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What changed in ESCO TECHNOLOGIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ESCO TECHNOLOGIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+160 added−185 removedSource: 10-K (2023-11-29) vs 10-K (2022-11-29)

Top changes in ESCO TECHNOLOGIES INC's 2023 10-K

160 paragraphs added · 185 removed · 136 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

46 edited+4 added−10 removed33 unchanged
Biggest changeWorkforce Composition (As of September 30, 2022) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ By Gender ​ By Race Male 71 % ​ Minorities 48 % Female 24 % ​ White 40 % Unknown* 5 % ​ Unknown* 12 % ​ *Some countries do not permit the collection or reporting of some or all of the above types of data. ​ ​ ​ ​ ​ By Generation Gen Z (1996-2015) 8 % Millennials (1977-1995) 39 % Gen X (1965-1976) 28 % Boomers (1946-1964) 25 % Silent (1945 & before) % ​ Minorities are defined to include individuals of Native American or Alaskan Native, Asian, Black or African American, Hispanic or Latino, Native Hawaiian or Other Pacific Islander, and Two or More Races. ​ The above is based on employees’ self-identification or other information believed by the Company to be reliable. ​ Financing For information about our credit facility, see Note 8 to the Consolidated Financial Statements, which is incorporated into this Item by reference. 6 Table of Contents Additional Information The information set forth in Item 1A, “Risk Factors,” is incorporated in this Item by reference.
Biggest changeWorkforce Composition (As of September 30, 2023) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ By Gender ​ By Race Male 70 % ​ Minorities 48 % Female 25 % ​ White 42 % Unknown* 5 % ​ Unknown* 10 % ​ ​ ​ ​ ​ By Generation Gen Z (1996-2015) 11 % Millennials (1977-1995) 40 % Gen X (1965-1976) 27 % Boomers (1946-1964) 22 % Silent (1945 & before) % ​ Minorities are defined to include individuals of Native American or Alaskan Native, Asian, Black or African American, Hispanic or Latino, Native Hawaiian or Other Pacific Islander, and Two or More Races. ​ The above is based on employees’ self-identification or other information believed by the Company to be reliable. *Some countries do not permit the collection or reporting of some or all of the above types of data. 6 Table of Contents Financing For information about our credit facility, see Note 6 to the Consolidated Financial Statements, which is incorporated into this Item by reference.
We are: ● A global provider of highly engineered filtration and fluid control products and integrated propulsion systems for the aviation, navy, space and process markets worldwide, as well as composite-based products and solutions for navy, defense and industrial customers; ● An industry leader in radio frequency (RF) shielding and electromagnetic compatibility (EMC) test products; and ● A provider of diagnostic instruments, software and services for the benefit of industrial power users and the electric utility and renewable energy industries.
We are: ● A global provider of highly engineered filtration and fluid control products and integrated propulsion systems for the aviation, navy, space and process markets worldwide, as well as composite-based products and solutions for navy, defense and industrial customers; ● An industry leader in radio frequency (RF) shielding and electromagnetic compatibility (EMC) test products; and ● A provider of diagnostic instruments, software and services for the benefit of the electric utility and renewable energy industries and industrial power users.
NRG has intellectual property related to certain LIDAR technology and applications, and has obtained and is pursuing additional patent protection on its line of bat deterrent systems, which are designed to significantly reduce bat mortality at windfarms and in other applications where bat conservation is a concern. In the Test segment, we have sought patent protection for significant inventions.
NRG has intellectual property related to certain LIDAR technology and applications, and it has obtained and is pursuing additional patent protection on its line of bat deterrent systems, which are designed to significantly reduce bat mortality at windfarms and in other applications where bat conservation is a concern. In the Test segment, we have sought patent protection for significant inventions.
For succession planning purposes, we focus on identifying high-potential future leaders and working with them on individual development plans and executive coaching. Attracting and retaining a talented workforce is of utmost importance.
For succession planning purposes, we focus on identifying high-potential future leaders and working with them on individual development plans and coaching. Attracting and retaining a talented workforce is of utmost importance.
Doble also holds an extensive library of apparatus performance information useful to entities that generate, distribute or consume electric energy, and it makes part of this library available to registered users via an Internet portal. Altonova has obtained and is pursuing additional patent protection on instruments and methods for detecting partial discharges in electrical apparatus.
Doble also holds an extensive library of apparatus performance information useful to entities that generate, distribute or consume electric energy, and it makes part of this library available to registered users via an Internet portal. Altanova has obtained and is pursuing additional patent protection on instruments and methods for detecting partial discharges in electrical apparatus.
Tucker worked at Emerson Electric Co (NYSE:EMR) for 24 years, where he held a series of financial and administrative positions, most recently as Vice President and Chief Financial Officer of Emerson’s Commercial and Residential Solutions business, consisting of 11 business units generating approximately $6 billion in annual revenue. David M. Schatz 59 Mr.
Tucker worked at Emerson Electric Co (NYSE:EMR) for 24 years, where he held a series of financial and administrative positions, most recently as Vice President and Chief Financial Officer of Emerson’s Commercial and Residential Solutions business, consisting of 11 business units generating approximately $6 billion in annual revenue. David M. Schatz 60 Mr.
We classify our business operations into three segments for financial reporting purposes, although for reporting certain financial information we treat Corporate activities as a separate segment. Our three operating segments during 2022, together with the significant domestic and foreign operating subsidiaries within each segment, are as follows: Aerospace & Defense (A&D): VACCO Industries (VACCO) PTI Technologies Inc. (PTI) Crissair, Inc.
We classify our business operations into three segments for financial reporting purposes, although for reporting certain financial information we treat Corporate activities as a separate segment. Our three operating segments during 2023, together with the significant domestic and foreign operating subsidiaries within each segment, are as follows: Aerospace & Defense (A&D): VACCO Industries (VACCO) PTI Technologies Inc. (PTI) Crissair, Inc.
Throughout this Annual Report, unless the context indicates otherwise, references to a year (for example 2022) refer to our fiscal year ending on September 30 of that year, and references to the “Consolidated Financial Statements” refer to our Consolidated Financial statements included in the Financial Information section of this Annual Report beginning on page F-1, an Index to which is provided on page F-1.
Throughout this Annual Report, unless the context indicates otherwise, references to a year (for example 2023) refer to our fiscal year ending on September 30 of that year, and references to the “Consolidated Financial Statements” refer to our Consolidated Financial statements included in the Financial Information section of this Annual Report beginning on page F-1, an Index to which is provided on page F-1.
See also Item 1A, “Risk Factors.” Primary competitors of our A&D segment include Pall Corporation, Moog, Inc., Safran (Sofrance), CLARCOR Inc., TransDigm (PneuDraulics), Marotta Controls, and Parker Hannifin. Significant competitors of our USG segment include OMICRON electronics Corp., Megger Group Limited, Vaisala, and Qualitrol Company LLC (a subsidiary of Fortive Corporation).
See also Item 1A, “Risk Factors.” Primary competitors of our A&D segment include Pall Corporation, Moog, Inc., Safran (Sofrance), CLARCOR Inc., TransDigm (PneuDraulics), Marotta Controls, Parker Hannifin, and Collins Aerospace. Significant competitors of our USG segment include OMICRON Electronics Corp., Megger Group Limited, Vaisala, and Qualitrol Company LLC (a subsidiary of Fortive Corporation).
We recognize that our success is based on the talents and dedication of those we employ, and we are invested in their success. Significant investments are made in the areas of talent development, technical skills and compliance training in areas such as supervisor training, employee coaching, ethics, safety, hazmat, ITAR, etc.
We recognize that our success is based on the talents and dedication of those we employ, and we are invested in their success. Significant investments are made in the areas of talent development, technical skills and compliance training in areas such as supervisor training, professional coaching, ethics, safety, hazmat, ITAR, etc.
One third of employees have been with us for 10 or more years and more than 50% of employees have been with us for five or more years. We are committed to the health and wellbeing of our employees and their families by encouraging participation in wellness programs.
Nearly one third of our employees have been with us for 10 or more years and nearly 50% of our employees have been with us for five or more years. We are committed to the health and wellbeing of our employees and their families by encouraging participation in wellness programs.
Policing the unauthorized use of intellectual property is difficult, and infringement and misappropriation are persistent problems for many companies, particularly in some international markets, and in some cases, we may elect not to pursue an unauthorized user due to the high costs and uncertainties associated with litigation.
Policing the 3 Table of Contents unauthorized use of intellectual property is difficult, and infringement and misappropriation are persistent problems for many companies, particularly in some international markets, and in some cases, we may elect not to pursue an unauthorized user due to the high costs and uncertainties associated with litigation.
Doble has obtained and is pursuing additional patent protection on improvements to its line of diagnostic equipment and NERC CIP compliance tools and its newly-introduced Calisto R9 dissolved gas analyzer.
Doble has obtained and is pursuing additional patent protection on improvements to its line of diagnostic equipment and NERC CIP compliance tools and its Calisto R9 dissolved gas analyzer.
Through our charitable Foundation and wellness activities we provide opportunities for civic involvement that not only support our communities and provides our employees with meaningful experiences that promote collaborative and rewarding work environments. We strive to maintain a culture that enables all employees to be treated with dignity and respect while performing their jobs to the best of their abilities.
Through our charitable Foundation and wellness activities we provide opportunities for civic involvement that supports our communities and provides our employees with meaningful experiences that promote collaborative and rewarding work environments. We strive to maintain a culture that enables all employees to be treated with dignity and respect while performing their jobs to the best of their abilities.
Given the ever-changing talent market, we have looked to broaden the ways in which we can recognize and reward performance, including more frequent merit increases, market adjustments, spot bonuses, and other creative ways to recognize and reward employees. While utilizing these and other measures, at the end of our fiscal year the average tenure of our workforce was nine years.
Given the ever-changing talent market, we have looked to broaden the ways in which we can recognize and reward performance, including more frequent merit increases, market adjustments, spot bonuses and other creative ways to recognize and reward employees. By utilizing these and other measures, at the end of our fiscal year the average tenure of our workforce was 13 years.
(NRG) ​ Except as the context otherwise indicates, the term “Doble” as used herein includes Doble Engineering Company and ESCO’s other USG subsidiaries except NRG. ​ RF Shielding and Test (Test): ETS-Lindgren Inc. ​ Except as the context otherwise indicates, the term “ETS-Lindgren” as used herein includes ETS-Lindgren Inc. and ESCO’s other Test segment subsidiaries.
(Phenix) ​ Except as the context otherwise indicates, the term “Doble” as used herein includes Doble Engineering Company and ESCO’s other USG subsidiaries except NRG. ​ RF Test & Measurement (formerly called RF Shielding and Test) (Test): ETS-Lindgren Inc. ​ Except as the context otherwise indicates, the term “ETS-Lindgren” as used herein includes ETS-Lindgren Inc. and ESCO’s other Test segment subsidiaries.
Sayler has led our Utility Solutions Group since 2016, where he played a key role in strategically building out the group, including leading our entry into the renewables business and overseeing six successful acquisitions that have more than doubled the size of the segment. From 1995 to 2016, he held senior positions with ETS-Lindgren. Christopher L. Tucker 51 Mr.
Sayler led our Utility Solutions Group from 2016 through 2022, where he played a key role in strategically building out the group, including leading our entry into the renewables business and overseeing six successful acquisitions that more than doubled the size of the segment. From 1995 to 2016, he held senior positions with ETS-Lindgren. Christopher L. Tucker 52 Mr.
Navy maritime survivability; and miniature electro-explosive devices for military aircraft ejection seats and missile arming devices. USG Our USG segment accounted for approximately 32%, 28% and 26% of our total revenue in 2022, 2021 and 2020, respectively. This segment has seven facilities in the United States, one in Canada, and eight outside North America.
Navy maritime survivability; and miniature electro-explosive devices for military aircraft ejection seats and missile arming devices. USG Our USG segment accounted for approximately 36%, 32% and 28% of our total revenue in 2023, 2022 and 2021, respectively. This segment has eight facilities in the United States, one in Canada, and ten outside North America.
We estimate that as of September 30, 2022 domestic customers accounted for approximately 70% of our total firm orders and international customers accounted for approximately 30%. Of our total backlog at September 30, 2022, approximately 80% is expected to be completed in the fiscal year ending September 30, 2023.
We estimate that as of September 30, 2023, domestic customers accounted for approximately 75% of our total firm orders and international customers accounted for approximately 25%. Of our total backlog at September 30, 2023, approximately 70% is expected to be completed in the fiscal year ending September 30, 2024.
We provide and maintain a work environment that attracts, develops and retains top talent by offering our employees an engaging work experience that contributes to their career development.
We provide and maintain a work environment that attracts, develops and retains top 5 Table of Contents talent by offering our employees an engaging work experience that contributes to their career development.
We consider our patents and other intellectual property to be of significant value to each of our segments. Backlog Total Company backlog of firm orders at September 30, 2022 was $695.0 million, representing an increase of $103.0 million (17.4%) from the backlog of $592.0 million at September 30, 2021.
We consider our patents and other intellectual property to be of significant value to each of our segments. Backlog Total Company backlog of firm orders at September 30, 2023 was $772.4 million, representing an increase of $77.4 million (11.1%) from the backlog of $695.0 million at September 30, 2022.
Generally, all our full-time employees, both domestic and international, are offered health and welfare benefits. We remain committed to our communities through financial support from our employees and the ESCO Foundation, and through personal participation of our employees with a variety of local organizations, such as food banks, blood drives, the Boys & Girls Club, and Habitat for Humanity.
Generally, all our full-time employees, both domestic and international, are offered health and welfare benefits. We remain committed to our communities through financial support from our employees and the ESCO Foundation, and through personal participation of our employees with a variety of local organizations, such as food banks, blood drives, the YMCA, Special Olympics, and Big Brothers Big Sisters.
Human Capital Management As of September 30, 2022, we employed 2,922 persons, including 2,894 full time employees 18% of whom were located in 17 foreign countries. We strive to be a responsible member of the communities in which we operate, and we are dedicated to preserving operational excellence and remaining an employer of choice.
Human Capital Management As of September 30, 2023, we employed 3,195 persons, including 3,131 full time employees 16% of whom were located in 27 foreign countries. We strive to be a responsible member of the communities in which we operate, and we are dedicated to preserving operational excellence and remaining an employer of choice.
We 5 Table of Contents operate in a supportive culture that incorporates strong ethical behavior and reinforces our human rights commitment through annual training on ethics, human rights, anti-human trafficking and anti-harassment. Our subsidiaries enjoy modest turnover at about half the national average for our industry. Fewer than 6% of our workforce are contingent workers.
We operate in a supportive culture that incorporates strong ethical behavior and reinforces our human rights commitment through annual training on ethics, human rights, anti-human trafficking and anti-harassment. Our subsidiaries enjoy moderate turnover compared to the national average for our industry. Fewer than 11% of our workforce are contingent workers.
By segment, the backlog at September 30, 2022 and September 30, 2021, respectively, was $408.3 million and $367.2 million for A&D; $128.1 million and $91.6 million for USG; and $158.6 million and $133.2. million for Test.
By segment, the backlog at September 30, 2023 and September 30, 2022, respectively, was $484.1 million and $408.3 million for A&D; $133.5 million and $128.1 million for USG; and $154.8 million and $158.6 million for Test.
ETS-Lindgren also supplies customers with a broad range of components including RF absorptive materials, RF filters, active compensation systems, antennas, antenna masts, turntables and electric and magnetic probes, RF test cells, proprietary measurement software and other test accessories required to perform a variety of tests.
ETS Lindgren also supplies a broad range of components including RF absorptive materials, filters, antennas, field probes, test cells, proprietary measurement software and other test accessories required to perform a variety of tests and measurements.
(Crissair) Globe Composite Solutions, LLC (Globe) Mayday Manufacturing Co. (Mayday) (includes former subsidiary Hi-Tech Metals, Inc., which was merged into Mayday effective December 31, 2021) Networks Electronic Co. (NEco) Westland Technologies, Inc. (Westland) ​ Utility Solutions Group (USG): Doble Engineering Company I.S.A. – Altanova Group S.r.l. and affiliates (Altanova) Morgan Schaffer Ltd. (Morgan Schaffer) NRG Systems, Inc.
(Crissair) Globe Composite Solutions, LLC (Globe) Westland Technologies, Inc. (Westland) Mayday Manufacturing Co. (Mayday) ​ Utility Solutions Group (USG): Doble Engineering Company I.S.A. – Altanova Group S.r.l. and affiliates (Altanova) Morgan Schaffer Ltd. (Morgan Schaffer) NRG Systems, Inc. (NRG) Phenix Technologies Inc.
Some intellectual property rights, such as patents, have a 3 Table of Contents limited term, and there can be no assurance that third parties will not infringe or design around our intellectual property.
However, the legal protection afforded by intellectual property rights is often uncertain and can involve complex legal and factual issues. Some intellectual property rights, such as patents, have a limited term, and there can be no assurance that third parties will not infringe or design around our intellectual property.
These officers are elected annually to terms which expire at the first meeting of the Board of Directors held after the Annual Meeting of Stockholders. ​ ​ ​ ​ ​ ​ Name Age Position(s) and Business Experience Victor L. Richey 65 Mr.
These officers are elected annually to terms which expire at the first meeting of the Board of Directors held after the Annual Meeting of Stockholders. ​ ​ ​ ​ ​ ​ Name Age Position(s) and Business Experience Bryan H. Sayler ​ 57 ​ Mr. Sayler has been the Company’s President and Chief Executive Officer since January 1, 2023. Mr.
Government Contracts Some of our products are sold to the U.S. Government either directly under contracts with the Army, Navy and Air Force as well as other Government agencies or indirectly under subcontracts with their prime contractors. Direct and indirect sales to the U.S.
Government either directly under contracts with the Army, Navy and Air Force as well as other Government agencies or indirectly under subcontracts with their prime contractors. Direct and indirect sales to the U.S. Government, primarily related to the A&D segment, accounted for approximately 26%, 27% and 26% of our total revenue in 2023, 2022 and 2021, respectively.
ETS-Lindgren offers a variety of services including calibration for antennas and field probes, chamber certification, field surveys, customer training and a variety of product tests. ETS-Lindgren’s test labs are accredited by the following organizations: American Association for Laboratory Accreditation, National Voluntary Laboratory Accreditation Program and CTIA-The Wireless Association Accredited Test Lab.
ETS Lindgren offers a variety of services including calibration and product tests accredited by the following organizations: American Association for Laboratory Accreditation, National Voluntary Laboratory Accreditation Program and CTIA-The Wireless Association Accredited Test Lab. ETS Lindgren serves the acoustics, medical, health and safety, electronics, wireless communications, automotive and defense markets.
Nonetheless, in some situations, there is a risk of shortages due to reliance on a limited number of suppliers or because of price fluctuations due to the nature of the raw materials. For example, aerospace-grade titanium and gaseous helium, important raw materials for our A&D segment subsidiaries, may at times be in short supply.
Nonetheless, in some situations, there is a risk of shortages due to reliance on a limited number of suppliers or because of price fluctuations due to the nature of the raw materials.
Competition Competition in our major markets is broadly based and global in scope. This competition can be particularly intense during periods of economic slowdown, and we have experienced this in some of our markets.
While ETS-Lindgren has long-term contracts with a number of its suppliers, performance of these contracts is vulnerable to the risks described in Item 1A. Competition Competition in our major markets is broadly based and global in scope. This competition can be particularly intense during periods of economic slowdown, and we have experienced this in some of our markets.
The A&D segment’s individual legal and operating entities and historical financial results are unchanged from what was formerly presented as Filtration/Fluid Flow. The A&D segment accounted for approximately 41%, 44% and 48% of our total revenue in 2022, 2021 and 2020, respectively. This segment has seven facilities in the United States and one in Mexico.
A&D The A&D segment accounted for approximately 41%, 41% and 44% of our total revenue in 2023, 2022 and 2021, respectively. This segment has seven facilities in the United States and one in Mexico.
Government, primarily related to the A&D segment, accounted for approximately 27%, 26% and 28% of our total revenue in 2022, 2021 and 2020, respectively. Our Government contracts primarily include firm fixed-price contracts under which work is performed and paid for at a fixed amount without adjustment for the actual costs experienced in connection with the contracts.
Our Government contracts primarily include firm fixed-price contracts under which work is performed and paid for at a fixed amount without adjustment for the actual costs experienced in connection with the contracts. All Government prime contracts and virtually all of our Government subcontracts provide that they may be terminated at the convenience of the Government or the customer.
Our sales to international customers accounted for approximately 30%, 28% and 27% of our total revenue in 2022, 2021 and 2020, respectively. See Note 12 to the Consolidated Financial Statements for financial information by geographic area. See Item 1A, “Risk Factors,” for a discussion of risks related to our international operations.
See Note 9 to the Consolidated Financial Statements for financial information by geographic area. See Item 1A, “Risk Factors,” for a discussion of risks related to our international operations. Government Contracts Some of our products are sold to the U.S.
This segment purchases significant quantities of raw materials such as polyurethane foam, polystyrene beads, steel, aluminum, copper, nickel and wood. Accordingly, it is subject to price fluctuations in the worldwide raw materials markets. While ETS-Lindgren has long-term contracts with a number of its suppliers, performance of these contracts is vulnerable to the risks described in Item 1A.
Our Test segment is a vertically integrated supplier of electro-magnetic (EM) shielding and RF absorbing products, producing most of its critical RF components itself. This segment purchases significant quantities of raw materials such as polyurethane foam, polystyrene beads, steel, aluminum, copper, nickel and wood. Accordingly, it is subject to price fluctuations in the worldwide raw materials markets.
Our USG segment manufactures electronic instrumentation through a network of regional contract manufacturers under long-term contracts. In general, USG purchases the same kinds of component parts as do other electronic products manufacturers, and these 4 Table of Contents electronic components can be subject to supply chain constraints.
In general, USG purchases the same kinds of component parts as do other electronic products manufacturers, and these electronic components can be subject to supply chain constraints. USG purchases only a limited amount of raw materials, although some USG products require helium, which may at times be in short supply.
NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar. 2 Table of Contents Altanova, headquartered in Taino, Italy, provides products and services in more than 100 countries.
NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar. 2 Table of Contents Altanova, headquartered in Taino, Italy, has historically had a strong market presence in Europe and Asia, and its acquisition has created a significant international platform for our USG segment by filling important product gaps and geographies not previously served by Doble’s products and solutions.
(Phenix); and in November 2021 we acquired Networks Electronic Company, LLC (NEco), a provider of miniature electro-explosive components and subsystems supporting mission, flight, and life-critical applications to the aerospace and defense end-markets. Information about these acquired businesses is provided in the following section, “Products,” and in Note 2 to the Consolidated Financial Statements.
(Phenix); and in November 2021 we acquired Networks Electronic Company, LLC (NEco). Information about these acquired businesses is provided in the following section, “Products,” and in Note 2 to the Consolidated Financial Statements. Products Our principal products are described below. See Note 9 to the Consolidated Financial Statements for financial information regarding business segments and 10% customers.
ETS-Lindgren serves the acoustics, medical, health and safety, electronics, wireless communications, automotive and defense markets. Marketing and Sales Our products generally are distributed to customers through a domestic and foreign network of distributors, sales representatives, direct sales teams and in-house sales personnel.
Marketing and Sales Our products generally are distributed to customers through a domestic and foreign network of distributors, sales representatives, direct sales teams and in-house sales personnel. Our sales to international customers accounted for approximately 30%, 30% and 28% of our total revenue in 2023, 2022 and 2021, respectively.
All of our facilities are in material compliance with appliable COVID-related Government regulations and executive orders. See Item 1A, “Risk Factors,” for a discussion of risks related to our Government business. Intellectual Property We own or have other rights in various forms of intellectual property (i.e., patents, trademarks, service marks, copyrights, mask works, trade secrets and other items).
Upon a termination for convenience, we are entitled to receive equitable compensation from the customer for the work we completed prior to termination. All of our facilities are in material compliance with appliable Government regulations and executive orders. See Item 1A, “Risk Factors,” for a discussion of risks related to our Government business.
In October 2020 we acquired Advanced Technology Machining, Inc. (ATM) and its sister company TECC Grinding, Inc.; in July 2021 we acquired I.S.A Altanova Group S.r.l. and its affiliated companies (Altanova); in August 2021 we acquired the assets of Phenix Technologies Inc.
CMT is a leading supplier of syntactic materials for buoyancy and specialty applications, with expertise in designing and manufacturing custom syntactic foam components and systems utilized in industrial, oceanographic, military, and naval applications. In July 2021 we acquired I.S.A Altanova Group S.r.l. and its affiliated companies (Altanova); in August 2021 we acquired the assets of Phenix Technologies Inc.
Doble’s offices outside North America have been consolidated with Altanova’s, and going forward we expect that Altanova will represent their combined businesses in markets outside the U.S. and Canada. Test Our Test segment accounted for approximately 27%, 28% and 26% of our total revenue in 2022, 2021 and 2020, respectively.
The Altanova team represents our products and solutions in markets outside North and South America and Canada. Test Our Test segment accounted for approximately 23%, 27% and 28% of our total revenue in 2023, 2022 and 2021, respectively. This segment has four facilities in the United States and six outside the United States.
As a major supplier of engineered products to industrial and commercial markets, we emphasize developing intellectual property and protecting our rights therein. However, the legal protection afforded by intellectual property rights is often uncertain and can involve complex legal and factual issues.
Intellectual Property We own or have other rights in various forms of intellectual property (i.e., patents, trademarks, service marks, copyrights, mask works, trade secrets and other items). As a major supplier of engineered products to industrial and commercial markets, we emphasize developing intellectual property and protecting our rights therein.
It supplies its customers with a broad range of isolated environments and turnkey systems, including RF test facilities, acoustic test enclosures, RF and magnetically shielded rooms, secure communication facilities, RF measurement systems and broadcast and recording studios. Many of these facilities include proprietary features such as shielded doors and windows.
ETS-Lindgren is an industry leader in designing and manufacturing products and systems to measure and control RF and acoustic energy for research and development, regulatory compliance, and medical and security applications. It supplies a broad range of turnkey systems, including RF test facilities and measurement systems, acoustic test enclosures, RF and magnetically shielded rooms, and secure communication facilities.
Removed
For example, during 2020 Doble consolidated its headquarters operations into a single, more cost-efficient facility in Marlborough, Massachusetts, and in 2021 it closed its facility in Toronto, Ontario and consolidated its Manta product line into its existing production capacity for Doble instruments. We are also continually seeking opportunities to supplement our growth by making strategic acquisitions.
Added
For example, in FY2023 we consolidated the businesses of Westland Technologies and Globe Composites into a single business managed by the Globe Composites leadership team in Stoughton, MA, and repurposed Westland’s Modesto, California location into a focused manufacturing site in support of our broader Navy materials business.
Removed
In December 2019, we sold the businesses comprising our former Technical Packaging segment and used the proceeds from the sale to pay down debt and for other corporate purposes. The Technical Packaging segment was reported as Discontinued Operations in 2020. See Note 3 to the Consolidated Financial Statements. Products Our principal products are described below.
Added
We are also continually seeking opportunities to supplement our growth by making strategic acquisitions. In February 2023 we acquired CMT Materials, LLC and its affiliate Engineered Syntactic Systems, LLC (together, CMT).
Removed
See Note 12 to the Consolidated Financial Statements for financial information regarding business segments and 10% customers. A&D Beginning in the first quarter of 2020, we renamed our Filtration/Fluid Flow segment as Aerospace & Defense to better reflect the composition of the segment’s products, end markets and customer characteristics.
Added
For example, aerospace-grade titanium and gaseous helium, important raw materials for our A&D segment subsidiaries, may at times be in short supply. 4 Table of Contents Our USG segment manufactures electronic instrumentation through a network of regional contract manufacturers under long-term contracts.
Removed
Its strong market share in Europe and Asia creates a significant international platform for our USG segment and fills important product gaps and geographies not previously served by our existing products and solutions.
Added
Additional Information The information set forth in Item 1A, “Risk Factors,” is incorporated in this Item by reference.
Removed
This segment has four facilities in the United States and six outside the United States. ETS-Lindgren is an industry leader in designing and manufacturing products which provide its customers with the ability to measure and contain magnetic, electromagnetic and acoustic energy.
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ETS-Lindgren also provides the design, program management, installation and integration services required to successfully complete these types of facilities.
Removed
All Government prime contracts and virtually all of our Government subcontracts provide that they may be terminated at the convenience of the Government or the customer. Upon a termination for convenience, we are entitled to receive equitable compensation from the customer for the work we completed prior to termination.
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USG purchases only a limited amount of raw materials, although some USG products require helium, which may at times be in short supply. Our Test segment is a vertically integrated supplier of electro-magnetic (EM) shielding and RF absorbing products, producing most of its critical RF components itself.
Removed
Richey has been Chairman of the Board of Directors and Chief Executive Officer since April 2003, and President since October 2006. He also serves as Chairman of the Executive Committee of the Board of Directors. Mr.
Removed
Richey will retire as Chief Executive Officer and President on December 31, 2022 but will continue as an employee and Chairman of the Board for a transition period. Bryan H. Sayler ​ 56 ​ Mr. Sayler will become the Company’s Chief Executive Officer and President on January 1, 2023. Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

31 edited+15 added−30 removed43 unchanged
Biggest changeIf this conflict were to spread beyond these two countries, we would expect an increasingly unfavorable impact on our global business environment. 9 Table of Contents Our international sales are also subject to other risks inherent in foreign commerce, including currency fluctuations and devaluations, differences in foreign laws, uncertainties as to enforcement of contract or intellectual property rights, and difficulties in negotiating and resolving disputes with our foreign customers.
Biggest changeFor example: ● Our Test segment does significant business in Asia, and changes in the Chinese political climate, or economic or territorial aggression by China against Taiwan or other nearby countries, could significantly and negatively affect our business; also, cash generated by our business in China may not be available to fund our operations or other uses outside China due to possible imposition of restrictions or limitations on our ability to repatriate the cash, and although we attempt to repatriate cash on a regular basis to mitigate this risk, we may not be able to continue to do this in the future; ● Several of our subsidiaries are based in Europe and could be negatively impacted by the ongoing conflicts between Russia and Ukraine, and between Israel and Hamas in Gaza; if either of these conflicts were to spread beyond these countries, or if other conflicts were to develop, we would expect an increasingly unfavorable impact on our global business environment; and ● Our international sales are also subject to other risks inherent in foreign commerce, including currency fluctuations and devaluations, differences in foreign laws, uncertainties as to enforcement of contract or intellectual property rights, and difficulties in negotiating and resolving disputes with our foreign customers.
Although we do not believe we have experienced a material information security breach in the last three years, and we have incurred no fines, settlement costs or other material expenses related to information security breaches, if we were to experience such a breach it could adversely affect our reputation and result in litigation, regulatory action, liability for fines, penalties and related expenses, and costs of implementing additional data protection procedures.
Further, although we do not believe we have experienced a material information security breach in the last three years, and we have incurred no material fines, settlement costs or other material expenses related to information security breaches, if we were to experience such a breach it could adversely affect our reputation and result in litigation, regulatory action, liability for fines, penalties and related expenses, and costs of implementing additional data protection procedures.
Acquisitions of other companies involve numerous risks, including difficulties in the integration of the operations, technologies and products of the acquired companies, the potential exposure to unanticipated and undisclosed liabilities, the potential that expected benefits or synergies are not realized and that operating costs increase, the potential loss of key personnel, suppliers or customers of acquired businesses and the diversion of Management’s time and attention from other business concerns.
In addition, acquisitions of other companies involve numerous risks, including difficulties in the integration of the operations, technologies and products of the acquired companies, the potential exposure to unanticipated and undisclosed liabilities, the potential that expected benefits or synergies are not realized and that operating costs increase, the potential loss of key personnel, suppliers or customers of acquired businesses and the diversion of Management’s time and attention from other business concerns.
Government regulations and controls such as the U.S. International Traffic in Arms Regulations (ITAR), which impose certain restrictions on the U.S. export of defense articles and services, and these restrictions are subject to change from time to time, including changes in the countries into which our products may lawfully be sold.
Government regulations and controls such as the International Traffic in Arms 9 Table of Contents Regulations (ITAR), which impose certain restrictions on the U.S. export of defense articles and services, and these restrictions are subject to change from time to time, including changes in the countries into which our products may lawfully be sold.
In addition, some of our customers or potential customers may prefer to purchase from a supplier which does not have such a limited number of sources of supply. Increases in prices of raw material and components, and decreased availability of such items, could adversely affect our business.
In addition, some of our customers or potential customers may prefer to purchase from a supplier which does not have such a limited number of sources of supply. 10 Table of Contents Increases in prices of raw material and components, and decreased availability of such items, could adversely affect our business.
In addition, our costs of new product development may not be recoverable if demand for our products is not as great as we anticipate it to be. 11 Table of Contents Product defects or customer claims could result in costly fixes, litigation and damages.
In addition, our costs of new product development may not be recoverable if demand for our products is not as great as we anticipate it to be. Product defects or customer claims could result in costly fixes, litigation and damages.
In addition, these disputes could result in a reduction in revenue, a loss on a particular project, or even a significant damages award against us. Despite our efforts, we may be unable to adequately protect our intellectual property.
In addition, these disputes could result in a reduction in revenue, a loss on a particular project, or even a significant damages award against us. 11 Table of Contents Despite our efforts, we may be unable to adequately protect our intellectual property.
As a result, we may be limited in the number of acquisitions which we are able to complete and we may face difficulties in achieving the profitability or cash flows needed to justify our investment in them. Our acquisitions of other companies carry risk.
As a result, we may be limited in the number of acquisitions which we are able to complete, and we may face difficulties in achieving the profitability or cash flows needed to justify our investment in them.
We have experienced COVID-related short term disruptions in the supply chain which have periodically resulted in extended lead times and cost increases, and the long term impacts of these disruptions are uncertain. See also “COVID-19 Related Risks” above.
We have experienced COVID-related short-term disruptions in the supply chain which have periodically resulted in extended lead times and cost increases, and the long term impacts of these disruptions are uncertain.
These funding effects could adversely affect our sales and profit, and could bring about a restructuring of our operations, which could result in an adverse effect on our financial condition or results of operations. A significant portion of VACCO’s, Westland’s and Globe’s sales involve major U.S. Government programs such as NASA’s Space Launch System (SLS) and U.S. Navy submarines.
These funding effects could adversely affect our financial condition or results of operations. A significant portion of VACCO’s, Globe’s and Westland’s sales involve major U.S. Government programs such as NASA’s Space Launch System (SLS) and U.S. Navy submarines.
We attempt to mitigate these risks through numerous measures, including implementation of standard cybersecurity controls, employee training and testing, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems.
While we attempt to mitigate these risks through numerous measures, including implementation of standard cybersecurity controls, employee training and testing, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, we cannot guarantee that these efforts will always be successful.
For example, our USG segment relies heavily on engineers with significant experience and reputation in the utility industry to furnish expert consulting services and support to customers, and our other segments similarly rely on qualified and experienced employees to carry on their businesses.
There is a risk of our losing key employees who have engineering and technical expertise. For example, our USG segment relies heavily on engineers with significant experience and reputation in the utility industry to furnish expert consulting services and support to customers, and our other segments similarly rely on qualified and experienced employees to carry on their businesses.
These and other weather-created disruptions in supply, in addition to affecting costs, could impact our ability to procure an adequate supply of these raw materials and components, and delay or prevent deliveries of products to our customers.
These and other weather-created disruptions in supply, in addition to affecting costs, could impact our ability to procure an adequate supply of these raw materials and components, and delay or prevent deliveries of products to our customers. In addition, significant natural disasters or weather events such as major earthquakes or hurricanes could disrupt our operations.
Although we attempt to identify and evaluate the risks inherent in any acquisition, we may not properly ascertain or mitigate all such risks, and our failure to do so could have a material adverse effect on our business.
Although we 12 Table of Contents attempt to identify and evaluate the risks inherent in any acquisition, we may not properly ascertain or mitigate all such risks, and our failure to do so could have a material adverse effect on our business. Our inability to hire or retain qualified key employees could affect our performance and revenues.
Although losses arising from some of these issues may be covered by information security insurance, we cannot guarantee that our coverage will be adequate for all costs or losses incurred.
Although losses arising from some of these issues may be covered by information security insurance, we cannot guarantee that our coverage will be adequate for all costs or losses incurred. A significant part of our manufacturing operations depends on a small number of third-party suppliers.
In addition to the risks and uncertainties discussed in those Items and elsewhere in this Form 10-K, and risks and uncertainties that apply to businesses or public companies generally, the following important risk factors which are particularly applicable to our business could cause actual results and events to differ materially from those contained in any forward-looking statements, or could otherwise materially adversely affect our business, operating results or financial condition: 7 Table of Contents COVID-19 Related Risks The continuation of the COVID-19 pandemic and the impacts of known or unknown COVID-19 variants may have a material adverse effect on our business which could continue for an unknown period of time.
In addition to the risks and uncertainties discussed in those Items and elsewhere in this Form 10-K, and risks and uncertainties that apply to businesses or public companies generally, the following important risk factors which are particularly applicable to our business could cause actual results and events to differ materially from those contained in any forward-looking statements, or could otherwise materially adversely affect our business, operating results or financial condition: 7 Table of Contents Risks Related to the Nature of our Business Restrictions in authorized U.S.
In 2022, approximately 30% of our net sales were to customers outside the United States. Adverse changes in the political situation in certain foreign countries in which we do business could cause a decline in revenues and adversely affect our financial condition.
Adverse changes in the political situation in certain foreign countries in which we do business could cause a decline in revenues and adversely affect our financial condition.
In addition, our reliance on sole or limited sources of supply of raw materials and components in each of our segments could adversely affect our business, as described in the preceding Risk Factor.
In addition, our reliance on sole or limited sources of supply of raw materials and components in each of our segments could adversely affect our business, as described in the preceding Risk Factor. The end of customer product life cycles, or our inability to timely develop new products, could reduce our future sales.
Depending on the nature of the problem or initiative in question, such noncompliance or failure could have a material adverse effect on our business, financial condition or result of operations. 13 Table of Contents Provisions in our articles of incorporation, bylaws and Missouri law could make it more difficult for a third party to acquire us and could discourage acquisition bids or a change of control, and could adversely affect the market price of our common stock.
Provisions in our articles of incorporation, bylaws and Missouri law could make it more difficult for a third party to acquire us and could discourage acquisition bids or a change of control, and could adversely affect the market price of our common stock.
We may not be able to identify suitable acquisition candidates or complete acquisitions successfully, which may inhibit our rate of growth. As part of our growth strategy, we plan to continue to pursue acquisitions of other companies, assets and product lines that either complement or expand our existing business.
As part of our growth strategy, we plan to continue to pursue acquisitions of other companies, assets and product lines that either complement or expand our existing business. However, we may be unable to implement this strategy if we are unable to identify suitable acquisition candidates or consummate future acquisitions at acceptable prices and terms.
Risks Related to our Manufacturing and Sales Operations and Technology Disruptions of Our Information Technology Systems, or Information Security and/or Data Privacy Breaches, Could Adversely Affect Our Business. We have many information technology systems that are important to the operation of our businesses, some of which are managed by third parties.
Risks Related to our Manufacturing and Sales Operations and Technology Disruptions of Our Information Technology Systems, or Information Security and/or Data Privacy Breaches, Could Adversely Affect Our Business.
Future costs associated with these situations, including ones which may be currently unknown to us, are difficult to quantify but could have a significant effect on our financial condition. See Item 1, “Business – Environmental Matters” for a discussion of these factors.
Future costs associated with these situations, including ones which may be currently unknown to us, are difficult to quantify but could have a significant effect on our financial condition. The effects of climate change, or significant natural disasters or weather events, could adversely affect our sales.
However, we may be unable to implement this strategy if we are unable to identify suitable acquisition candidates or consummate future acquisitions at acceptable prices and terms. We expect to face competition for acquisition candidates which may limit the number of acquisition opportunities available to us and may result in higher acquisition prices.
We expect to face competition for acquisition candidates which may limit the number of acquisition opportunities available to us and may result in higher acquisition prices.
Risks Related to our Governmental and Aerospace Business Our sales of products to the Government depend upon continued Government funding. Sales to the U.S. Government and its prime contractors and subcontractors represent a significant portion of our business. Over the past three fiscal years, from 26% to 28% of our revenues have been generated from sales to the U.S.
Government defense spending or acquisition priorities could negatively impact our financial position and result of operations. Sales to the U.S. Government and its prime contractors and subcontractors represent a significant portion of our business. Over the past three fiscal years, approximately 26% of our revenues have been generated from sales to the U.S.
As certain aircraft are retired and replaced by newer aircraft, there could be a corresponding decrease in sales associated with our current products. Such a decrease could adversely affect our operating results.
For example, a substantial portion of PTI's revenue is generated from commercial aviation aftermarket sales. As certain aircraft are retired and replaced by newer aircraft, if we were unable to offer suitable aftermarket products for the newer aircraft there could be a corresponding decrease in sales associated with our products which could adversely affect our operating results.
For example, Doble has arrangements with six manufacturers which produce and supply a substantial portion of its end-products, and one of these suppliers produces approximately 23% of Doble’s products from a single location within the United States. 10 Table of Contents As another example, PTI has a single supplier of critical electronic components for a significant aircraft production program, and if this supplier were to discontinue producing these components the need to secure another source could pose a risk to the production program.
A significant part of our manufacturing operations relies on a small number of third-party manufacturers to supply component parts or products. For example, Doble has arrangements with six manufacturers which produce and supply a substantial portion of its end-products, and one of these suppliers produces approximately 23% of Doble’s products from a single location within the United States.
A reduction or delay in Government spending on these programs could have a significant adverse impact on our financial results which could extend for more than a single year. Our Government business increases the risk that we may not realize the full amount of our backlog.
A reduction or delay in Government spending on these programs could have a significant adverse impact on our financial results which could extend for more than a single year. As of September 30, 2023, our twelve-month backlog was approximately $540.7 million, which represents confirmed orders we believe will be recognized as revenue within the next twelve months.
Government’s and its subcontractors’ ability to modify or terminate major programs or contracts, and if and to the extent that this occurs, our future revenues could be materially reduced. The end of customer product life cycles could negatively affect our A&D segment’s results. Many of our A&D segment products are sold to be components in our customers’ end-products.
There can be no assurance that our customers will purchase all the orders represented in our backlog, particularly as to contracts which are subject to the U.S. Government’s and its subcontractors’ ability to modify or terminate major programs or contracts, and if and to the extent that this occurs, our future revenues could be materially reduced.
Although we maintain insurance coverage for data privacy risks, we cannot guarantee that our coverage will be adequate for all costs or losses incurred. A significant part of our manufacturing operations depends on a small number of third-party suppliers. A significant part of our manufacturing operations relies on a small number of third-party manufacturers to supply component parts or products.
Although we maintain insurance coverage for data privacy risks, we cannot guarantee that our coverage will be adequate for all costs or losses incurred. We have many information technology systems that are important to the operation of our businesses, some of which are managed by third parties.
In addition, a rise in the dollar against foreign currencies could make our products more expensive for foreign customers and cause them to reduce the volume of their purchases. Economic, political and other risks of our international operations, including terrorist activities or armed conflict, could adversely affect our business.
While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect our future operations, revenues and financial condition. Economic, political and other risks of our international operations, including unforeseen developments such as terrorist activities, international tensions. war or other armed conflict, and international pandemics, could adversely affect our business.
Government or its contractors, primarily within our A&D segment. These sales are dependent on government funding of the underlying programs, which is generally subject to annual Congressional appropriations. There could be reductions or terminations of, or delays in, the government funding on programs which apply to us or our customers.
These sales are dependent on government funding of the underlying programs, which is generally subject to annual Congressional appropriations and periodic authorization of increases in the Government debt ceiling, and they may therefore be adversely affected not only by failure to obtain timely and adequate appropriations but also by extended Government shutdowns.
Removed
The effects of the COVID-19 global pandemic continue to create or increase the economic, demand and operational uncertainties of our business.
Added
Government or its contractors, primarily within our A&D segment.
Removed
We have global operations, customers and suppliers, including in countries most impacted by COVID-19, and both the disease itself and the actions taken around the world to slow the spread of COVID-19 and its variants have impacted our customers and suppliers; and future developments could cause further disruptions to the Company due to the interconnected nature of our business relationships.
Added
The lack of certainty about long-term Government defense spending priorities and Congressional willingness to continue short-term Governmental funding in a timely manner creates a continuing risk of reductions or terminations of, or delays in, the government funding of programs applicable to us or our customers, which we cannot anticipate.
Removed
We have been and may continue to be subject to postponement or cancellation of certain contracts to which we are a party. Current restrictions and conditions have and may continue to prevent or delay us in accessing customer facilities to deliver products and provide services, and disrupt or delay our supply chain.
Added
We enter into fixed-price contracts which could subject us to losses if we have cost overruns. We derive some of our revenues from fixed-price contracts.
Removed
Further, we have occasionally incurred short-term disruptions in some facility operations, and due to the nature of the COVID-19 pandemic there can be no assurance that we will not suffer facility closures or other adverse effects on our business operations in the future.
Added
While fixed-price contracts enable us to benefit from performance improvements, cost reductions and efficiencies, they also subject us to the risk of reduced margins or incurring losses if we are unable to achieve estimated costs and revenues. If our costs exceed our estimated price, we recognize losses which can significantly affect our reported results.
Removed
The facilities of our suppliers and customers have experienced, and may continue to experience, disruptions in manufacturing and supply arrangements due to the loss or disruption of critical manufacturing and supply elements, such as raw materials or other finished product components, transportation, workforce or other manufacturing and distribution capability.
Added
The long term nature of many of our contracts makes the process of estimating costs and revenues on fixed-price contracts inherently risky. Fixed-price contracts often contain price incentives and penalties tied to performance, which can be difficult to estimate and have significant impacts on margins.
Removed
We may also experience failure of third parties on which we rely, including our suppliers, distributors and contractors, to meet their obligations to us, or significant restrictions in their ability to do so. These facts and circumstances may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Added
Estimating costs to complete fixed-price development contracts is generally subject to more uncertainty than fixed-price production contracts, especially in times of higher inflation. Many of these development programs have highly complex designs.
Removed
The extent to which the COVID-19 pandemic will impact our business, results of operations, financial condition and cash flows in the future, and the length of time these impacts may continue, will depend on future developments that are highly uncertain and cannot be predicted at this time, including new information that may emerge concerning the severity of COVID-19 and its variants, the longevity of COVID-19 and its variants, and the actions taken to contain their impacts.
Added
In addition, technical or quality issues that arise during development could lead to schedule delays and higher costs to complete, which could result in a material charge or otherwise adversely affect our financial condition.
Removed
As of September 30, 2022, our twelve-month backlog was approximately $556.2 million, which represents confirmed orders we believe will be recognized as revenue within the next twelve months. There can be no assurance that our customers will purchase all the orders represented in our backlog, particularly as to contracts which are subject to the U.S.
Added
Risks Related to our International Business We derive a significant part of our revenues from non-U.S. sales and are subject to the risks of doing business in other countries. In 2023, approximately 30% of our net sales were to customers outside the United States.
Removed
If a customer discontinues a certain end-product line, our ability to continue to sell those components will be reduced or eliminated. The result could be a significant 8 Table of Contents decrease in our sales. For example, a substantial portion of PTI’s revenue is generated from commercial aviation aftermarket sales.
Added
We expect that non-U.S. sales will continue to account for a significant portion of our revenues for the foreseeable future.
Removed
Risks Related to our International Business Negative worldwide economic conditions and related inflation, rising interest rates and a potential economic slowdown could result in a decrease in our sales and an increase in our operating costs, which could adversely affect our business and operating results.
Added
As a result, we are subject to the risks of doing business internationally, including: ● Changes in regulatory requirements or other executive branch actions, such as Executive Orders; ● Changes in the global trade environment, including disputes with authorities in non-U.S. jurisdictions, including international trade authorities, that could impact sales and/or delivery of products and services outside the U.S. and/or impose costs on our customers in the form of tariffs, duties or penalties attributable to the importation of our products; 8 Table of Contents ● Trade restrictions against certain foreign-made products or entities may adversely affect our business and our ability to compete in certain markets; ● Our business may also be impacted by the ongoing trade tensions between the U.S. and China which are causing U.S. goods to be viewed in a less favorable light by Chinese customers; ● Changes to U.S. and non-U.S. government policies, including sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements; ● Fluctuations in international currency exchange rates; ● Volatility in international political and economic environments and changes in non-U.S. national priorities and budgets, which can lead to delays or fluctuations in orders; ● Imposition of domestic and international taxes, export controls, tariffs, embargoes, sanctions (such as those imposed on Russia) and other trade restrictions; ● Compliance with a variety of non-U.S. laws, as well as U.S. laws affecting the activities of U.S. companies abroad; and ● Unforeseen developments and conditions, including terrorism, war, epidemics and international tensions and conflicts.
Removed
If there is a worsening of global and U.S. economic and financial market conditions and additional tightening of global credit markets, many of our customers may further delay or reduce their purchases of our products. Uncertainties in the global economy may cause the utility industry and commercial market customers to experience increases in cost of capital, which could limit spending.
Added
As another example, Globe has a single supplier of critical materials for a significant military production program, and if this supplier were to discontinue producing these components in a timely manner the need to secure another source could pose a risk to the production program.
Removed
To the extent this problem affects our customers, our sales and profits could be adversely affected.
Added
Many of our A&D segment products are sold to be components in our customers' end products. If a customer discontinues a certain end-product line and we are unable to develop and successfully market replacement products there could be a significant decrease in our sales and an adverse effect on our operating results.
Removed
Likewise, if our suppliers face challenges in obtaining credit, they may have to increase their prices or become unable to continue to offer the products and services we use to manufacture our products, which could have an adverse effect on our business, results of operations and financial condition.
Added
For example, many of our A&D segment's operations are located near major fault lines in California, where a major earthquake could result in significant physical damage to or closure of one or more of these facilities, and Doble has a significant supplier in coastal Florida, where a major hurricane could have similar effects.
Removed
Increases in tariffs or other changes in trade policies could adversely affect our ability to compete. In addition to the effects of increases in market prices, increases in domestic import tariffs could increase the prices to us of our foreign-sourced raw materials and product components and thereby require us to either increase our selling prices or accept reduced margins.
Added
Any prolonged disruption in one or more of these manufacturing operations could significantly delay our ability to make timely deliveries of products to our customers. Risks Related to Our Business Strategy and Corporate Structure We may not be able to identify suitable acquisition candidates or complete acquisitions successfully, which may inhibit our rate of growth.
Removed
In the case of ETS-Lindgren, for example, tariffs on imports of Chinese goods have raised the costs of components purchased by it either from its China facility or from other Chinese suppliers, and its margins in China have been impacted by the increased costs of its products made in the U.S. and sold through its Chinese business.
Added
Depending on the nature of the problem or initiative in question, such noncompliance or failure could have a material adverse effect on our business, financial condition or result of operations.
Removed
In addition, increases in foreign-country tariffs applicable to our exported products could increase the effective prices of our products to our customers in those countries unless we are able to offset the tariffs by reducing our selling prices.
Removed
Any or all of these factors could decrease the demand for our products, reduce our profitability, and/or make our products less competitive than those of other manufacturers that are not subject to the same tariffs.
Removed
For example, since 2019 increased tariffs imposed by China on U.S. origin goods have adversely affected sales of NRG’s products in China by increasing their prices to Chinese customers. In addition, trade restrictions against certain foreign-made products or entities may adversely affect our business and our ability to compete in certain markets.
Removed
Our business may also be impacted by the ongoing trade tensions between the U.S. and China which are causing U.S. goods to be viewed in a less favorable light by Chinese customers. Our international operations expose us to fluctuations in currency exchange rates that could adversely affect our results of operations and cash flows.
Removed
We have significant manufacturing and sales activities in foreign countries, and our domestic operations have sales to foreign customers.
Removed
Our financial results may be affected by fluctuations in foreign currencies and by the translation of the financial statements of our foreign subsidiaries from local currencies into U.S. dollars, and we may not be able to adequately or successfully hedge against these risks.
Removed
For example, our Test segment does significant business in Asia, and changes in the Asian political climate or political changes in specific Asian countries could negatively affect our business. Several of our subsidiaries are based in Europe and could be negatively impacted by the ongoing conflict between Russia and Ukraine.
Removed
The entire electronics industry is currently disrupted due to limited sources of supply, and we are subject to the same supply chain risks as other manufacturers of products containing electronic components. Our inability to timely develop new products could reduce our future sales.
Removed
Risks Related to Our Business Strategy and Corporate Structure Changes in testing standards could adversely impact our Test and USG segments’ sales. A significant portion of the business of our USG and Test segments involves sales to technology customers who need to have a third party verify that their products meet specific international and domestic test standards.
Removed
If regulatory agencies were to eliminate or reduce certain domestic or international test standards, or if demand for product testing from these customers were to decrease for some other reason, our sales could be adversely affected.
Removed
For example, if a regulatory authority were to relax the test standards for certain electronic devices because they were determined not to interfere with the broadcast spectrum, or if new wireless 12 Table of Contents communication technologies were developed that required less testing or different types of testing, our sales of certain testing products could be significantly reduced.
Removed
We may incur significant costs, experience short-term inefficiencies, or be unable to realize expected long-term savings from facility consolidations and other business reorganizations.
Removed
We periodically assess the cost and operational structure of our facilities in order to manufacture and sell our products in the most efficient manner, and based on these assessments, we may from time to time reorganize, relocate or consolidate certain of our facilities.
Removed
These actions may require us to incur significant costs and may result in short term business inefficiencies as we consolidate and close facilities and transition our employees; and in addition, we may not achieve the expected long-term benefits. Any or all of these factors could result in an adverse impact on our operating results, cash flows and financial condition.
Removed
Our inability to hire or retain qualified key employees could affect our performance and revenues. There is a risk of our losing key employees having engineering and technical expertise.

Item 2. Properties

Properties — owned and leased real estate

5 edited+0 added−0 removed1 unchanged
Biggest changeFt. ​ Expiration Date) ​ W=Warehouse) ​ Segment Modesto, CA ​ 181,500 ​ Leased (9/30/2033) ​ M, E, O,W ​ A&D Denton, TX ​ 145,000 ​ Leased (9/30/2029, plus options) ​ M, E, O, W ​ A&D Cedar Park, TX 130,000 Owned M, E, O, W Test Oxnard, CA 127,400 Owned M, E, O, W A&D South El Monte, CA 100,100 Owned M, E, O, W A&D Durant, OK 100,000 Owned M, O, W Test Valencia, CA 79,300 Owned M, E, O A&D Marlborough, MA 79,100 Leased (2/28/2037) M, E, O, W USG Hinesburg, VT 77,000 Owned M, E, O, W USG Stoughton, MA 71,400 Leased (1/31/2029) M, E, O, W A&D Accident, MD 66,800 Owned M, E, O, W USG South El Monte, CA 63,300 Leased (6/30/2024) M, O, W A&D Brockton, MA ​ 47,300 ​ Leased (7/31/2023) ​ W ​ A&D Eura, Finland 41,500 Owned M, E, O, W Test Montreal, Québec ​ 38,400 ​ Leased (8/31/2041) ​ M, E, O, W ​ USG Tianjin, China 38,100 Leased (11/19/2027) M, E, O Test Minocqua, WI 35,400 Owned M, O, W Test Bologna, Italy ​ 28,200 ​ Leased (8/13/2028) ​ M, E, O, W ​ USG Ontario, CA 26,900 Leased (8/31/2025) M, E, O, W USG Chatsworth, CA ​ 24,800 ​ Leased (12/31/2023) ​ M, E, O, W ​ A&D St.
Biggest changeFt. ​ Expiration Date) ​ W=Warehouse) ​ Segment Modesto, CA ​ 181,500 ​ Leased (9/30/2033) ​ M, E, O,W ​ A&D Stoughton, MA ​ 151,100 ​ Leased (1/31/2037) ​ M, E, O, W ​ A&D Denton, TX ​ 145,000 ​ Leased (9/30/2029, plus options) ​ M, E, O, W ​ A&D Cedar Park, TX 130,000 Owned M, E, O, W Test Oxnard, CA 127,400 Owned M, E, O, W A&D South El Monte, CA 100,100 Owned M, E, O, W A&D Durant, OK 100,000 Owned M, O, W Test Valencia, CA 79,300 Owned M, E, O A&D Marlborough, MA 79,100 Leased (2/28/2037) M, E, O, W USG Hinesburg, VT 77,000 Owned M, E, O, W USG Accident, MD 66,800 Owned M, E, O, W USG South El Monte, CA 52,700 Leased (6/30/2024) M, O, W A&D Brockton, MA ​ 47,300 ​ Leased (3/31/2024) ​ W ​ A&D Eura, Finland 41,500 Owned M, E, O, W Test Montreal, Québec ​ 38,400 ​ Leased (8/31/2041) ​ M, E, O, W ​ USG Tianjin, China 38,100 Leased (11/19/2027) M, E, O Test Minocqua, WI 35,400 Owned M, O, W Test Bologna, Italy ​ 28,200 ​ Leased (8/13/2028) ​ M, E, O, W ​ USG Ontario, CA 26,900 Leased (8/31/2025) M, E, O, W USG Chatsworth, CA ​ 24,800 ​ Leased (12/31/2025) ​ M, E, O, W ​ A&D St.
See also Note 14 to the Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Use(s) ​ ​ ​ ​ ​ ​ ​ (M=Manufacturing, ​ ​ ​ ​ Approx. ​ Owned / Leased (with ​ E=Engineering, O=Office, ​ Operating Location ​ Sq.
See also Note 11 to the Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Use(s) ​ ​ ​ ​ ​ ​ ​ (M=Manufacturing, ​ ​ ​ ​ ​ ​ ​ ​ E=Engineering, ​ ​ ​ ​ Approx. ​ Owned / Leased (with ​ O=Office, ​ Operating Location ​ Sq.
Louis, MO 21,500 Leased (8/31/2025) ESCO Corporate Office Corporate Taino, Italy 18,000 Leased (various term ends) M, E, O, W USG Zola Predosa, Italy ​ 12,900 ​ Leased (1/31/2029) ​ M, E, O, W ​ USG Morrisville, NC 11,600 Leased (1/31/2027), plus options O USG Wood Dale, IL 10,700 Leased (6/30/2024) E, O Test ​ ​ ​ 14 Table of Contents
Louis, MO 21,500 Leased (8/31/2025) ESCO Corporate Office Corporate Taino, Italy 18,000 Leased (various term ends) M, E, O, W USG Zola Predosa, Italy ​ 12,900 ​ Leased (1/31/2029) ​ M, E, O, W ​ USG Morrisville, NC 11,600 Leased (1/31/2027), plus options O USG Wood Dale, IL 10,700 Leased (6/30/2024) E, O Test ​
We do not believe any of the omitted properties, consisting primarily of office and/or warehouse space, are individually or collectively material to our operations or business.
We do not believe any of the omitted properties, consisting primarily of office space, warehouse space and land held for possible future use, are individually or collectively material to our operations or business.
At September 30, 2022, our physical properties, including those described in the table below, comprised approximately 1,618,000 square feet of floor space, of which approximately 757,500 square feet were owned and approximately 860,500 square feet were leased. The table below includes our principal physical properties.
At September 30, 2023, our physical properties, including those described in the table below, comprised approximately 2,253,700 square feet, of which approximately 757,500 square feet were owned and approximately 1,496,200 square feet were leased. The table below includes our principal physical properties.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThese figures assume that all dividends, if any, paid over the measurement period were reinvested, and that the starting values of each index and the investments in our common stock were $100 at the close of trading on September 30, 2017. ​ 16 Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among ESCO Technologies Inc., the Russell 2000 Index, and the S&P SmallCap 600 Industrials Index ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/30/17 9/30/18 9/30/19 9/30/20 9/30/21 9/30/22 ESCO Technologies Inc. ​ $ 100.00 ​ $ 114.13 ​ $ 134.04 ​ $ 136.42 ​ $ 130.83 ​ $ 125.19 Russell 2000 Index ​ 100.00 ​ 115.24 ​ 104.99 ​ 105.40 ​ 155.66 ​ 119.08 S&P Small Cap 600 Industrials Index ​ 100.00 ​ 121.53 ​ 112.63 ​ 105.97 ​ 155.41 ​ 134.57 ​ The stock price performance included in this graph is not necessarily indicative of future stock price performance. ​
Biggest changeThese figures assume that all dividends, if any, paid over the measurement period were reinvested, and that the starting values of each index and the investments in our common stock were $100 at the close of trading on September 30, 2018. 15 Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among ESCO Technologies Inc., the Russell 2000 Index, and the S&P SmallCap 600 Industrials Index ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/30/18 9/30/19 9/30/20 9/30/21 9/30/22 9/30/23 ESCO Technologies Inc. ​ $ 100.00 ​ $ 117.45 ​ $ 119.53 ​ $ 114.64 ​ $ 109.69 ​ $ 156.55 Russell 2000 Index ​ 100.00 ​ 91.11 ​ 91.47 ​ 135.08 ​ 103.34 ​ 112.56 S&P SmallCap 600 Industrials Index ​ 100.00 ​ 92.67 ​ 87.20 ​ 127.07 ​ 110.73 ​ 143.28 ​ The stock price performance included in this graph is not necessarily indicative of future stock price performance. ​
Securities Authorized for Issuance Under Equity Compensation Plans. For information about securities authorized for issuance under our equity compensation plans, please refer to Item 12 of this Form 10-K and to Note 10 to the Consolidated Financial Statements. Performance Graph.
Securities Authorized for Issuance Under Equity Compensation Plans. For information about securities authorized for issuance under our equity compensation plans, please refer to Item 12 of this Form 10-K and to Note 8 to the Consolidated Financial Statements. Performance Graph.
The Company is a component of both the Russell 2000 index and the S&P SmallCap 600 Industrials index. The measurement period begins on September 30, 2017 and measures at each September 30 thereafter.
The Company is a component of both the Russell 2000 index and the S&P SmallCap 600 Industrials index. The measurement period begins on September 30, 2018 and measures at each September 30 thereafter.
Our common stock is listed on the New York Stock Exchange; its trading symbol is “ ESE ” . Company Purchases of Equity Securities. For information about our common stock repurchase programs, please refer to Note 9 to the Consolidated Financial Statements. We did not repurchase any shares of our common stock during the fourth quarter of fiscal 2022.
Our common stock is listed on the New York Stock Exchange; its trading symbol is “ ESE ” . Company Purchases of Equity Securities. For information about our common stock repurchase programs, please refer to Note 7 to the Consolidated Financial Statements. The Company did not repurchase any shares during the fourth quarter of 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Holders of Record . As of November 7, 2022, there were approximately 1,808 holders of record of our common stock. Price Range of Common Stock and Dividends.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Holders of Record . As of November 10, 2023, there were approximately 1,814 holders of record of our common stock. Price Range of Common Stock and Dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDiluted EPS – As Adjusted for 2021 was $2.59 excluding $6.0 million of pretax charges (or $0.17 per share after tax) consisting of one-time compensation and acquisition related costs at Corporate; restructuring costs within the USG segment, primarily facility consolidation charges; purchase accounting adjustments related to the Phenix and Altanova acquisitions, primarily inventory step-up charges; partially offset by the final settlement from the sale of the Doble Watertown facility.
Biggest changeHighlights of 2023 ● Sales, net earnings and diluted earnings per share in 2023 were $956.0 million, $92.5 million and $3.58 per share, respectively, compared to sales, net earnings and diluted earnings per share in 2022 of $857.5 million, $82.3 million and $3.16 per share, respectively. ● Diluted EPS – GAAP for 2023 increased 13.3% to $3.58, compared to Diluted EPS – GAAP for 2022 of $3.16. 17 Table of Contents ● Diluted EPS – As Adjusted for 2023 was $3.70 excluding $4.1 million of pretax charges (or $0.12 per share after tax), consisting of executive management transition costs and acquisition related costs at Corporate, CMT purchase accounting adjustments, and restructuring charges primarily within the A&D segment.
PTI, VACCO and Crissair primarily design and manufacture specialty filtration products, including hydraulic filter elements and fluid control devices used in commercial aerospace applications, unique filter mechanisms used in micro-propulsion devices for satellites and custom designed filters for manned aircraft and submarines. Westland and Globe design, develop and manufacture elastomeric-based signature reduction solutions for U.S. naval vessels.
PTI, VACCO and Crissair primarily design and manufacture specialty filtration products, including hydraulic filter elements and fluid control devices used in commercial and defense aerospace applications, unique filter mechanisms used in micro-propulsion devices for satellites and custom designed filters for manned aircraft and submarines. Globe and Westland design, develop and manufacture elastomeric-based signature reduction solutions for U.S. naval vessels.
At September 30, 2022 we have determined that no goodwill or other long-lived assets were impaired. We amortize intangible assets with estimable useful lives over their respective estimated useful lives to their estimated residual values, and review them for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.
At September 30, 2023 we have determined that no goodwill or other long-lived assets were impaired. We amortize intangible assets with estimable useful lives over their respective estimated useful lives to their estimated residual values, and review them for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.
NRG designs and manufactures decision support tools for the renewable energy industry, primarily wind and solar. Test. ETS-Lindgren is an industry leader in providing its customers with the ability to identify, measure and contain magnetic, electromagnetic and acoustic energy. We continue to operate with meaningful growth prospects in our primary served markets and with considerable financial flexibility.
NRG designs and manufactures decision support tools for the renewable energy industry, primarily wind and solar. Test. ETS-Lindgren is an industry leader in providing its customers with the ability to identify, measure and control magnetic, electromagnetic and acoustic energy. We continue to operate with meaningful growth prospects in our primary served markets and with considerable financial flexibility.
No provision has been made in 2022 for foreign withholding of any applicable U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries where these earnings are considered indefinitely invested or otherwise retained for continuing international operations. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable.
No provision has been made in 2023 for foreign withholding of any applicable U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries where these earnings are considered indefinitely invested or otherwise retained for continuing international operations. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable.
Diluted EPS – Continuing Operations As Adjusted, EBIT on a consolidated basis, and EBIT margin on a consolidated basis are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, we believe that EBIT and EBIT margin provide investors and Management with valuable information for assessing our operating results.
Diluted EPS –As Adjusted, EBIT on a consolidated basis, and EBIT margin on a consolidated basis are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, we believe that EBIT and EBIT margin provide investors and Management with valuable information for assessing our operating results.
Year-to-year comparisons of the 2021 financial information to the same information for 2020 are contained in Item 7 of our Form 10-K for 2021 filed with the Securities and Exchange Commission on November 29, 2021 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html . 17 Table of Contents Introduction We classify our business operations into three segments for financial reporting purposes, although for reporting certain financial information we treat Corporate activities as a separate segment.
Year-to-year comparisons of the 2022 financial information to the same information for 2021 are contained in Item 7 of our Form 10-K for 2022 filed with the Securities and Exchange Commission on November 29, 2022 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html . 16 Table of Contents Introduction We classify our business operations into three segments for financial reporting purposes, although for reporting certain financial information we treat Corporate activities as a separate segment.
Our estimates of cash flows and discount rate are subject to change due to the economic environment, including such factors as interest rates, expected market returns and volatility of markets served. We believe that Management’s estimates of future cash flows and fair value are reasonable; however, changes in estimates could result in impairment charges.
Our estimates of cash flows and discount rate are subject to change due to the economic environment, 23 Table of Contents including such factors as interest rates, expected market returns and volatility of markets served. We believe that Management’s estimates of future cash flows and fair value are reasonable; however, changes in estimates could result in impairment charges.
We include estimated amounts in the transaction price to the 23 Table of Contents extent it is probable that a significant reversal of cumulative revenue recognized will not occur. The estimated amounts are based on an assessment of our anticipated performance and all other information that is reasonably available to us.
We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. The estimated amounts are based on an assessment of our anticipated performance and all other information that is reasonably available to us.
Approximately 60% of the A&D segment’s revenue (25% of consolidated revenue) is recognized over time as the products do not have an alternative use and either we have an enforceable right to payment for costs incurred plus a reasonable margin or the inventory is owned by the customer.
Approximately 55% of the A&D segment’s revenue (22% of consolidated revenue) is recognized over time as the products do not have an alternative use and either we have an enforceable right to payment for costs incurred plus a reasonable margin or the inventory is owned by the customer.
EBIT is also one of the measures Management uses to determine resource allocations and incentive compensation. We believe that the presentation of EBIT, EBIT margin and Diluted EPS – Continuing Operations As Adjusted provides important supplemental information to investors by facilitating comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
EBIT is also one of the measures Management uses to determine resource 19 Table of Contents allocations and incentive compensation. We believe that the presentation of EBIT, EBIT margin and Diluted EPS –As Adjusted provides important supplemental information to investors by facilitating comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Selected financial information for each of our business segments is provided in the discussion below and in Note 12 to the Company’s Consolidated Financial Statements. This section includes comparisons of certain 2022 financial information to the same information for 2021.
Selected financial information for each of our business segments is provided in the discussion below and in Note 9 to the Company’s Consolidated Financial Statements. This section includes comparisons of certain 2023 financial information to the same information for 2022.
The aggregate impact of adjustments in contract estimates decreased our earnings before income tax and diluted earnings per share by $0.9 million and $0.03 per share, respectively, in 2022. Income Taxes We operate in numerous taxing jurisdictions and are subject to examination by various U.S. Federal, state and foreign jurisdictions for various tax periods.
The aggregate impact of adjustments in contract estimates decreased our earnings before income tax and diluted earnings per share by approximately $14.0 million and $0.43 per share, respectively, in 2023. Income Taxes We operate in numerous taxing jurisdictions and are subject to examination by various U.S. Federal, state and foreign jurisdictions for various tax periods.
Dividends During both 2022 and 2021 we paid a regular quarterly cash dividend at an annual rate of $0.32 per share, totaling $8.3 million in both 2022 and 2021. Off-Balance-Sheet Arrangements We had no off-balance-sheet arrangements outstanding at September 30, 2022. Share Repurchases During 2022, the Company repurchased approximately 257,500 shares for approximately $20.0 million.
Dividends During both 2023 and 2022 we paid a regular quarterly cash dividend at an annual rate of $0.32 per share, totaling $8.3 million in both 2023 and 2022. Off-Balance-Sheet Arrangements We had no off-balance-sheet arrangements outstanding at September 30, 2023. Share Repurchases During 2023, the Company repurchased approximately 140,000 shares for approximately $12.4 million.
Non-GAAP Financial Measures The information reported herein includes the financial measures Diluted EPS As Adjusted, which we define as Diluted EPS excluding the per-share impact of discrete compensation and acquisition related costs, severance charges primarily within the A&D segment, and purchase accounting charges related to the Company’s recent acquisitions (Altanova and NEco) in 2022; the per-share net impact of discrete compensation and acquisition related costs, facility consolidation charges within the USG segment, and purchase accounting charges related to the Company’s recent acquisitions in 2021, partially offset by a gain on the final installment of the Doble Watertown, MA property sale; and pension plan termination charge and restructuring charges related to our facility consolidation restructuring plans in 2020; EBIT, which we define as earnings before interest and taxes; and EBIT margin, which we define as EBIT 20 Table of Contents expressed as a percentage of net sales.
Non-GAAP Financial Measures The information reported herein includes the financial measures Diluted EPS As Adjusted, which we define as Diluted EPS excluding the per-share net impact of discrete compensation and acquisition related costs at Corporate, purchase accounting charges related to the CMT acquisition, and restructuring charges primarily within the A&D segment (primarily severance) in 2023; the per-share net impact of discrete compensation and acquisition related costs, severance charges primarily within the A&D segment, and purchase accounting charges related to the Company’s acquisitions (Altanova and NEco) in 2022; and the per-share net impact of discrete compensation and acquisition related costs, facility consolidation charges within the USG segment, and purchase accounting charges related to the Company’s acquisitions of Altanova and Phenix in 2021, partially offset by a gain on the final installment of the Doble Watertown, MA property sale; EBIT, which we define as earnings before interest and taxes; and EBIT margin, which we define as EBIT expressed as a percentage of net sales.
Capital Resources and Liquidity Our overall financial position and liquidity are strong. Working capital (current assets less current liabilities) increased to $254.5 million at September 30, 2022 from $191.2 million at September 30, 2021.
Capital Resources and Liquidity Our overall financial position and liquidity are strong. Working capital (current assets less current liabilities) increased to $266.4 million at September 30, 2023 from $254.5 million at September 30, 2022.
Acquisitions and Divestiture Information regarding our acquisitions and divestiture during 2022, 2021 and 2020 is set forth in Notes 2 and 3 to the Consolidated Financial Statements, which Notes are incorporated by reference herein.
Acquisitions Information regarding our acquisitions during 2023, 2022 and 2021 is set forth in Note 2 to the Consolidated Financial Statements, which Note is incorporated by reference herein.
The remaining amortization expenses relate to other identifiable intangible assets (primarily software, patents and licenses), which are included in the respective segment’s operating results. The increase in amortization expense in 2022 as compared to 2021 was mainly due to the Company’s recent acquisitions of Phenix, Altanova and NEco.
The remaining amortization expenses relate to other identifiable intangible assets (primarily software, patents and licenses), which are included in the respective segment’s operating results. The increase in amortization expense in 2023 as compared to 2022 was mainly due to an increase in amortization of capitalized software.
Orders and Backlog New orders received were $960.5 million in 2022 and $796.3 million in 2021. Order backlog was $695.0 million at September 30, 2022, compared to order backlog of $592.0 million at September 30, 2021. Orders are entered into backlog as firm purchase order commitments are received.
Orders and Backlog New orders received were $1,033 million in 2023 and $960.5 million in 2022. Order backlog was $772.4 million at September 30, 2023, compared to order backlog of $695.0 million at September 30, 2022. Orders are entered into backlog as firm purchase order commitments are received.
Our three operating segments during 2022 were Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Shielding and Test (Test). Our operating segments are comprised of the following primary operating subsidiaries: ● A&D : PTI Technologies Inc. (PTI); VACCO Industries (VACCO); Crissair, Inc. (Crissair); Westland Technologies, Inc. (Westland); Mayday Manufacturing Co.
Our three operating segments during 2023 were Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test & Measurement, formerly called RF Shielding and Test (Test). Our operating segments are comprised of the following primary operating subsidiaries: ● A&D : PTI Technologies Inc. (PTI); VACCO Industries (VACCO); Crissair, Inc. (Crissair); Globe Composite Solutions, LLC (Globe); Westland Technologies, Inc.
Amortization of Intangible Assets Amortization of intangible assets was $25.9 million in 2022 and $20.8 million in 2021, including $19.3 million and $14.3 million of amortization of acquired intangible assets in 2022 and 2021, respectively, related to our acquisitions. The amortization of acquired intangible assets related to acquisitions is included in the Corporate segment’s results.
Amortization of Intangible Assets Amortization of intangible assets was $29.0 million in 2023 and $25.9 million in 2022, including $18.5 million and $19.3 million of amortization of acquired intangible assets in 2023 and 2022, respectively, related to our acquisitions. The amortization of acquired intangible assets related to acquisitions is included in the Corporate segment’s results.
Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses were $195.1 million, or 22.7% of net sales, in 2022, and $167.5 million, or 23.4% of net sales, in 2021.
Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses were $217.1 million, or 22.7% of net sales, in 2023, and $195.1 million, or 22.7% of net sales, in 2022.
We continue to focus on new products that incorporate proprietary design and process technologies. Our Management is committed to delivering shareholder value through organic growth, ongoing performance improvement initiatives, and acquisitions. In December 2019, we sold the businesses comprising our former Technical Packaging segment.
We continue to focus on new products that incorporate proprietary design and process technologies. Our Management is committed to delivering shareholder value through organic growth, ongoing performance improvement initiatives, and acquisitions.
(Mayday); Globe Composite Solutions, LLC (Globe); and Networks Electronic Co. (NEco). ● USG : Doble Engineering Company, I.S.A. – Altanova Group S.r.l. and affiliates (Altanova) and Morgan Schaffer Ltd. (collectively, Doble); and NRG Systems, Inc. (NRG). ● Test : ETS-Lindgren Inc. (ETS-Lindgren). A&D.
(Westland); and Mayday Manufacturing Co. (Mayday);. ● USG : Doble Engineering Company; I.S.A. – Altanova Group S.r.l. and affiliates (Altanova); Morgan Schaffer Ltd. and Phenix Technologies (Phenix) (collectively, Doble); and NRG Systems, Inc. (NRG). ● Test : ETS-Lindgren Inc. (ETS-Lindgren). A&D.
Backlog at September 30, 2022 was $695.0 million compared to $592.0 million at September 30, 2021. ● The Company declared dividends of $0.32 per share during 2022, totaling $8.3 million in dividend payments.
Backlog at September 30, 2023 was $772.4 million, an increase of $77.4 million, or 11.1%, compared to backlog of $695.0 million at September 30, 2022. ● The Company declared dividends of $0.32 per share during 2023, totaling $8.3 million in dividend payments.
Inventories increased by $15.3 million during 2022 mainly due to a $7.9 million increase within the Test segment and an $8.7 million increase within the USG segment resulting primarily from the timing of receipt of raw materials to meet anticipated demand and an increase in work in process inventories due to timing of manufacturing existing orders.
Inventories increased by $21.7 million during 2023 mainly due to a $13.2 million increase within the USG segment and a $12.7 million increase within the A&D segment resulting primarily from the timing of receipt of raw materials to meet anticipated demand and an increase in work in process inventories due to timing of manufacturing existing orders partially offset by a $4.2 million decrease within the Test segment.
Critical Accounting Policies The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires Management to make estimates and assumptions in certain circumstances that affect amounts reported in the Consolidated Financial Statements.
During 2022, the Company repurchased approximately 257,500 shares for approximately $20.0 million. Critical Accounting Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires Management to make estimates and assumptions in certain circumstances that affect amounts reported in the Consolidated Financial Statements.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance when Management believes it is more likely than not such assets will not be recovered, taking into consideration historical operating results, expectations of future earnings, tax planning strategies, and the expected timing of the reversals of existing temporary differences. 24 Table of Contents Goodwill and Other Long-Lived Assets Our Management annually reviews goodwill and other long-lived assets for impairment or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance when Management believes it is more likely than not such assets will not be recovered, taking into consideration historical operating results, expectations of future earnings, tax planning strategies, and the expected timing of the reversals of existing temporary differences.
EBIT ​ The reconciliation of EBIT to a GAAP financial measure is as follows: ​ ​ ​ ​ ​ ​ ​ (Dollars in millions) 2022 2021 EBIT ​ $ 111.3 ​ 82.9 Less: Interest expense, net ​ (4.9) (2.2) Less: Income tax expense ​ (24.1) (17.2) Net earnings ​ $ 82.3 ​ 63.5 ​ EBIT by business segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ Fiscal year ended ​ 2022 (Dollars in millions) 2022 2021 vs. 2021 A&D ​ $ 68.4 56.5 21.1 % % of net sales ​ 19.5 % 17.9 % ​ ​ USG ​ 57.6 40.9 40.8 % % of net sales ​ 20.7 % 20.2 % ​ ​ Test ​ 32.6 27.6 18.1 % % of net sales ​ 14.3 % 14.0 % ​ ​ Corporate ​ (47.3) (42.1) (12.4) % Total ​ $ 111.3 82.9 34.3 % % of net sales ​ 13.0 % 11.6 % ​ ​ A&D The $11.9 million, or 21.1%, increase in EBIT in 2022 as compared to 2021 was primarily due to higher sales volumes, favorable product mix and price increases at Mayday, Westland, PTI and Globe partially offset by a decrease in EBIT at Crissair and VACCO due to product mix and inflationary pressures.
EBIT ​ The reconciliation of EBIT to a GAAP financial measure is as follows: ​ ​ ​ ​ ​ ​ ​ (Dollars in millions) 2023 2022 EBIT ​ $ 127.7 ​ 111.3 Less: Interest expense, net ​ (8.8) (4.9) Less: Income tax expense ​ (26.4) (24.1) Net earnings ​ $ 92.5 ​ 82.3 ​ EBIT by business segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ Fiscal year ended ​ 2023 (Dollars in millions) 2023 2022 vs. 2022 A&D ​ $ 71.6 68.4 4.7 % % of net sales ​ 18.2 % 19.5 % ​ ​ USG ​ 76.7 57.6 33.2 % % of net sales ​ 22.4 % 20.7 % ​ ​ Test ​ 32.4 32.6 (0.6) % % of net sales ​ 14.6 % 14.3 % ​ ​ Corporate ​ (53.0) (47.3) (12.1) % Total ​ $ 127.7 111.3 14.7 % % of net sales ​ 13.4 % 13.0 % ​ ​ A&D The $3.2 million, or 4.7%, increase in EBIT in 2023 as compared to 2022 was primarily due to higher sales volumes at Mayday, PTI, Crissair and Globe partially offset by a decrease in EBIT at VACCO due to lower sales volumes as mentioned above and margin erosion on certain space development contracts.
By operating segment, 2022 orders were $392.5 million related to A&D products, $314.9 million related to USG products, and $253.1 million related to Test products; and 2021 orders were $337.4 million related to A&D products, $243.9 million related to USG products (including $29 million of acquired backlog), and $215.0 million related to Test products.
By operating segment, 2023 orders were $468.2 million related to A&D products (including $7.0 million of acquired backlog), $347.6 million related to USG products, and $217.5 million related to Test products and 2022 orders were $392.5 million related to A&D products, $314.9 million related to USG products, and $253.1 million related to Test products.
Accounts receivable increased by $18.3 million during 2022 mainly due to a $10.4 million increase within the USG segment, a $4.7 million increase within the Test segment and a $3.2 million increase within the A&D segment, driven by timing and higher sales volumes in the current year.
Accounts receivable increased by $33.9 million during 2023 mainly due to a $24.0 million increase within the USG segment and a $9.6 million increase within the A&D segment, driven by timing and higher sales volumes in the current year.
Highlights of 2022 ● Sales, net earnings and diluted earnings per share in 2022 were $857.5 million, $82.3 million and $3.16 per share, respectively, compared to sales, net earnings and diluted earnings per share in 2021 of $715.4 million, $63.5 million and $2.42 per share, respectively. ● Diluted EPS – GAAP for 2022 was $3.16, compared to Diluted EPS – GAAP for 2021 of $2.42. 18 Table of Contents ● Diluted EPS – As Adjusted for 2022 was $3.21 excluding $1.3 million of pretax charges (or $0.05 per shares after tax), consisting of Altanova and NEco purchase accounting adjustments, severance charges primarily at VACCO and NRG, and acquisition and management transition costs at Corporate.
Diluted EPS – As Adjusted for 2022 was $3.21 excluding $1.3 million of pretax charges (or $0.05 per share after tax), consisting of Altanova and NEco purchase accounting adjustments, severance charges primarily at VACCO and NRG, and acquisition and management transition costs at Corporate.
The A&D segment generally uses the cost-to-cost method to measure progress on our contracts, as the rate at which costs are incurred to fulfill a contract best depicts the transfer of control to the customer.
Selecting the method to measure progress towards completion for our contracts requires judgment and is based on the nature of the products or services to be provided. 22 Table of Contents The A&D segment generally uses the cost-to-cost method to measure progress on our contracts, as the rate at which costs are incurred to fulfill a contract best depicts the transfer of control to the customer.
See “ Non-GAAP Financial Measures ” below. ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended (Dollars in millions) 2022 2021 Diluted EPS – GAAP ​ $ 3.16 2.42 One time compensation & acquisition related costs ​ 0.02 0.12 Restructuring adjustments ​ 0.01 0.08 Purchase accounting adjustments ​ ​ 0.02 0.03 Gain on building sale ​ ​ — ​ (0.06) Diluted EPS – As Adjusted ​ $ 3.21 ​ 2.59 ​ ● Net cash provided by operating activities was $135.3 million in 2022 compared to $123.1 million in 2021. ● At September 30, 2022, cash on hand was $97.7 million and outstanding debt was $153.0 million, for a net debt position (total debt less cash on hand) of approximately $55.3 million. ● Entered orders for 2022 were $960.5 million resulting in a book-to-bill ratio of 1.12x.
See “ Non-GAAP Financial Measures ” below. ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended (Dollars in millions) 2023 2022 Diluted EPS – GAAP ​ $ 3.58 3.16 Executive management transition costs & acquisition related costs ​ 0.07 0.02 Restructuring adjustments ​ 0.03 0.01 Purchase accounting adjustments ​ ​ 0.02 0.02 Diluted EPS – As Adjusted ​ $ 3.70 ​ 3.21 ​ ● At September 30, 2023, cash on hand was $41.9 million and outstanding debt was $102.0 million, for a net debt position (total debt less cash on hand) of approximately $60.1 million. ● Entered orders for 2023 were $1,033 million resulting in a book-to-bill ratio of 1.08x.
The increase in net sales in 2022 as compared to 2021 was mainly due to a $75.5 million increase in the USG segment, a $36.6 million increase in the A&D segment, and a $30.0 million increase in the Test segment.
The increase in net sales in 2023 as compared to 2022 was mainly due to a $63.9 million increase in the USG segment and a $41.0 million increase in the A&D segment, partially offset by a $6.4 million decrease in the Test segment. A&D .
EBIT in 2022 was negatively impacted by a $0.3 million inventory step-up charge related to the NEco acquisition and $0.4 million of severance charges primarily at VACCO.
EBIT in 2023 was negatively impacted by a $0.6 million inventory step-up charge related to the CMT acquisition and $0.8 million in restructuring charges (mainly severance).
The $30.0 million, or 15.2%, increase in net sales in 2022 as compared to 2021 was mainly due to a $22.3 million increase in net sales from the Company’s U.S. operations, $11.5 million increase in net sales from the Company’s Asian operations both driven by increased medical and industrial shielding and power filter demand, partially offset by a $3.8 million decrease in net sales from the Company’s European operations, primarily driven by the timing of test and measurement chamber projects.
The $6.4 million, or (2.8)%, decrease in net sales in 2023 as compared to 2022 was due to a $15.3 million decrease in net sales from the Company’s Asian operations due to COVID-19 disruptions in China and a $2.0 million decrease in net sales from the Company’s U.S. operations, partially offset by a $10.9 million increase in net sales from the segment’s European operations due to timing of test and measurement chamber projects.
USG The $16.7 million, or 40.8%, increase in EBIT in 2022 as compared to 2021 was mainly due to higher sales volumes at Doble and NRG with a favorable product mix and price increases, partially offset by inflationary pressures and increased travel and event costs.
USG The $19.1 million, or 33.2%, increase in EBIT in 2023 as compared to 2022 was mainly due to higher sales volumes at Doble and NRG with a favorable product mix and price increases, partially offset by the impacts of wage and material cost inflation and higher commissions related to increased sales.
Net cash used in investing activities was $55.9 million in 2022 and $202.4 million in 2021. The decrease in net cash used in investing activities in 2022 as compared to 2021 was mainly due to a decrease in amounts spent on acquisitions in 2022. Capital expenditures were $32.1 million in 2022 and $26.7 million in 2021.
Net cash used in investing activities was $52.5 million in 2023 and $55.9 million in 2022. Capital expenditures were $22.4 million in 2023 and $32.1 million in 2022. The decrease in 2023 as compared to 2022 was mainly due to the purchase of the NRG building of approximately $10 million in 2022.
Accounts payable increased by $22.1 million during 2022 mainly due to a $9.6 million increase within the Test segment, a $7.1 million increase within the A&D segment and a $4.2 million increase within the USG segment, due to the timing of payments. Net cash provided by operating activities was $135.3 million in 2022 and $123.1 million in 2021.
Accounts payable increased by $8.2 million during 2023 mainly due to a $6.2 million increase within the USG segment and a $4.2 million increase within the A&D segment partially offset by a $2.2 million increase within the Test segment, due to the timing of payments.
Results of Operations Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ Fiscal year ended ​ 2022 (Dollars in millions) 2022 2021 vs. 2021 A&D ​ $ 351.4 314.8 11.6 % USG ​ 278.4 202.9 37.2 % Test ​ 227.7 197.7 15.2 % Total ​ $ 857.5 715.4 19.9 % ​ Net sales increased $142.1 million, or 19.9%, to $857.5 million in 2022 from $715.4 million in 2021.
Results of Operations Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ Fiscal year ended ​ 2023 (Dollars in millions) 2023 2022 vs. 2022 A&D ​ $ 392.4 351.4 11.7 % USG ​ 342.3 278.4 23.0 % Test ​ 221.3 227.7 (2.8) % Total ​ $ 956.0 857.5 11.5 % ​ Net sales increased $98.5 million, or 11.5%, to $956.0 million in 2023 from $857.5 million in 2022, with the CMT acquisition adding approximately $10 million of revenue in 2023.
The $36.6 million, or 11.6%, increase in net sales in 2022 as compared to 2021 was mainly due to a $16.4 million increase in net sales at PTI (including $5.2 million from NEco), a $14.1 million increase in net sales at Mayday, both primarily due to an increase in commercial aerospace sales driven by the rebound from the COVID-19 pandemic; a $3.0 million increase in net sales at Westland driven by timing of navy defense projects, a $1.5 million increase in net sales at VACCO, a $0.9 million increase in net sales at Crissair and a $0.7 million increase in net sales at Globe. 19 Table of Contents USG .
The $41 million, or 11.7%, increase in net sales in 2023 as compared to 2022 was mainly due to a $21.8 million increase in net sales at Mayday, a $12.5 million increase in net sales at Crissair and an $11.2 million increase in net sales at PTI, all primarily due to an increase in commercial aerospace sales driven by the rebound from the COVID-19 pandemic; a $6.5 million increase in net sales at Globe/Westland combined, partially offset by an $11.0 million decrease in net sales at VACCO driven mainly by margin erosion on certain space development contracts.
The increase in the 2022 effective tax rate as compared to 2021 was due an increase in state income tax expense and a reduction in research credit benefits, increasing the rate by 1.0% and 0.6%, respectively.
Income Tax Expense The effective tax rates for 2023 and 2022 were 22.2% and 22.7%, respectively. The decrease in the 2023 effective tax rate as compared to 2022 was primarily due to a decrease in state income tax expense and an increase in research credit benefits partially offset by the impact of foreign operations.
Bank Credit Facility A description of our credit facility (the “Credit Facility”) is set forth in Note 8 to the Consolidated Financial Statements, which Note is incorporated by reference herein.
Net cash used by financing activities was $78 million in 2023 compared to net cash used by financing activities of $32 million in 2022, primarily due to the increase in debt paydown during 2023. 21 Table of Contents Bank Credit Facility A description of our credit facility (the “Credit Facility”) is set forth in Note 6 to the Consolidated Financial Statements, which Note is incorporated by reference herein.
Other Income or Expenses, Net Other income, net, was $0.3 million in 2022, compared to other income, net, of $0.9 million in 2021. There were no individually significant items in other income, net in 2022.
There were no individually significant items in other income, net in 2022.
The “Reconciliation to Consolidated Totals (Corporate)” in Note 12 to the Consolidated Financial Statements represents Corporate office operating charges. Interest Expense, Net Interest expense, net was $4.9 million and $2.3 million in 2022 and 2021, respectively. The increase in interest expense in 2022 was mainly due to higher average outstanding borrowings and higher average interest rates.
Interest Expense, Net Interest expense, net was $8.8 million and $4.9 million in 2023 and 2022, respectively. The increase in interest expense in 2023 was mainly due to higher average interest rates. The weighted average interest rates were 5.82% in 2023 compared to 2.11% in 2022. Average outstanding borrowings were $140 million in 2023 compared to $190 million in 2022.
Test The $5.0 million, or 18.1%, increase in EBIT in 2022 as compared to 2021 was primarily due to leverage on higher sales volumes and price increases mainly from the segment’s Asian and U.S. operations partially offset by material cost and wage inflation. 21 Table of Contents Corporate Corporate operating charges included in 2022 consolidated EBIT increased to $47.3 million as compared to $42.1 million in 2021 mainly due to an increase in amortization expense of acquired intangible assets related to the Company’s recent acquisitions of Phenix, Altanova and NEco.
Test The $(0.2) million, or (0.6)%, decrease in EBIT in 2023 as compared to 2022 was primarily due to a decrease in EBIT from the segment’s Asian operations due to COVID disruptions in China, partially offset by leverage on higher sales volumes from the segment’s European operations and price increases from the segment’s U.S. operations.
The $75.5 million, or 37.2%, increase in net sales in 2022 as compared to 2021 was mainly due to a $46.9 million increase in net sales from the 2021 acquisitions of Altanova and Phenix, a $20 million increase in core Doble products and services; and a $8.2 million increase in net sales at NRG driven by renewable energy products.
The $63.9 million, or 23.0%, increase in net sales in 2023 as compared to 2022 was mainly due to a $41.8 million increase in net sales at Doble mainly due to higher shipments of condition monitoring and protection testing products and service revenue, and a $22.1 million increase in net sales at NRG driven by higher shipments of wind energy assessment towers and sensors, and solar products. 18 Table of Contents Test .
There were no commitments outstanding that were considered material for capital expenditures at September 30, 2022. Net cash used by financing activities was $32 million in 2022 compared to net cash provided by financing activities of $81.5 million in 2021, primarily due to lower borrowings in the current year and repurchases of common stock into treasury.
In addition, the Company incurred expenditures for capitalized software of $12.4 million in 2023 and $12.9 million in 2022. There were no commitments outstanding that were considered material for capital expenditures at September 30, 2023.
Removed
We received net proceeds from the sale of approximately $184 million and recorded $76.5 million of after-tax net earnings on the sale in 2020. The Technical Packaging segment is reflected as discontinued operations in the Consolidated Financial Statements and related notes for all periods presented, in accordance with accounting principles generally accepted in the United States of America (GAAP).
Added
The increase in SG&A expenses in 2023 as compared to 2022 was mainly due to higher expenses within the USG segment as a result of increased engineering and commission expenses and wage and material inflation and higher expenses at Corporate due to executive management transition costs and professional fees.
Removed
See Note 3 to the Consolidated Financial Statements for further discussion.
Added
Other Income or Expenses, Net Other expenses, net, was $1.9 million in 2023, compared to other income, net, of $(0.3) million in 2022. The principal component of other expenses, net, in 2023 included approximately $1.0 million of restructuring costs within the A&D segment and USG segment (mainly severance charges).
Removed
Organic sales increased $90 million and recent acquisitions added approximately $52 million of revenue growth in 2022 as compared to 2021. A&D .
Added
Corporate Corporate operating charges included in 2023 consolidated EBIT increased to $53.0 million as compared to $47.3 million in 2022 mainly due to an increase in executive management transition costs and professional fees and amortization expense of acquired intangible assets related to the Company’s recent acquisition of CMT Materials. 20 Table of Contents The “Reconciliation to Consolidated Totals (Corporate)” in Note 9 to the Consolidated Financial Statements represents Corporate office operating charges.
Removed
The increase in SG&A expenses in 2022 as compared to 2021 was mainly due to higher expenses at Doble as a result of the SG&A expenses from the Altanova and Phenix acquisitions and the return of discretionary spending to more normal levels (travel, events, etc.) as COVID-19 pandemic related restrictions eased.
Added
Net cash provided by operating activities was $76.9 million in 2023 and $135.3 million in 2022. The decrease in net cash provided by operating activities in 2023 as compared to 2022 was mainly driven by higher working capital requirements, including an increase in inventories and accounts receivable, and higher tax and interest payments.
Removed
The principal components of other income, net, in 2021 included a gain of approximately $2 million for the final settlement on the sale of the Doble Watertown, MA property, partially offset by facility consolidation charges within the USG segment (Doble Manta, Morgan Schaffer and Altanova facilities).
Added
Goodwill and Other Long-Lived Assets Our Management annually reviews goodwill and other long-lived assets for impairment or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
Removed
EBIT in 2022 was negatively impacted by approximately $0.5 million of inventory step-up charges related to the Altanova acquisition.
Removed
Average outstanding borrowings were $190 million in 2022 compared to $71 million in 2021. The weighted average interest rates were 2.11% in 2022 compared to 1.20% in 2021. Income Tax Expense The effective tax rates from continuing operations for 2022, 2021 and 2020 were 22.7%, 21.3% and 37.1%, respectively.
Removed
The increase in 2022 as compared to 2021 was mainly due to the purchase of 22 Table of Contents the NRG building of approximately $10 million in the first quarter of 2022. In addition, the Company incurred expenditures for capitalized software of $12.9 million in 2022 and $8.8 million in 2021.
Removed
Selecting the method to measure progress towards completion for our contracts requires judgment and is based on the nature of the products or services to be provided.

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