales for Diversi fication Allowed/Encouraged Beyond Required Ownership Levels Board of Directors Ownership Program 5X Retainer Stock Option Incentive Program (Approx. 200 Manageme
Slide 17: Segment Profiles
All are Technically Driven Industrial Businesses Customer and Solution Focused Expanding Through New Products and Internationally 17 Segment Profiles
Slide 18: Communications Segment: TWACS System
TWACS ® System 18 Communications Segment
Slide 19: Communications Market Profile
33% 53% 19 Market Profile ESCO Addressable Market North American Aut omatic Meter Reading (AMR) ~ $5B 105 Million Meters 72% Investor Owned 15% Municipal 13% COOP Plus Developing Demand Side Management International Served Markets - Utility - Video Security Customer Base: Communications COOPS Sales
Slide 20: TWACS Power Line Based Fixed Network System
20 TWACS ® Power Line Based Fixed Network System Most Capable Proven System Available >140 North American Utilities, ~8M End Points - Ordered or Installed Can be Deployed System-wide Versatility / Value-Added Features Two-way Load Control Time of Use Outage Mapping Remote Disconnect Incorporates Pat
Slide 21: Communications Growth Drivers
21 Growth Drivers External Utilities Focus Cost - Meter Reading - Theft - Call Center Customer Service - Billing Accuracy - Call Center Responsiveness - Outage Restoration Advanced Metering - Demand Response Real time pricing Critical peak pricing ESCO Existing Product Attributes Investment in New P
Slide 22: Filtration Segment
22 Filtration Segment
Slide 23: Filtration Segment Market Profile
32% 41% 23 ESCO Addressable Market ~$4B Served Markets: Liquid Only – Health Care – Automotive – Consumer & Appl. – Aerospace Broad Blue Chip Customer Base: Filtration Segment Sales EBIT $23.1M 2004 CONTRIBUTION $173.9M x/ Corp Costs
Slide 24: Filtration Growth Drivers
24 Leadership Posit ion in Certain Niches Driven by Technology Advancements and Customer Support Medical Devices Aerospace Fuel Delivery Served Market Growth: GDP+ New Products Health Care (Medical Devices/Drug Delivery) Intelligent Sensors Micro-Propulsion Devices Acquisitions Medical Devices Aeros
Slide 25: RF Shielding & Test Segment
25 RF Shielding & Test Segment
Slide 26: RF Shielding & Test Market Profile
26% 15% 26 Market Profile ESCO Addressable Market ~ $500M Served Markets Electronics - Automotive Health Care - Aerospace Acoustics Broad Blue Chip Customer Base: RF Shielding & Test Sales EBIT $ 11.3M 2004 CONTRIBUTION $110.4M x/ Corp Costs
Slide 27: RF Shielding & Test Growth Drivers
27 ESCO is the global leader of radio frequency (RF) shielding and electromagnetic compatibility (EMC) test products. Growth Drivers Proliferation of Wireless Devices MRI International Government Security Acoustics Calibration Services RF Shielding & Test
Slide 28: The Way Forward
28 Continued Growth of Communications: IOUs New Products in Filtration Extend our Reach in Test Selective Acquisitions Continue to Aggressively work our Cost and Improve our Competitive Position The Way Forward Committed to $6.00 per share in ‘09 Committed to $6.00 per share in ‘09
Slide 29: Appendix A: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures 29 Appendix A
Slide 30: Reconciliation of Non-GAAP Financial Measures FY 2004
Reconciliation of Non-GAAP Financial Measures FY 2004 ($M ) Note: EBIT Margin greater than or equal to 18% in ESCO’s Financial Goals Section cannot be reconciled with a GAAP measure as this represents a forward looking financial measure with no comparable GAAP measurement quantifiable at this time.
Slide 31: ESCO Technologies
Communications Filtration/Fluid Flow AF Shielding and Test TECHNOLOGIES
Esco Technologies — Investor Presentation (November 2004) on 6ix