10q10k10q10k.net

What changed in ESCO TECHNOLOGIES INC's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of ESCO TECHNOLOGIES INC's 2023 and 2024 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 2024 report.

+160 added−143 removedSource: 10-K (2024-11-29) vs 10-K (2023-11-29)

Top changes in ESCO TECHNOLOGIES INC's 2024 10-K

160 paragraphs added · 143 removed · 130 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

53 edited+17 added−7 removed23 unchanged
Biggest changeMarketing 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.
Biggest changeMPE’s comprehensive standard suite of core products spans high performance feedthrough capacitors, high current power, telephone, data & control line filters, through to the latest range of High Altitude Electromagnetic Protection filters. 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.
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.
For example, in FY2023 we consolidated the businesses of Westland Technologies and Globe Composites into a single business managed by the Globe 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.
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).
See also Item 1A, “Risk Factors.” Primary competitors of our A&D segment include Pall Corporation (a subsidiary of Danaher 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).
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.
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 53 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 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.
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 2024, together with the significant domestic and foreign operating subsidiaries within each segment, are as follows: Aerospace & Defense (A&D): PTI Technologies Inc. (PTI) VACCO Industries (VACCO) Crissair, Inc.
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.
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 9 years.
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.
Throughout this Annual Report, unless the context indicates otherwise, references to a year (for example 2024) 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.
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.
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 ​ 58 ​ Mr. Sayler has been the Company’s President and Chief Executive Officer since January 1, 2023. Mr.
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.
We recognize that our success is based on the talents and dedication of those we employ, and we are invested in their success. We make significant investments in the areas of talent development, technical skills and compliance training in areas such as supervisor training, professional coaching, ethics, safety, hazmat, ITAR, etc.
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.
One-third of our employees have been with us for 10 or more years and over 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.
(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.
(Crissair) Mayday Manufacturing Co. (Mayday) Globe Composite Solutions, LLC (Globe, including Westland Technologies, Inc.) Utility Solutions Group (USG): Doble Engineering Company Morgan Schaffer Ltd. (Morgan Schaffer) I.S.A. – Altanova Group S.r.l. and affiliates (Altanova) NRG Systems, Inc.
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.
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%, 36% and 32% of our total revenue in 2024, 2023 and 2022, respectively. This segment has eight facilities in the United States, one in Canada, and ten outside North America.
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.
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.
Our companies within this segment primarily design and manufacture specialty filtration, fluid control and naval products, including hydraulic filter elements, fluid control devices, and precision-tolerance machined components used in aerospace and defense applications, unique filter mechanisms used in micro-propulsion devices for satellites, custom designed filters for manned aircraft and submarines, products and systems to reduce vibration and/or acoustic signatures and otherwise reduce or obscure a vessel’s signature, and other communications, sealing, surface control and hydrodynamic related applications to enhance U.S.
The companies within this segment primarily design and manufacture specialty filtration, fluid control and naval products, including hydraulic filter elements, fluid control devices and precision-tolerance machined components used in aerospace and defense applications, unique filter mechanisms used in micro- 2 Table of Contents propulsion devices for satellites, custom designed filters for manned aircraft and submarines, products and systems to reduce vibration and/or acoustic signatures and otherwise reduce or obscure a vessel’s signature, and other communications, sealing, surface control and hydrodynamic related applications to enhance U.S.
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.
For succession planning purposes, we focus on identifying high-potential future leaders and working with them on individual development plans and coaching. 6 Table of Contents Attracting and retaining a talented workforce is of utmost importance.
Our Test segment is a global leader in EM shielding. Significant competitors in this market include Rohde & Schwarz GMBH, Microwave Vision SA (MVG), TDK RF Solutions Inc., Albatross GmbH, IMEDCO AG, and Universal Shielding Corp. Research and Development Research and development and our technological expertise are important factors in our business.
Our Test segment is a global leader in EM shielding. Significant competitors in this market include Rohde & Schwarz GMBH, Microwave Vision SA (MVG), TDK RF Solutions Inc., Albatross GmbH, IMEDCO AG, Universal Shielding Corp., and Schaffner. 5 Table of Contents Research and Development Research and development and our technological expertise are important factors in our business.
See Item 1A, “Risk Factors.” A number of products in the Aerospace & Defense segment are based on patented or otherwise proprietary technology that sets them apart from the competition, such as VACCO’s proprietary quieting technology and Westland’s signature reduction solutions. In addition, Globe has developed significant manufacturing and logistics capability useful for special hull treatments for submarines.
See Item 1A, “Risk Factors.” A number of products in the Aerospace & Defense segment are based on patented or otherwise proprietary technology that sets them apart from the competition, such as PTI’s metal fiber media filter elements and Westland’s signature reduction solutions. In addition, Globe has developed significant manufacturing and logistics capability utilized for special hull treatments for submarines.
(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.
(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 Test & Measurement (Test): ETS-Lindgren Inc. MPE Limited (MPE) Except as the context otherwise indicates, the term “ETS-Lindgren” as used herein includes ETS-Lindgren Inc. and ESCO’s other Test segment subsidiaries.
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.
Human Capital Management As of September 30, 2024, we employed 3,281 persons, including 3,242 full time employees 20% of whom were located in 19 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 make available free of charge on or through our website, www.escotechnologies.com , our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as well as our recent Proxy Statements for meetings of our shareholders, as soon as reasonably practicable after we file or furnish this material to the Securities and Exchange Commission.
Additional Information The information set forth in Item 1A, “Risk Factors,” is incorporated in this Item by reference. 7 Table of Contents We make available free of charge on or through our website, www.escotechnologies.com , our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as well as our recent Proxy Statements for meetings of our shareholders, as soon as reasonably practicable after we file or furnish this material to the Securities and Exchange Commission.
Additionally, we invest time and resources in reviewing pay equity within our workforce. The majority of full-time domestic and international employees are eligible for bonus or commission plans, most of which are designed to incentivize and reward performance based on results such as EPS, EBIT, cash flow, quality and backlog reduction, or other measures.
The majority of full-time domestic and international employees are eligible for bonus or commission plans, most of which are designed to incentivize and reward performance based on results such as EPS, EBIT, cash flow, quality and backlog reduction, or other measures.
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.
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, 2024 was $879.0 million, representing an increase of $106.6 million (13.8%) from the backlog of $772.4 million at September 30, 2023.
Schatz has been Senior Vice President, General Counsel and Secretary since April 2021. He has worked at ESCO since 1998 in various positions with increasing responsibility, including serving as Vice President, IP Counsel and Assistant Secretary from 2015 until April 2021. He has extensive knowledge of ESCO’s operations, technologies, intellectual property, regulatory matters, M&A and other complex legal matters.
He has worked at ESCO since 1998 in various positions with increasing responsibility, including serving as Vice President, IP Counsel and Assistant Secretary from 2015 until April 2021. He has extensive knowledge of ESCO’s operations, technologies, intellectual property, regulatory matters, M&A and other complex legal matters. There are no family relationships among any of our executive officers and directors. ​
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.
By segment, the backlog at September 30, 2024 and September 30, 2023, respectively, was $600.4 million and $484.1 million for A&D; $120.0 million and $133.5 million for USG; and $158.6 million and $154.8 million for Test.
Workforce 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.
Workforce Composition (As of September 30, 2024) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ By Gender ​ By Race Male 69 % ​ Minorities 41 % Female 24 % ​ White 37 % Unknown* 7 % ​ Unknown* 22 % ​ ​ ​ ​ ​ By Generation Gen Z (1996-2015) 13 % Millennials (1977-1995) 40 % Gen X (1965-1976) 27 % Boomers (1946-1964) 20 % 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.
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.
It 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 .
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.
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.
Purchased Components and Raw Materials Our products require a wide variety of components and materials. Although we have multiple sources of supply for most of our materials requirements, certain components and raw materials are supplied by sole source vendors, and our ability to perform certain contracts depends on their timely performance.
Although we have multiple sources of supply for most of our materials requirements, certain components and raw materials are supplied by sole source vendors, and our ability to perform certain contracts depends on their timely performance. In the past, these required raw materials and various purchased components generally have been available in sufficient quantities.
Our business is focused on generating predictable and profitable long-term growth through continued innovation and expansion of our product offerings across each of our business segments. We conduct our business through a number of wholly-owned direct and indirect subsidiaries.
Our business is focused on generating predictable and profitable long-term growth in sales and earnings through continued expansion of our product offerings across each of our business segments. Our corporate strategy is centered on a multi-segment portfolio serving our established high-growth, high-margin end markets through a number of wholly-owned direct and indirect subsidiaries.
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.
See Note 9 to the Consolidated Financial Statements for financial information regarding business segments and 10% customers. A&D The A&D segment accounted for approximately 44%, 41% and 41% of our total revenue in 2024, 2023 and 2022, respectively. This segment has nine facilities in the United States and one in Mexico.
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.
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.
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.
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.
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.
We remain committed to our communities, including through financial support from the ESCO Foundation and through personal participation of our employees with a variety of local organizations, such as area food banks, blood drives, community outreach, Special Olympics, Habitat for Humanity, Big Brothers Big Sisters, United Way and many other favored local charities.
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.
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.
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 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. Through our charitable Foundation we provide opportunities for civic involvement that supports our communities and provides our employees with meaningful experiences that promote collaborative and rewarding work environments.
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.
The segment’s operations consist primarily of ETS-Lindgren, 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.
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.
Our sales to international customers accounted for approximately 28%, 30% and 30% of our total revenue in 2024, 2023 and 2022, respectively. 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.
Doble is an industry leader in the development, manufacture and delivery of diagnostic testing and data management solutions that enable electric power grid operators to assess the integrity of high-voltage power delivery equipment. It combines three core elements for customers – diagnostic test instruments and condition monitoring systems, expert consulting, and testing services.
The segment’s operations consist primarily of Doble Engineering Company, Morgan Schaffer and Altanova (collectively, Doble), and NRG. Doble is an industry leader in the development, manufacture and delivery of diagnostic testing and data management solutions that enable electric power grid operators to assess the integrity of high-voltage, high-current and high-power delivery equipment.
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 estimate that as of September 30, 2024, domestic customers accounted for approximately 78% of our total firm orders and international customers accounted for approximately 22%.
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).
We are also continuing to seek opportunities to supplement our growth by making strategic acquisitions. In November 2023 we acquired MPE Limited (MPE), a United Kingdom-based global manufacturer of high-performance products for military, utility, telecommunication and other critical infrastructure applications. In February 2023 we acquired CMT Materials, LLC and its affiliate Engineered Syntactic Systems, LLC (together, CMT).
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.
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 electronic components can be subject to supply chain constraints.
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.
Government, primarily related to the A&D segment, accounted for approximately 27%, 23% and 25% of our total revenue in 2024, 2023 and 2022, 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 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.
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.
We invest in creating a diverse, inclusive and safe work environment which will inspire our employees to give their best efforts every day. In fact, nearly half of our employee base comes from diverse backgrounds. We generally conduct formal compensation benchmarking reviews every 1-2 years to ensure wages are competitive in local markets and support our retention and recruiting efforts.
We pride ourselves on maintaining a diverse, inclusive and safe work environment to inspire our employees to give their best efforts every day. In fact, over half of our employee base comes from demographically diverse backgrounds.
Tucker has been Senior Vice President and Chief Financial Officer since April 2021. Prior to joining ESCO, Mr.
Tucker has been Senior Vice President and Chief Financial Officer since April 2021. Since joining ESCO, he has prioritized broadening the capabilities of the finance and IT teams at ESCO while also strengthening financial reporting and planning systems. Prior to joining ESCO, Mr. Tucker worked at Emerson Electric Co.
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.
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 November 2021, we acquired Networks Electronic Company, LLC (NEco). NEco, based in Chatsworth, California, provides miniature electro-explosive devices utilized in mission-critical defense and aerospace applications.
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.
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. 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.
(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.
Information about these acquired businesses is provided in the following section, “Products,” and in Note 2 to the Consolidated Financial Statements.
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.
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. 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).
Our corporate strategy is centered on a multi-segment approach designed to enhance the strength and sustainability of sales and earnings growth by providing lower risk through diversification. Our stock is listed on the New York Stock Exchange, where its ticker symbol is “ESE”. Our fiscal year ends September 30.
Our stock is listed on the New York Stock Exchange, where its ticker symbol is “ESE”. Our fiscal year ends September 30.
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.
NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar. Test Our Test segment accounted for approximately 20%, 23% and 27% of our total revenue in 2024, 2023 and 2022, respectively. This segment has four facilities in the United States and seven outside the United States.
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.
(NYSE:EMR) for 24 years, most recently as Vice President and Chief Financial Officer of Emerson’s Commercial and Residential Solutions business segment. David M. Schatz 61 Mr. Schatz has been Senior Vice President, General Counsel and Secretary since April 2021.
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.
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.
Removed
The acquisition of Phenix’s assets has enhanced Doble’s high voltage, high current, high power test systems, components and solutions.
Added
As previously announced in July 2024, we have entered into a Sale and Purchase Agreement (“Purchase Agreement”) with Ultra Electronics Holdings Limited, a private limited liability company incorporated in England & Wales (“Ultra”), pursuant to which one or more wholly owned subsidiaries of the Company will acquire from Ultra or its subsidiaries Ultra’s Signature Management & Power (“SM&P”) business, including all of the issued and outstanding equity interests of (i) Ultra PMES Limited, a private limited liability company incorporated in England & Wales, (ii) Measurement Systems, Inc., a Delaware corporation, (iii) EMS Development Corporation, a New York corporation, and (iv) DNE Technologies, Inc., a Delaware corporation, for a total purchase price of approximately $550 million, plus or minus certain customary adjustments at closing and post-closing for cash, debt, working capital and transaction expenses as specified in the Purchase Agreement (the “SM&P Acquisition”).
Removed
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.
Added
Although we have secured adequate financing for the SM&P Acquisition and the waiting period under the Hart-Scott-Rodino Act expired in August 2024, closing of the SM&P Acquisition remains subject to certain other conditions including the receipt of clearance under the United Kingdom’s National Security and Investment Act of 2021 (the “NSIA”).
Removed
In the past, these required raw materials and various purchased components generally have been available in sufficient quantities.
Added
We submitted our filing for clearance under the NSIA in July 2024 and the UK government is assessing the SM&P Acquisition. We are optimistic that the assessment will be positively resolved and the required clearance will be obtained.
Removed
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.
Added
The closing of the SM&P Acquisition will occur at a date mutually agreed between the Company and Ultra following the satisfaction of conditions to closing, with closing currently expected to occur in the second quarter of fiscal 2025.
Removed
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.
Added
See Item 1A, “Risk Factors.” In addition, as previously announced in August 2024, we are currently engaged in a strategic review of our Space business at VACCO. The results of this review could include, among other alternatives, a sale of VACCO or its Space business. The intent is to optimize our portfolio of businesses and create value for ESCO shareholders.
Removed
Additional Information The information set forth in Item 1A, “Risk Factors,” is incorporated in this Item by reference.
Added
This decision was made as part of our continued strategic portfolio analysis, which is focused on positioning us to serve high-growth markets that have high margin potential. During this review process, we remain committed to continuing the execution of our current Space programs to serve the needs of our customers. Products Our principal products are described below.
Removed
There are no family relationships among any of our executive officers and directors. ​
Added
The segment’s operations consist of PTI, VACCO, Crissair, Mayday and Globe.
Added
It combines three core elements for customers – diagnostic test instruments and condition monitoring systems, expert consulting, and testing services – and provides access to its large reserve of related empirical knowledge. Altanova provides a significant international platform for Doble by representing our products and solutions in markets outside North and South America and Canada.
Added
It serves the acoustics, medical, health and safety, electronics, wireless communications, automotive and defense markets, providing 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.
Added
All Government prime contracts and virtually all 3 Table of Contents 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.
Added
Of our total backlog at September 30, 2024, approximately 70% is expected to be completed in the fiscal year ending September 30, 2025. 4 Table of Contents Purchased Components and Raw Materials Our products require a wide variety of components and materials.
Added
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, RF absorbing products and EMC/EMP/Tempest filters, producing most of its critical RF components itself.
Added
Our engagement strategy focuses on attracting, developing and retaining world-class talent to maximize customer value. This year we conducted our first-ever global engagement survey which measured five primary engagement drivers as well as our company values: Integrity, Teamwork, Customer Service, Safety, Innovation and Quality.
Added
We had a significantly high response rate of 75% and overall engagement favorability of 81%, exceeding comparable benchmarks. The insights gained from the survey have informed leader actions to build on strengths and address areas of opportunity. Periodic engagement surveys will help measure progress against those actions. Fewer than 3% of our workforce are contingent workers.
Added
We generally conduct formal compensation benchmarking reviews every 1-2 years to ensure wages are competitive in local markets and support our retention and recruiting efforts. Additionally, we invest time and resources in reviewing pay equity within our workforce.
Added
Generally, all our full-time employees, both domestic and international, are offered health and welfare benefits.
Added
Financing For information about our credit facility, see Note 6 to the Consolidated Financial Statements, which is incorporated into this Item by reference.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

19 edited+0 added−3 removed67 unchanged
Biggest changeThese 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.
Biggest changeThese 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 or by changes in priorities following the 2025 change in the Administration. 8 Table of Contents 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.
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, 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 products for the newer aircraft there could be a corresponding decrease in sales associated with our products which could adversely affect our operating results.
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.
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; ● 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; 9 Table of Contents ● 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 Iran) 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.
For 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.
For 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, between Israel and Hamas in Gaza and Lebanon, or between Israel and Iran; if any of these conflicts were to expand in scope or 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.
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 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: Risks Related to the Nature of our Business Restrictions in authorized U.S.
Aerospace-grade titanium and gaseous helium, important raw materials for our A&D segment, may at times be in short supply; in addition, although we try to tie our supplier pricing to long-term contracts this is not always possible, and we are experiencing price inflation on a number of products.
Aerospace-grade titanium and gaseous helium, important raw materials for our A&D segment, may at times be in short supply; in addition, although we try to tie our supplier pricing to long-term contracts this is not always 11 Table of Contents possible, and we are experiencing price inflation on a number of products.
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.
Government regulations and controls such as the 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.
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, 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.
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 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. Our inability to hire or retain qualified key employees could affect our performance and revenues.
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.
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, 2024, our twelve-month backlog was approximately $608 million, which represents confirmed orders we believe will be recognized as revenue within the next twelve months.
Any or all of these actions may divert our resources and cause us to incur substantial costs. Environmental laws and regulations or environmental contamination could increase our expenses and adversely affect our profitability.
Any or all of these actions may divert our resources and cause us to incur substantial costs. 12 Table of Contents Environmental laws and regulations or environmental contamination could increase our expenses and adversely affect our profitability.
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.
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 2024, approximately 28% of our net sales were to customers outside the United States.
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.
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.
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.
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. See Item 1C, Cybersecurity, for information on our cybersecurity risk management, strategy and governance. A significant part of our manufacturing operations depends on a small number of third-party suppliers.
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.
Government defense spending or changes in 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. In 2024, approximately 27% of our revenues have been generated from sales to the U.S. Government or its contractors, primarily within our A&D segment.
Global information technology security threats and targeted computer crime are increasing in frequency and sophistication and pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data and communications.
Global information technology security threats and targeted computer crime (e.g., computer hacking, malware, phishing and spamming attacks against online networking platforms) are increasing in frequency and sophistication and pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data and communications.
In addition, some of these regulations may be viewed as too restrictive by our international customers, who may elect to develop their own domestic products or procure products from other international suppliers which are not subject to comparable export restrictions; and the laws, regulations or policies of certain other countries may also favor their own domestic suppliers over foreign suppliers such as the Company.
In addition, some of these regulations may be viewed as too restrictive by our international customers, who may elect to develop their own domestic products or procure products from other international suppliers which are not subject to comparable export restrictions; and the laws, regulations or policies of certain other countries may also favor their own domestic suppliers over foreign suppliers such as the Company. 10 Table of Contents Risks Related to our Manufacturing and Sales Operations and Technology Cybersecurity Incidents and Related Data Breaches or Other Disruptions of Our Information Technology Systems Could Adversely Affect Our Business.
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.
In addition, acquisitions of other companies, including but not limited to those encompassed in the SM&P Acquisition, involve numerous risks, including unexpected or unavoidable delays in consummation, possible failure to satisfy preconditions to closing or comply with post-closing terms, 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.
Despite our active recruitment efforts, there remains a shortage of these qualified engineers and other employees because of hiring competition from other companies in the industry and a generally tight labor market, possibly exacerbated by COVID-related retirements or career changes.
Despite our active recruitment efforts, there remains a shortage of these qualified engineers and other employees because of hiring competition 13 Table of Contents from other companies in the industry and a generally tight labor market.
Removed
Government or its contractors, primarily within our A&D segment.
Removed
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
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.

Item 2. Properties

Properties — owned and leased real estate

4 edited+1 added−0 removed2 unchanged
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.
Biggest changeFt. ​ Expiration Date) ​ O=Office) ​ Segment Modesto, CA ​ 181,500 ​ Leased (9/30/2033) ​ M, E, W, O ​ A&D Stoughton, MA ​ 151,100 ​ Leased (1/31/2037) ​ M, E, W, O ​ A&D Denton, TX ​ 145,000 ​ Leased (9/30/2029, plus options) ​ M, E, W, O ​ A&D Cedar Park, TX 130,000 Owned M, E, W, O Test Oxnard, CA 127,400 Owned M, E, W, O A&D South El Monte, CA 100,100 Owned M, E, W, O A&D Durant, OK 100,000 Owned M, W, O Test Valencia, CA 79,300 Owned M, E, O A&D Marlborough, MA 79,100 Leased (2/28/2037) M, E, W, O USG Hinesburg, VT 77,000 Owned M, E, W, O USG Accident, MD 66,800 Owned M, E, W, O USG South El Monte, CA 52,700 Leased (12/31/2024) M, W, O A&D Liverpool, England 42,000 Owned M, E, W, O Test Eura, Finland ​ 41,500 ​ Owned ​ M, E, W, O ​ Test Montreal, Québec 38,400 Leased (8/31/2041) M, E, W, O USG Tianjin, China ​ 38,100 ​ Leased (11/19/2027) ​ M, E, O ​ Test Minocqua, WI 35,400 Owned M, W ,O Test Bologna, Italy 28,200 Leased (8/13/2028) M, E, W ,O USG Cedar Park, TX ​ 28,000 ​ Leased (8/31/2028) ​ M.
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.
See also Note 11 to the Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Use(s) ​ ​ ​ ​ ​ ​ ​ (M=Manufacturing, ​ ​ ​ ​ ​ ​ ​ ​ E=Engineering, ​ ​ ​ ​ Approx. ​ Owned / Leased (with ​ W=Warehouse, ​ Operating Location ​ Sq.
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.
At September 30, 2024, our physical properties, including those described in the table below, comprised approximately 2,319,000 square feet, of which approximately 799,500 square feet were owned and approximately 1,519,500 square feet were leased. The table below includes our principal physical properties.
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 ​
Louis, MO ​ 21,500 ​ Leased (8/31/2025) ​ ESCO Corporate Office ​ Corporate Attleboro, MA 20,500 Leased (3/31/2025) M, E, W, O A&D Taino, Italy 18,000 Leased (various term ends) M, E, W ,O USG Bangalore, India ​ 17,000 ​ Leased (2/28/2031) ​ M, E, W, O ​ Test Zola Predosa, Italy 12,900 Leased (1/31/2029) M, E, W ,O USG Morrisville, NC 11,600 Leased (1/31/2027, plus options) O USG Wood Dale, IL 10,700 Leased (8/31/2029) E, O Test ​ ​ 15 Table of Contents
Added
W ​ Test Ontario, CA 26,900 Leased (8/31/2025) M, E, W ,O USG Chatsworth, CA 24,800 Leased (12/31/2025) M, E, W ,O A&D St.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed2 unchanged
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. ​
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, 2019. 17 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/30/19 9/30/20 9/30/21 9/30/22 9/30/23 9/30/24 ESCO Technologies Inc. ​ $ 100.00 ​ $ 101.77 ​ $ 97.60 ​ $ 93.39 ​ $ 133.29 ​ $ 165.10 Russell 2000 Index ​ 100.00 ​ 100.39 ​ 148.25 ​ 113.42 ​ 123.55 ​ 156.61 S&P SmallCap 600 Industrials Index ​ 100.00 ​ 94.09 ​ 137.98 ​ 119.49 ​ 154.61 ​ 207.57 ​ The stock price performance included in this graph is not necessarily indicative of future stock price performance. ​
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.
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 2024.
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.
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, 2019 and measures at each September 30 thereafter.
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 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Holders of Record . As of November 2, 2024, there were approximately 1,820 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

49 edited+12 added−3 removed32 unchanged
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.
Biggest changeDiluted 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.
Mayday designs and manufactures mission-critical bushings, pins, sleeves and precision-tolerance machined components for landing gear, rotor heads, engine mounts, flight controls, and actuation systems for the aerospace and defense industries. USG. Doble develops, manufactures and delivers diagnostic testing solutions that enable electric power grid operators to assess the integrity of high-voltage power delivery equipment.
Mayday manufactures mission-critical bushings, pins, sleeves and precision-tolerance machined components for landing gear, rotor heads, engine mounts, flight controls, and actuation systems for the aerospace and defense industries. USG. Doble develops, manufactures and delivers diagnostic testing solutions that enable electric power grid operators to assess the integrity of high-voltage power delivery equipment.
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.
At September 30, 2024 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.
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.
Year-to-year comparisons of the 2023 financial information to the same information for 2022 are contained in Item 7 of our Form 10-K for 2023 filed with the Securities and Exchange Commission on November 29, 2023 and available through the SEC’s website at https://www.sec.gov/edgar/searchedgar/companysearch.html . 18 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.
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.
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 –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 9 to the Company’s Consolidated Financial Statements. This section includes comparisons of certain 2023 financial information to the same information for 2022.
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 2024 financial information to the same information for 2023.
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.
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.
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.
Acquisitions Information regarding our acquisitions during 2024, 2023 and 2022 is set forth in Note 2 to the Consolidated Financial Statements, which Note is incorporated by reference herein.
We recognize anticipated losses on contracts in full in the period in which the losses become known. The impact of adjustments in contract estimates on our operating earnings can be reflected in either revenue or operating costs and expenses.
We recognize anticipated losses on contracts in full in the period in which the losses become known. 25 Table of Contents The impact of adjustments in contract estimates on our operating earnings can be reflected in either revenue or operating costs and expenses.
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.
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 21 Table of Contents accounting principles (GAAP). However, we believe that EBIT and EBIT margin provide investors and Management with valuable information for assessing our operating results.
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.
Approximately 52% of the A&D segment’s revenue (23% 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.
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.
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 designs, develops and manufactures elastomeric-based signature reduction solutions for U.S. naval vessels.
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.
The aggregate impact of adjustments in contract estimates decreased our earnings before income tax and diluted earnings per share by approximately $13 million and $0.38 per share, respectively, in 2024. 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 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.
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 2024 as compared to 2023 was mainly due to an increase in amortization of capitalized software and amortization of intangible assets related to the MPE acquisition.
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.
In addition, the Company incurred expenditures for capitalized software of $12.1 million in 2024 and $12.4 million in 2023. There were no commitments outstanding that were considered material for capital expenditures at September 30, 2024.
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.
Dividends During both 2024 and 2023 we paid a regular quarterly cash dividend at an annual rate of $0.32 per share, totaling $8.2 million and $8.3 million in 2024 and 2023, respectively. Off-Balance-Sheet Arrangements We had no off-balance-sheet arrangements outstanding at September 30, 2024. Share Repurchases During 2024, the Company repurchased approximately 80,500 shares for approximately $8.0 million.
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.
Our three operating segments during 2024 were Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test & Measurement (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, including Westland Technologies, Inc.); and Mayday Manufacturing Co.
(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.
(Mayday);. ● USG : Doble Engineering Company, Morgan Schaffer Ltd. (Morgan Schaffer) and I.S.A. – Altanova Group S.r.l. and affiliates (Altanova) (collectively, Doble); and NRG Systems, Inc. (NRG). ● Test : ETS-Lindgren Inc. (ETS-Lindgren) and MPE Limited (MPE). A&D.
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.
Net cash used by financing activities was $0.8 million in 2024 and $78.3 million in 2023, primarily due to the increase in debt borrowings during 2024. 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.
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.
Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses were $224.0 million, or 21.8% of net sales, in 2024, and $217.1 million, or 22.7% of net sales, in 2023.
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.
EBIT ​ The reconciliation of EBIT to a GAAP financial measure is as follows: ​ ​ ​ ​ ​ ​ ​ (Dollars in millions) 2024 2023 Net earnings ​ $ 101.9 ​ 92.5 Add: Interest expense, net ​ 15.2 8.8 Add: Income tax expense ​ 28.0 26.4 EBIT ​ $ 145.1 ​ 127.7 ​ EBIT by business segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ Fiscal year ended ​ 2024 (Dollars in millions) 2024 2023 vs. 2023 A&D ​ $ 84.7 71.6 18.3 % % of net sales ​ 18.9 % 18.2 % — ​ USG ​ 85.9 76.7 12.0 % % of net sales ​ 23.3 % 22.4 % — ​ Test ​ 28.6 32.4 (11.7) % % of net sales ​ 13.7 % 14.6 % — ​ Corporate ​ (54.1) (53.0) (2.1) % Total ​ $ 145.1 127.7 13.6 % % of net sales ​ 14.1 % 13.4 % — ​ ​ A&D The $13.1 million, or 18.3%, increase in EBIT in 2024 as compared to 2023 was primarily due to leverage on higher sales volumes and price increases at Mayday, PTI, Crissair and Globe partially offset by a decrease in EBIT at VACCO due to margin erosion on certain space development contracts, revenue mix and inflationary pressures.
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.
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.
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.
Backlog at September 30, 2024 was $879.0 million, an increase of $106.6 million, or 13.8%, compared to backlog of $772.4 million at September 30, 2023. ● The Company declared dividends of $0.32 per share during 2024, totaling $8.2 million in dividend payments.
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.
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 debt financing and acquisition related costs at Corporate primarily related to the pending SM&P Acquisition, restructuring charges in the A&D, Test and USG segments (primarily severance) and purchase accounting charges related to the MPE acquisition in 2024; 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; and 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; 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.
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.
See “ Non-GAAP Financial Measures ” below. ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended (Dollars in millions) 2024 2023 Diluted EPS – GAAP ​ $ 3.94 3.58 Debt financing costs related to pending SM&P Acquisition ​ 0.09 — Acquisition related costs ​ 0.06 0.01 Restructuring adjustments ​ ​ 0.05 0.03 Purchase accounting adjustments ​ ​ 0.04 ​ 0.02 Executive management transition costs ​ ​ — ​ 0.06 Diluted EPS – As Adjusted ​ $ 4.18 ​ 3.70 ​ ● At September 30, 2024, cash on hand was $66.0 million and outstanding debt was $122.0 million, for a net debt position (total debt less cash on hand) of approximately $56.0 million. ● Entered orders for 2024 were $1,133.4 million resulting in a book-to-bill ratio of 1.10x.
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.
Amortization of Intangible Assets Amortization of intangible assets was $32.8 million in 2024 and $29.0 million in 2023, including $20.7 million and $18.8 million of amortization of acquired intangible assets in 2024 and 2023, respectively, related to our acquisitions. The amortization of acquired intangible assets related to acquisitions is included in the Corporate segment’s results.
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.
Cash repatriated to the U.S. is generally not subject to U.S. federal income taxes. No provision has been made in 2024 for foreign withholding or 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.
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.
USG The $9.2 million, or 12.0%, increase in EBIT in 2024 as compared to 2023 was mainly due to leverage on higher sales volumes at Doble and NRG with a favorable product mix and price increases, partially offset by inflationary pressures and higher commissions related to increased sales.
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.
Test The $3.8 million, or 11.7%, decrease in EBIT in 2024 as compared to 2023 was primarily due to a decrease in EBIT from the segment’s U.S. and Asian operations and inflationary pressure, partially offset by leverage on higher sales volumes from the segment’s European operations and price increases and cost reduction actions from the segment’s U.S. operations.
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.
Accounts payable increased by $11.4 million during 2024 mainly due to a $4.5 million increase within the A&D segment, a $3.1 million increase within the Test segment, a $2.3 million increase within the USG segment, and a $1.5 million increase at Corporate due to the timing of payments.
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.
Accounts receivable increased by $42.1 million during 2024 mainly due to a $20.4 million increase within the A&D segment, a $12.2 million increase within the Test segment and a $9.5 million increase within the USG segment, driven by timing and higher sales volumes in the current year.
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.
Income Tax Expense The effective tax rates for 2024 and 2023 were 21.6% and 22.2%, respectively. The decrease in the 2024 effective tax rate as compared to 2023 was primarily due to a decrease in non-deductible executive compensation partially offset by an increase in state income tax expense.
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.
The $11.8 million, or 5.3%, decrease in net sales in 2024 as compared to 2023 was due to an $11.8 million decrease in sales from the Company’s U.S. operations and a $2.8 million decrease in sales from the Company’s Asian operations due to lower wireless, filters and acoustic volumes and timing of test and measurement chamber projects partially offset by a $2.8 million increase in sales from the segment’s European operations.
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.
Inventories increased by $25.1 million during 2024 mainly due to a $14.1 million increase within the A&D segment and a $10.8 million increase within the USG segment resulting primarily from the timing of finished goods and receipt of raw materials to meet anticipated demand and an increase in work in process inventories due to timing of manufacturing existing orders.
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 .
The increase in net sales in 2024 as compared to 2023 was mainly due to a $55.8 million increase in the A&D segment and a $26.8 million increase in the USG segment, partially offset by an $11.8 million decrease in the Test segment. A&D .
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.
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.
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 .
The $26.8 million, or 7.8%, increase in net sales in 2024 as compared to 2023 was mainly due to an $18.9 million increase in net sales at Doble mainly due to higher shipments of condition monitoring products and service revenue partially offset by lower shipments of protection testing products, and a $7.9 million increase in net sales at NRG driven by higher shipments of solar products.
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.
Results of Operations Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ Fiscal year ended ​ 2024 (Dollars in millions) 2024 2023 vs. 2023 A&D ​ $ 448.2 392.4 14.2 % USG ​ 369.1 342.3 7.8 % Test ​ 209.5 221.3 (5.3) % Total ​ $ 1,026.8 956.0 7.4 % ​ Net sales increased $70.8 million, or 7.4%, to $1,026.8 million in 2024 from $956.0 million in 2023.
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).
Other Expenses, Net Other expenses, net, was $2.1 million in 2024, compared to other expenses, net, of $1.9 million in 2023. The principal component of other expenses, net, in 2024 was approximately $1.8 million of restructuring costs within the A&D, USG and Test segments (mainly severance charges). There were no individually significant items in other expenses, net in 2023.
In preparing these financial statements, Management has made its best estimates and judgments of certain amounts included in the Consolidated Financial Statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below.
We do not believe there is a great 24 Table of Contents likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below.
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.
EBIT in 2024 was negatively impacted by $0.3 million of inventory step-up charges related to the MPE acquisition and $0.2 million of restructuring charges (mainly severance). 22 Table of Contents Corporate Corporate operating charges included in 2024 consolidated EBIT increased to $54.1 million as compared to $53.0 million in 2023 mainly due to an increase in professional fees, including acquisition related costs, and amortization expense of acquired intangible assets related to the Company’s recent acquisition of MPE.
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.
Net cash provided by operating activities was $127.5 million in 2024 and $76.9 million in 2023. The increase in net cash provided by operating activities in 2024 as compared to 2023 was mainly driven by higher net earnings and lower working capital requirements. Net cash used in investing activities was $104.6 million in 2024 and $52.5 million in 2023.
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.
Working capital (current assets less current liabilities) increased to $318.8 million at September 30, 2024 from $266.4 million at September 30, 2023.
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.
The increase in interest expense in 2024 was mainly due to the $3.1 million of debt financing costs related to the pending SM&P Acquisition, higher average interest rates and higher outstanding borrowings. The weighted average interest rates were 6.72% in 2024 compared to 5.82% in 2023. Average outstanding borrowings were $167 million in 2024 compared to $140 million in 2023.
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.
MPE contributed $10 million in revenue in 2024 since the date of acquisition. Orders and Backlog New orders received were $1,133.4 million in 2024 and $1,033.3 million in 2023. Order backlog was $879.0 million at September 30, 2024, compared to order backlog of $772.4 million at September 30, 2023.
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.
Orders are entered into backlog as firm purchase order commitments are received. By operating segment, 2024 orders were $564.5 million related to A&D products, $355.6 million related to USG products, and $213.3 million related to Test products, and 2023 orders were $468.2 million related to A&D products, $347.6 million related to USG products, and $217.5 million related to Test products.
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).
EBIT in 2024 was negatively impacted by $0.2 million of restructuring charges (mainly severance).
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.
By subsidiary, the $55.8 million increase in net sales in 2024 as compared to 2023 was due to an $18.1 million increase in net sales at PTI, a $12.6 million increase in net sales at Globe, a $10.1 million increase in net sales at Crissair, a $7.6 million increase in net sales at Mayday and a $7.4 million increase in net sales at VACCO. 20 Table of Contents USG .
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.
The $6.9 million increase in SG&A expenses in 2024 as compared to 2023 was mainly due to an increase within the A&D and USG segments due to higher sales; inflationary impacts; and MPE acquisition impacts.
Removed
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.
Added
Highlights of 2024 ● Sales and net earnings in 2024 were $1,026.8 million and $101.9 million, respectively, compared to sales and net earnings in 2023 of $956.0 million and $92.5 million, respectively. ● Diluted EPS – GAAP for 2024 increased 10.1% to $3.94, compared to Diluted EPS – GAAP for 2023 of $3.58. 19 Table of Contents ● Diluted EPS – As Adjusted for 2024 was $4.18 excluding $8.0 million of pretax charges (or $0.24 per share after tax), consisting of debt financing and acquisition costs at Corporate primarily related to the pending SM&P Acquisition that was announced in July 2024, restructuring charges in the A&D, Test and USG segments, and MPE purchase accounting adjustments.
Removed
There were no individually significant items in other income, net in 2022.
Added
The $55.8 million, or 14.2%, increase in net sales in 2024 as compared to 2023 was mainly due to a $15.7 million increase in commercial aerospace revenues, a $20.3 million increase in defense aerospace revenues and a $20.0 million increase in navy revenues.
Removed
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.
Added
EBIT in 2024 was negatively impacted by $1.2 million in restructuring charges (mainly severance).
Added
The “Reconciliation to Consolidated Totals (Corporate)” in Note 9 to the Consolidated Financial Statements represents Corporate office operating charges. Interest Expense, Net Interest expense, net was $15.2 million and $8.8 million in 2024 and 2023, respectively.
Added
Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable. The Organization for Economic Co-operation and Development’s (OECD) Global Anti-Base Erosion Model (Pillar Two) rules are effective beginning with the Company’s fiscal year ending September 30, 2025.
Added
Pillar Two rules generally provide for a 15 percent minimum effective tax rate in every jurisdiction in which the Company operates. At present, Pillar Two is not expected to have a significant impact on our consolidated financial statements or related disclosures.
Added
On July 8, 2024, the Company and certain of its wholly owned subsidiaries entered into a Sale and Purchase Agreement (“Purchase Agreement”) with Ultra Electronics Holdings Limited, a private limited liability company incorporated in England & Wales (“Ultra”), pursuant to which one or more wholly owned subsidiaries of the Company will acquire from Ultra or its subsidiaries Ultra’s Signature Management & Power (“SM&P”) business, including all of the issued and outstanding equity interests of (i) Ultra PMES Limited, a private limited liability company incorporated in England & Wales (“the UK Target Company”), (ii) Measurement Systems, Inc., a Delaware corporation, (iii) EMS Development Corporation, a New York corporation, and (iv) DNE Technologies, a Delaware corporation, for a purchase price of approximately $550 million, plus or minus certain customary adjustments at closing and post-closing for cash, debt, working capital and transaction expenses as specified in the Purchase Agreement (the “SM&P Acquisition”).
Added
The closing of the SM&P Acquisition is subject to certain conditions, including receipt of clearance under the UK National Security and Investment Act of 2021. 23 Table of Contents Capital Resources and Liquidity Our overall financial position and liquidity are strong.
Added
The increase in 2024 as compared to 2023 was mainly due to the MPE acquisition in the current year. Capital expenditures were $36.2 million in 2024 and $22.4 million in 2023. The increase in 2024 as compared to 2023 was mainly due to an increase in building improvements and machinery & equipment within the A&D segment.
Added
During 2023, the Company repurchased approximately 140,000 shares for approximately $12.4 million. The Company did not purchase any shares during the fourth quarter of 2024.
Added
In preparing these financial statements, Management has made its best estimates and judgments of certain amounts included in the Consolidated Financial Statements, giving due consideration to materiality.
Added
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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk See "Other Matters - Quantitative And Qualitative Disclosures About Market Risk" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated into this Item by reference. ​
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk See "Other Matters - Quantitative And Qualitative Disclosures About Market Risk" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated into this Item by reference. ​ 26 Table of Contents

Other ESE 10-K year-over-year comparisons