Slide 1: December 2002 NYSE Symbol: ESE
DECEMBER 2002 NYSE Symbol: ESE
Slide 2: Forward-Looking Statement
Forward-Looking Statement This presentation contains "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 November 27, 2002. The Company's actual results i
Slide 3: ESCO Heritage
ESCO Heritage Spun-off in 1990 from Emerson Primarily Defense (90%) 7 Acquisitions; 2 Divestitures Sold Last Major Defense Property in September of 1999 NEW ESCO 2
Slide 4: 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 Process, Health Care and Transportation Markets Worldwide The Industry Leader in RF Shielding and EMC Test Products 3
Slide 5: ESCO Products & Applications
ESCO Products & Applications Communications Test Filtration 4
Slide 6: ESCO Business Profile - FY '00 vs '02
RF Shielding & Test Filtration Other Comm Test East 192.5 11.4 94.6 69 ESCO Business Profile - FY '00 vs '02 Filtration $192.5M 52% Other Communications Fiscal 2002 Sales = $367.5M 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr East 181.7 63 42.7 12.8 West 30.6 31.6 34.6 38.6 North 45.9 43.9 45 46.9 Fiscal 2000 Sa
Slide 7: ESCO Served Markets - FY 2002
ESCO Served Markets - FY 2002 Electronics 7% Industrial 11% Healthcare 18% Automotive Products 11% Commercial Aerospace 7% 6 Communications 25% Defense Aerospace 11% Consumer & Appliance 10% 54% 11% 35% 100%
Slide 8: ESCO Strategy
ESCO will sustain its Momentum through Continued Investment in New Products Ongoing Performance Improvement Actions Selective Acquisitions Supported by A Strong Balance Sheet -- AND - A Dedicated Management Team whose Interests are Strongly Aligned with the Shareholders ESCO Strategy 7
Slide 9: Financial Goals
Financial Goals New ESCO 5 Year View Sales Growth > 10% CAGR EBIT Margin > 13% (~5% Improvement) EPS Growth > 15% CAGR 8
Slide 10: Income Statement
Excludes Goodwill Amort of: FY '01 = $3.4M & FY '00 = $2.6M (Pretax) Excludes Non-recurring Gain of $.22 Related to Property Divestitures Excludes Elimination of the Net Deferred Tax Valuation Allowance of $.99 per share Excludes impact of Management Transition Agreement $.7M in FY'02 Income Stateme
Slide 11: ESCO Segment Performance
ESCO Segment Performance EBIT Excludes Impact of Management Transition Agreement $.7M 10
Slide 12: Entered Orders and Backlog
Entered Orders and Backlog (in Millions) 11
Slide 13: New Product Sales Outlook
73% Increase New Product Sales Outlook Includes Products Introduced During Prior 3 Years ESCO Patents Over 200 Issued Over 150 Pending 15.7% Sales 20.3% Sales 12 22.1% Sales
Slide 14: Engineering Investment
Filtration 51% RF Shielding & Test 14% Communications 28% Other 7% Engineering Investment FY '02 Engineering Expenditures = $28.9M (6.9% Sales) Engineering Force Count > 250 13
Slide 15: ESCO Performance Improvement Actions
Cost and Competitive Position '01 and '02 - 4 Facilities Closed/Consolidated and 2 Downsized - 145,000 sq. ft. reduction Work Transfer (Europe and Juarez) Advanced Automation Make/Buy Routine Attention ESCO Performance Improvement Actions 14
Slide 16: ESCO Acquisitions: FY '00 - '02
ESCO Acquisitions: FY '00 - '02 Completed: 5 3 in Filtration: One Product Line Drop-in (Space Products) One Stand-Alone: Europe (Distributor on the Continent) One Technology / Patent Portfolio (Cross Flow Filtration and Separation) 2 in Test: One Line Extension Fully Consolidated (Components) One Te
Slide 17: Balance Sheet
Balance Sheet (In Millions) Includes Tax Effected NOL of $36.8M, retained from former defense subsidiaries. 16 FREE CASH FLOW ($35 FROM OPS LESS $13.2 CAPX) 21.8
Slide 18: Dedicated Management
Dedicated Management Executive Equity Ownership Program Outright Ownership of 3X & 5X Total Cash Compensation Board of Directors Ownership Program 5X Retainer Broad Stock Option Incentive Program (Approx. 200 Management Participants) Economic Profit Improvement is an Incentive Compensation Component
Slide 19: ESCO Strategy
ESCO will sustain its Momentum through Continued Investment in New Products Ongoing Performance Improvement Actions Selective Acquisitions Supported by A Strong Balance Sheet -- AND - A Dedicated Management Team whose Interests are Strongly Aligned with the Shareholders ESCO Strategy 18
Slide 20: Segment Profiles
SEGMENT PROFILES ESCO TECHNOLOGIES 19
Slide 21: Communications Segment TWACS System
Communications Segment TWACS(r) System 20
Slide 22: Communications Market Profile
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 26 74 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 59 41 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Communications Market Profile ESCO Addressable Market North American Automatic Meter Reading (AMR) ~
Slide 23: Two-way Automatic Communications System TWACS
Two-way Automatic Communications System TWACS(r) Power Line Based Fixed Network System Most Capable Proven System Available 40 North American Utilities, 3.5M End Points Can be Deployed System-wide Versatility / Value-Added Features Two-way Load Control Time of Use Outage Mapping Clearly the Best Sol
Slide 24: Communications Growth Drivers
Communications Growth Drivers Market Deregulation Driving More Attention to Efficiency and Customer Care $ - Meter Reading Cost - Theft - Call Center Cost Customer - Billing Accuracy - Call Center Responsiveness - Outage Restoration ESCO Existing Product Attributes Investment in New Product Features
Slide 25: Filtration Segment
Filtration Segment 24
Slide 26: Filtration Segment: ESCO Addressable Market
ESCO Addressable Market ~$5B Served Markets: Liquid Only Industrial Process (21%) Health Care (19%) Consumer & Appl. (13%) Includes Potable Water Broad Blue Chip Customer Base: 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 46 54 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Filtration Segment Sale
Slide 27: Filtration Growth Drivers
Filtration Growth Drivers Leadership Position in Certain Niches Driven by Technology Advancements and Customer Support Separations and Concentrations Technology Membrane Development Advanced Pleating Geometries Process Improvement in Insert Injection Molding Served Market Growth: 5%-10+% CAGR New Pr
Slide 28: RF Shielding & Test Segment
RF Shielding & Test Segment 27
Slide 29: RF Shielding & Test Market Profile
RF Shielding & Test 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 19 81 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 10 90 90 20.4 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Sales EBIT $3.6M 19% 10% 2002 CONTRIBUTION Market Profile ESCO Addressable Marke
Slide 30: RF Shielding & Test Growth Drivers
RF Shielding & Test ESCO is the global leader of radio frequency (RF) shielding and electromagnetic compatibility (EMC) test products. Growth Drivers MRI International Proliferation of Electronic Devices Calibration Services 29
Slide 31: The Way Forward
30 The Way Forward Commited to $3.00 per share in "05 ‘Modest Support from Economy Continued Growth of Communications: IOU's Feature Expansion for Further Differentiation) New Products in Filtration (Primarily Healthcare) Extend our Reach in Test (International Opportunities and Served Markets) Cont