ESCO Technologies(ESE) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's analysis of its financial condition and results of operations ITEM 1. FINANCIAL STATEMENTS Contains the unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and related notes Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net earnings for the first quarter of fiscal years 2024 and 2023 Condensed Consolidated Statements of Operations (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $218,314 | $205,501 | $12,813 | 6.2% | | Total costs and expenses | $198,860 | $186,602 | $12,258 | 6.6% | | Earnings before income taxes | $19,454 | $18,899 | $555 | 2.9% | | Income tax expense | $4,285 | $4,172 | $113 | 2.7% | | Net earnings | $15,169 | $14,727 | $442 | 3.0% | | Basic EPS | $0.59 | $0.57 | $0.02 | 3.5% | | Diluted EPS | $0.59 | $0.57 | $0.02 | 3.5% | Condensed Consolidated Statements of Comprehensive Income Reports net earnings and other comprehensive income, such as foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $15,169 | $14,727 | $442 | 3.0% | | Foreign currency translation adjustments | $9,414 | $11,513 | $(2,099) | -18.2% | | Total other comprehensive income (loss) | $9,414 | $11,513 | $(2,099) | -18.2% | | Comprehensive income | $24,583 | $26,240 | $(1,657) | -6.3% | Condensed Consolidated Balance Sheets Outlines the company's assets, liabilities, and shareholders' equity at the end of the reporting period Condensed Consolidated Balance Sheets (As of December 31, 2023 vs. September 30, 2023) | Metric | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total current assets | $603,202 | $581,095 | $22,107 | 3.8% | | Property, plant and equipment, net | $159,262 | $155,484 | $3,778 | 2.4% | | Intangible assets, net | $422,053 | $392,124 | $29,929 | 7.6% | | Goodwill | $537,601 | $503,177 | $34,424 | 6.8% | | Total assets | $1,772,526 | $1,683,214 | $89,312 | 5.3% | | Total current liabilities | $304,693 | $314,651 | $(9,958) | -3.2% | | Long-term debt | $152,000 | $82,000 | $70,000 | 85.4% | | Total liabilities | $618,432 | $552,072 | $66,360 | 12.0% | | Total shareholders' equity | $1,154,094 | $1,131,142 | $22,952 | 2.0% | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | | :--- | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $8,746 | $(9,008) | $17,754 | | Net cash used by investing activities | $(66,969) | $(7,586) | $(59,383) | | Net cash provided (used) by financing activities | $66,504 | $(29,626) | $96,130 | | Net increase (decrease) in cash and cash equivalents | $9,530 | $(45,802) | $55,332 | | Cash and cash equivalents, end of period | $51,396 | $51,922 | $(526) | - Acquisition of business, net of cash acquired, was a significant investing activity at $(56.179) million in Q1 2024, compared to none in Q1 2023[12] - Proceeds from long-term debt and short-term borrowings increased significantly to $99.0 million in Q1 2024 from $17.0 million in Q1 2023[12] NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Provides detailed disclosures and explanations for the line items presented in the primary financial statements 1. BASIS OF PRESENTATION Explains that the interim financial statements are unaudited and do not include all annual GAAP disclosures - Interim financial statements are unaudited and prepared per Form 10-Q, not full GAAP annual disclosures[14] - Results for the three-month period ended December 31, 2023, are not necessarily indicative of the full fiscal year 2024[15] 2. EARNINGS PER SHARE (EPS) Details the calculation of basic and diluted earnings per share, including weighted average shares outstanding Weighted Average Shares Outstanding for EPS Calculation (in thousands) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | | :--- | :--- | :--- | | Weighted Average Shares Outstanding — Basic | 25,797 | 25,863 | | Dilutive Restricted Shares | 49 | 80 | | Adjusted Shares — Diluted | 25,846 | 25,943 | 3. ACQUISITION Describes the acquisition of MPE Limited, its business focus, and its integration into the Test segment - Acquired MPE Limited on November 9, 2023, for approximately $56.2 million (net of cash acquired)[17] - MPE is a leading global manufacturer of high-performance EMC/EMP filters and capacitor products for military, utility, telecommunication, and other critical infrastructure applications[17] - MPE's operating results are included as part of ETS-Lindgren in the Test segment since the acquisition date[17] 4. SHARE-BASED COMPENSATION Outlines the costs associated with share-based compensation plans for employees and non-employee directors Share-Based Compensation Expense (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Performance-Accelerated/Time-Vested RSU/PSU Awards Expense | $1.9 million | $1.6 million | $0.3 million | 18.8% | | Non-Employee Directors Plan Expense | $0.3 million | $0.3 million | $0.0 million | 0.0% | | Total share-based compensation cost (SG&A) | $2.2 million | $1.9 million | $0.3 million | 15.8% | | Total income tax benefit | $0.2 million | $0.1 million | $0.1 million | 100.0% | - As of December 31, 2023, $15.5 million of total unrecognized compensation cost related to share-based arrangements is expected to be recognized over a remaining weighted-average period of 2.0 years[21] 5. INVENTORIES Presents the breakdown of inventory balances, including finished goods, work in process, and raw materials Inventories (in thousands) | (In thousands) | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Finished goods | $37,996 | $34,577 | $3,419 | 9.9% | | Work in process | $54,656 | $42,178 | $12,478 | 29.6% | | Raw materials | $109,925 | $107,312 | $2,613 | 2.4% | | Total inventories | $202,577 | $184,067 | $18,510 | 10.1% | 6. GOODWILL AND OTHER INTANGIBLE ASSETS Details the composition and changes in goodwill and other intangible assets, such as patents and customer relationships Goodwill and Intangible Assets (in thousands) | (Dollars in thousands) | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Goodwill | $537,601 | $503,177 | $34,424 | 6.8% | | Intangible assets, net: | | | | | | Patents | $1,264 | $1,298 | $(34) | -2.6% | | Capitalized software | $41,528 | $41,109 | $419 | 1.0% | | Customer relationships | $210,869 | $183,616 | $27,253 | 14.8% | | Other | $5,183 | $4,654 | $529 | 11.4% | | Trade names (indefinite lives) | $163,209 | $161,447 | $1,762 | 1.1% | - Goodwill increased by $34.4 million, with $30.3 million from acquisition activity (MPE) and $4.1 million from foreign currency translation[24] 7. BUSINESS SEGMENT INFORMATION Provides a breakdown of net sales and EBIT for the company's three reportable operating segments - Company operates in three reportable segments: Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test & Measurement (Test)[25] Net Sales and EBIT by Business Segment (Three Months Ended December 31, in thousands) | (In thousands) | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | NET SALES | | | | | | Aerospace & Defense | $94,733 | $82,983 | $11,750 | 14.2% | | USG | $82,984 | $71,045 | $11,939 | 16.8% | | Test | $40,597 | $51,473 | $(10,876) | -21.1% | | Consolidated totals | $218,314 | $205,501 | $12,813 | 6.2% | | EBIT | | | | | | Aerospace & Defense | $16,663 | $12,536 | $4,127 | 32.9% | | USG | $17,625 | $16,131 | $1,494 | 9.3% | | Test | $1,779 | $5,411 | $(3,632) | -67.1% | | Corporate (loss) | $(13,946) | $(13,521) | $(425) | 3.1% | | Consolidated EBIT | $22,121 | $20,557 | $1,564 | 7.6% | - EBIT (Earnings Before Interest and Taxes) is a non-GAAP financial measure used by management to assess operational profitability, resource allocation, and incentive compensation[31] 8. DEBT Summarizes the company's debt structure, available credit, interest rates, and covenant compliance Debt Summary (in thousands) | (In thousands) | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total borrowings | $172,000 | $102,000 | $70,000 | 68.6% | | Current portion of long-term debt | $(20,000) | $(20,000) | $0 | 0.0% | | Total long-term debt, less current portion | $152,000 | $82,000 | $70,000 | 85.4% | - The Credit Facility includes a $500 million revolving line of credit with an option to increase by an additional $250 million, maturing August 30, 2028[33] - As of December 31, 2023, the company had approximately $322 million available to borrow under the Credit Facility, plus the $250 million increase option, and $51.4 million cash on hand[34] - Weighted average interest rates were 6.8% for Q1 2024, up from 4.6% in Q1 2023; the company was in compliance with all debt covenants[35] 9. INCOME TAX EXPENSE Reports the effective income tax rate for the current and prior-year periods - The effective income tax rate was 22.0% in Q1 2024, consistent with 22.1% in Q1 2023, with no significant changes between periods[36] 10. SHAREHOLDERS' EQUITY Presents the components and changes in shareholders' equity, including retained earnings and treasury stock Shareholders' Equity (in thousands) | (In thousands) | Dec 31, 2023 | Dec 31, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Common stock (ending balance) | $308 | $307 | $1 | 0.3% | | Additional paid-in-capital (ending balance) | $305,283 | $300,697 | $4,586 | 1.5% | | Retained earnings (ending balance) | $1,002,420 | $917,682 | $84,738 | 9.2% | | Accumulated other comprehensive income (loss) (ending balance) | $(14,555) | $(20,251) | $5,696 | -28.1% | | Treasury stock (ending balance) | $(139,362) | $(132,037) | $(7,325) | 5.5% | | Total equity | $1,154,094 | $1,066,398 | $87,696 | 8.2% | - Foreign currency translation adjustments contributed $9.4 million to accumulated other comprehensive income (loss) in Q1 2024[37] 11. FAIR VALUE MEASUREMENTS Describes the methodology for measuring fair value and confirms the valuation of financial and nonfinancial assets - Fair value measurements are categorized into a three-level hierarchy (Level 1, 2, 3) based on the transparency of inputs to the valuation[38][39] - The carrying amounts of cash, receivables, inventories, payables, and other current assets and liabilities approximate fair value due to their short maturity[40] - No impairments were recorded for nonfinancial assets (property, plant, equipment, other intangible assets) during the three-month period ended December 31, 2023[42] 12. REVENUES Provides a disaggregation of revenue by customer type, geographic location, and recognition method Disaggregation of Revenues (Three Months Ended December 31, in thousands) | (In thousands) | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Customer type: | | | | | | Commercial | $153,765 | $152,894 | $871 | 0.6% | | Government | $64,549 | $52,607 | $11,942 | 22.7% | | Total revenues | $218,314 | $205,501 | $12,813 | 6.2% | | Geographic location: | | | | | | United States | $158,114 | $142,816 | $15,298 | 10.7% | | International | $60,200 | $62,685 | $(2,485) | -4.0% | | Total revenues | $218,314 | $205,501 | $12,813 | 6.2% | | Revenue recognition method: | | | | | | Point in time | $114,148 | $98,736 | $15,412 | 15.6% | | Over time | $104,166 | $106,765 | $(2,599) | -2.4% | | Total revenues | $218,314 | $205,501 | $12,813 | 6.2% | - Remaining performance obligations (backlog) totaled $847.8 million at December 31, 2023, with approximately 66% expected to be recognized as revenue in the next twelve months[49] - Contract assets, contract liabilities, and accounts receivable totaled $138.4 million, $131.9 million, and $194.4 million, respectively, at December 31, 2023[50] 13. LEASES Discloses information about the company's operating and finance leases, including costs and lease terms - The company recognizes Right-of-Use (ROU) assets and lease liabilities based on the present value of future lease payments, excluding leases with terms of 12 months or less[51] Lease Costs (Three Months Ended December 31, in thousands) | (Dollars in thousands) | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Finance lease cost | $616 | $629 | $(13) | -2.1% | | Operating lease cost | $1,864 | $1,645 | $219 | 13.3% | | Total lease costs | $2,480 | $2,274 | $206 | 9.1% | - Weighted-average remaining lease terms for operating and finance leases were both approximately 11.1 years as of December 31, 2023[54] 14. RECENT ACCOUNTING PRONOUNCEMENTS Discusses recently issued accounting standards and their potential impact on the company's financial statements - FASB issued ASU 2023-07 (Segment Reporting) effective for fiscal years beginning after December 15, 2023, expanding annual and interim disclosure requirements for reportable segments[56] - FASB issued ASU 2023-09 (Income Taxes) effective for fiscal years beginning after December 15, 2024, providing updates to rate reconciliation and income taxes paid disclosures[57] - Management expects these ASUs to result in additional disclosures but no changes to consolidated statements of operations, financial position, or cash flows[56][57] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Provides management's perspective on financial performance, liquidity, and capital resources for the first quarter of fiscal 2024 OVERVIEW Presents a high-level summary of the company's financial performance for the first quarter of fiscal year 2024 Q1 2024 Financial Performance Overview (in millions, except EPS) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | $218.3 million | $205.5 million | $12.8 million | 6.2% | | Net earnings | $15.2 million | $14.7 million | $0.5 million | 3.4% | | Diluted EPS | $0.59 | $0.57 | $0.02 | 3.5% | NET SALES Analyzes the changes in net sales, detailing performance drivers across the company's business segments - Net sales increased by $12.8 million, or 6.2%, to $218.3 million in the first quarter of 2024[60] - The increase was driven by a $12.0 million increase in the USG segment and an $11.7 million increase in the Aerospace & Defense segment[60] - This growth was partially offset by a $10.9 million decrease in the Test segment[60] Aerospace & Defense (A&D) Sales Details the sales performance of the Aerospace & Defense segment, highlighting key product and acquisition contributions - A&D net sales increased by $11.7 million (14.1%) to $94.7 million in Q1 2024[61] - The increase was primarily due to approximately $7.0 million higher aerospace shipments at Mayday, Crissair, and PTI, and a $4.7 million increase at Globe driven mainly by the CMT acquisition[61] USG Sales Details the sales performance of the Utility Solutions Group segment, driven by offline testing and renewables markets - USG net sales increased by $12.0 million (16.9%) to $83.0 million in Q1 2024[62] - The increase was mainly due to a $7.6 million increase at Doble from higher sales of offline testing products and services, and a $4.4 million increase at NRG driven by continued strength in the renewables end-market[62] Test Sales Details the sales performance of the Test segment, which saw a decline due to the timing of chamber projects - Test segment net sales decreased by $10.9 million (21.2%) to $40.6 million in Q1 2024[63] - The decrease was primarily due to $7.5 million of lower sales from the segment's U.S. operations and $3.4 million of lower sales from Asian and European operations, all attributed to the timing of test and measurement chamber projects[63] ORDERS AND BACKLOG Reports on new orders received during the quarter and the resulting total backlog at period-end Orders and Backlog (in millions) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | New orders received | $293.7 million | $228.9 million | $64.8 million | 28.3% | | Backlog (Dec 31, 2023 / Sep 30, 2023) | $847.8 million | $772.4 million | $75.4 million | 9.8% | - Of the new orders received in Q1 2024, $171.5 million related to Aerospace & Defense, $77.0 million to USG, and $45.2 million to Test products[64] SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Analyzes the change in SG&A expenses, attributing the increase to higher sales and acquisition impacts Selling, General and Administrative Expenses (SG&A) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | SG&A expenses | $54.0 million | $51.3 million | $2.7 million | 5.3% | | SG&A as % of net sales | 24.7% | 25.0% | -0.3% pts | | - The increase in SG&A was mainly due to higher sales, inflationary impacts, and acquisition impacts within the USG and A&D segments[65] AMORTIZATION OF INTANGIBLE ASSETS Explains the increase in amortization expense, primarily due to capitalized software and recent acquisitions Amortization of Intangible Assets | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Amortization of intangible assets | $7.9 million | $6.9 million | $1.0 million | 14.5% | - The increase was mainly due to an increase in amortization of capitalized software and amortization of intangible assets related to the MPE and CMT acquisitions[67] OTHER EXPENSES, NET Discusses the components of other net expenses, noting the absence of prior-year restructuring charges Other Expenses, Net | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Other expenses, net | $0.2 million | $0.4 million | $(0.2) million | -50.0% | - The principal component of other expenses, net, in Q1 2023 included approximately $0.2 million of restructuring charges within the A&D segment, which were not present in Q1 2024[68] EBIT Provides an analysis of consolidated and segment-level EBIT, a non-GAAP measure of operating performance Consolidated EBIT (in millions) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Consolidated EBIT | $22.1 million | $20.6 million | $1.5 million | 7.3% | | EBIT as % of net sales | 10.1% | 10.0% | 0.1% pts | | - EBIT is a non-GAAP financial measure used by management to evaluate the performance of its operating segments[69] Aerospace & Defense EBIT Details the significant increase in A&D EBIT, driven by higher sales volumes across its businesses Aerospace & Defense EBIT | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | A&D EBIT | $16.7 million | $12.5 million | $4.2 million | 33.6% | | A&D EBIT as % of net sales | 17.6% | 15.1% | 2.5% pts | | - The increase in A&D EBIT was mainly due to higher sales volumes at Mayday, Crissair, and Globe[71] USG EBIT Analyzes the growth in USG EBIT, which resulted from increased sales volumes at both Doble and NRG USG EBIT | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | USG EBIT | $17.6 million | $16.1 million | $1.5 million | 9.3% | | USG EBIT as % of net sales | 21.2% | 22.7% | -1.5% pts | | - The increase in USG EBIT was mainly due to higher sales volumes at both Doble and NRG[72] Test EBIT Explains the sharp decline in Test segment EBIT, caused by lower sales and acquisition-related charges Test Segment EBIT | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Test EBIT | $1.8 million | $5.4 million | $(3.6) million | -66.7% | | Test EBIT as % of net sales | 4.4% | 10.5% | -6.1% pts | | - The decrease in Test EBIT was primarily driven by lower sales volumes from the segment's U.S. and Asian operations[73] - EBIT in Q1 2024 was negatively impacted by $0.3 million of inventory step-up charges related to the MPE acquisition[73] Corporate Costs (EBIT Impact) Details the increase in corporate costs, which was mainly due to share-based compensation and acquisition expenses Corporate Costs (included in EBIT) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Corporate costs (included in EBIT) | $13.9 million | $13.5 million | $0.4 million | 3.0% | - The increase in Corporate costs was mainly due to an increase in share-based compensation costs and costs related to the MPE acquisition[74] INTEREST EXPENSE, NET Explains the rise in net interest expense, driven by higher interest rates and increased average borrowings Interest Expense, Net | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest expense, net | $2.7 million | $1.7 million | $1.0 million | 58.8% | - The increase in interest expense was mainly due to higher average interest rates (6.8% in Q1 2024 compared to 4.6% in Q1 2023) and higher average outstanding borrowings[75] INCOME TAX EXPENSE Reports a stable effective income tax rate with no significant changes between the current and prior-year periods - The effective income tax rate was 22.0% in Q1 2024, compared to 22.1% in Q1 2023, with no significant changes between the periods[76] CAPITAL RESOURCES AND LIQUIDITY Assesses the company's financial position, highlighting strong liquidity, improved operating cash flow, and key capital activities - The company's overall financial position and liquidity remain strong, with working capital increasing to $298.5 million at December 31, 2023, from $266.4 million at September 30, 2023[77] - Net cash provided by operating activities was $8.7 million in Q1 2024, a significant improvement from net cash used of $(9.0) million in Q1 2023[78] - Capital expenditures increased to $7.8 million in Q1 2024 from $4.8 million in Q1 2023, mainly due to building improvements and machinery & equipment within the A&D segment[79] Acquisition (MPE Limited) Details the acquisition of MPE Limited, which was funded through borrowings under the company's credit facility - On November 9, 2023, the company acquired MPE Limited for approximately $56.2 million, net of cash acquired, integrating its operations into the Test segment[80] Credit Facility Outlines the company's available borrowing capacity and outstanding debt under its bank credit facility - As of December 31, 2023, the company had approximately $322 million available to borrow under its bank credit facility, plus a $250 million increase option, and $51.4 million cash on hand[81] - Outstanding borrowings under the credit facility totaled $172 million[81] Dividends Reports on the quarterly cash dividends paid to shareholders during and subsequent to the first quarter - A dividend of $0.08 per share, totaling $2.1 million, was paid on October 17, 2023[82] - A subsequent quarterly dividend of $0.08 per share, totaling $2.1 million, was paid on January 19, 2024[82] CRITICAL ACCOUNTING POLICIES Affirms the use of reasonable accounting policies and references the detailed disclosure in the Annual Report on Form 10-K - Management believes the accounting policies used are reasonable and appropriate, acknowledging that they require significant judgment and estimates[83] - The most significant areas involving management judgments and estimates are detailed in the Critical Accounting Policies section of the company's Annual Report on Form 10-K[83] OTHER MATTERS Addresses contingencies and forward-looking statements relevant to the company's operations and financial reporting Contingencies Discloses the company's involvement in routine legal and environmental matters and management's assessment of their potential impact - The company is involved in various claims, charges, litigation, and environmental matters as a normal incident of business[84] - Management believes the aggregate costs for these matters are adequately reserved, covered by insurance, or would not have a material adverse effect on the company's results[84] FORWARD LOOKING STATEMENTS Provides a safe harbor statement cautioning investors about the risks and uncertainties inherent in forward-looking statements - Statements regarding future events and results in this Form 10-Q are considered 'forward-looking statements' under federal securities laws[85] - Investors are cautioned that actual future results may differ materially from projections due to various risks and uncertainties, including economic conditions, supply chain disruptions, and competition[86] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK States that the company's exposure to interest rate and foreign currency risks has not materially changed - Market risks primarily result from changes in interest rates and foreign currency exchange rates[88] - The company selectively uses derivative financial instruments, including forward contracts and swaps, to manage these market risks[88] - There has been no material change to the company's market risks since September 30, 2023[88] ITEM 4. CONTROLS AND PROCEDURES Confirms the effectiveness of the company's disclosure controls and procedures as of the end of the reporting period - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[89] - There has been no material change in the company's internal control over financial reporting during the period covered by this report[89] PART II. OTHER INFORMATION This section includes information on equity securities, other disclosures, exhibits, and the report's formal signature ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Reports that the company did not repurchase any shares of its common stock during the first quarter of fiscal year 2024 - The company did not repurchase any shares during the first quarter of 2024[90] ITEM 5. OTHER INFORMATION Discloses that no director or officer adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the first quarter of fiscal 2024[91] ITEM 6. EXHIBITS Provides a comprehensive list of all exhibits filed with the Form 10-Q, including corporate and financial documents - Exhibits include Restated Articles of Incorporation, Amended Certificate of Designation, Articles of Merger, Amendment of Articles of Incorporation, Bylaws, Amended and Restated Credit Agreement, Form of Fiscal 2024 Performance Share Unit Awards, Certifications of CEO and CFO, and XBRL Instance Documents[92] SIGNATURE Contains the formal signature block, confirming the due authorization and submission of the report - The report was signed on behalf of ESCO Technologies Inc. by Christopher L. Tucker, Senior Vice President and Chief Financial Officer, on February 9, 2024[96]