Investor / Analyst Day

103 Pages·2014·4.42 MB·English

by  Bob Prow

ESCO Technologies
Investor / Analyst Day
September 9, 2014
ESCO TECHNOLOGIES.
Forward Looking Statement
Statements regarding future events, the ability of the Company to expand globally, performance
improvements, increases in shareholder value, investments, the success of acquisition efforts,
sales, margin and revenue growth, EBIT, EBITDA, EBIT growth, EPS, projected aerospace and
defense orders and other statements contained herein which are not strictly historical are
considered “forward-looking” statements within the meaning of the safe harbor provisions of the
federal securities laws. Investors are cautioned that such statements are only predictions, and
speak only as of the date of this presentation and the Company undertakes no duty to
update. The Company’s actual results in the future may differ materially from those projected in
the forward-looking statements due to risks and uncertainties that exist in the Company’s
operations and business environment including, but not limited to: the risk factors described in
Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30,
2013; the success of restructuring and performance improvement initiatives; weakening of
economic conditions in served markets; defense budgets; shortages of critical components,
changes in customer demands or customer insolvencies; competition; the availability of select
acquisitions on acceptable terms; intellectual property rights; containment of engineering and
development costs; the performance of the Company’s international operations; unforeseen
charges impacting corporate operating expenses; technical difficulties; delivery delays or
defaults by customers; termination for convenience of customer contracts; timing and magnitude
of future contract awards; performance issues with key suppliers and subcontractors; collective
bargaining and labor disputes; material changes in the costs of certain raw materials; the
impacts of natural disasters; changes in laws and regulations including changes in accounting
standards and taxation requirements; costs relating to environmental matters arising from
current and former facilities; financial exposure in connection with Company guarantees of
certain Aclara contracts; uncertainty regarding the ultimate resolution of current disputes, claims,
litigation and arbitration; and the Company’s successful integration of newly acquired
businesses.

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ESCO TECHNOLOGIES
Agenda
> Introductions
> ESCO Overview – Vic Richey
> Filtration (Fluid Controls) – Sam Chapetta
> Doble – Dave Zabetakis
> Test – Bruce Butler
> TEQ – Randy Loga
> ESCO Outlook – Vic Richey
> Wrap-Up
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ESCO TECHNOLOGIES
Strategy
ESCO will increase shareholder value through
> Maintaining a multi-segment business platform to enhance
the sustainability of sales and earnings growth
> Increasing revenues greater than industry growth rates
> Targeted long-term growth: Sales +10%, EPS >15%
> Focus on increasing ROIC > WACC
> Solid capital allocation strategy
> Continued investment in new products / services / solutions
> Selective acquisitions supplementing organic growth
> Performance improvement actions driving margin expansion

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ESCO TECHNOLOGIES
ESCO “Defined”
ESCO is a manufacturer of highly engineered products
serving a number of end markets
> Shared characteristics
• Technology driven products and services
• Market leader in niche markets
• High level of engineering and manufacturing expertise
• High quality, loyal employees
> Shared Challenges
• End market organic growth rates
• SG&A spend
• Balance sheet management
• Acquisition opportunities (availability / valuation)
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ESCO TECHNOLOGIES
ESCO “At A Glance”
> Three legged stool provides diversification and lower risk
• Can increase the diameter or add another leg
> Consistent and predictable revenue growth
> Market leadership positions across the Company
> Effective cost management with solid operating margins
• Resulting in EBIT Growth > Sales Growth
> Essentially Debt Free / Supports growth initiatives
> Strong Cash Flow Generating Capabilities

Primary Goal:
Increase Shareholder Returns

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ESCO TECHNOLOGIES
ESCO – Investor Fundamentals
> History of Stable and Profitable Growth From Continuing Operations
> Exceptional Management Teams
• 25 + Years of Industry Experience Across All 3 Segments
> Identifiable and Tangible Sources of Future EBITDA Expansion
• Crissair Consolidation / NRE Moving to Production / Sales Increases = Favorable Absorption
• Test's Lower Domestic Cost Structure / Doble's Expanding Services and Software Business
> Above Industry-Average Top Line Growth Prospects
• New Platform Wins (Aero) / New Markets (EMP) / New Solutions (DobleARMs) / New
Geographies
> Healthy and Growing End-Markets
• Strong Upcycle in Aero / Proliferation of Wireless Devices / Aging Utility Infrastructure
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ESCO TECHNOLOGIES
ESCO – Investor Fundamentals
> Ability to Expand Internationally
• Extensive Market Reach with Test / Doble world-wide Locations and Rep Networks
• Manageable Off-shore Competition with respect to both size and capabilities
> Recurring / Repeatable Revenues
• Proprietary Products / Strong Service Business / Growing Software Applications
• Doble's World-Class “Knowledge Reservoir” which Can't be Replicated
> Defined and Sustainable Competitive Advantages
• Market Leading Positions providing Highly Engineered Products and Solutions
> Diversified Customer Base / Long-Standing Customer Relationships
> Diversity of End-Markets Enhances Ability to Withstand Economic Cycles
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ESCO TECHNOLOGIES
History of Stable & Profitable Growth

Sales Segment EBIT
$ $
600 100
CAGR 90 CAGR
10.5% 13.4%
500
80
USG 70
400
USG
60
300 50
Test Test
40
200
30
20
100 Filtration Filtration
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0 0
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013
2013 EBIT – As Adjusted
$ in Millions
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ESCO TECHNOLOGIES
FY’14 Expected Sales & EBIT
Sales EBIT *
Fluid Control Test Fluid Control Test
~44% ~35% ~47% ~25%
Utility Solutions Utility Solutions
~21% ~28%
* As Adjusted
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