e10vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended September 30, 2007
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-10596
ESCO Technologies Inc.
(Exact name of registrant as specified in its charter)
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Missouri
(State or other jurisdiction
of incorporation or organization)
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43-1554045
(I.R.S. Employer
Identification No.) |
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9900A Clayton Road
St. Louis, Missouri
(Address of principal executive offices)
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63124-1186
(Zip Code) |
Registrant’s telephone number, including area code:
(314) 213-7200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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| Title of Each Class
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Name of Each Exchange on Which Registered |
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| Common Stock, par value $0.01 per share
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New York Stock Exchange, Inc. |
| Preferred Stock Purchase Rights
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New York Stock Exchange, Inc. |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. o
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form l0-K
or any amendment to this Form l0-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).
Yes o No þ
Aggregate market value of the Common Stock held by non-affiliates of the registrant as of the close
of business on March 31, 2007: $1,144,087,825*.
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For purpose of this calculation only, without determining whether the
following are affiliates of the registrant, the registrant has assumed that (i)
its directors and executive officers are affiliates, and (ii) no party who has
filed a Schedule 13D or 13G is an affiliate. |
Number of shares of Common Stock outstanding at November 26, 2007: 25,747,897.
DOCUMENTS INCORPORATED BY REFERENCE:
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Portions of the registrant’s Annual Report to Stockholders for fiscal year ended September
30, 2007 (the “2007 Annual Report”) (Parts I and II). |
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Portions of the registrant’s Proxy Statement dated December 19, 2007 (the “2008 Proxy
Statement”) (Part III). |
ESCO TECHNOLOGIES INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
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PART I
Item 1. Business
THE COMPANY
ESCO Technologies Inc. (“ESCO”) is a producer of engineered products and systems sold to
customers worldwide, primarily for industrial and commercial applications. ESCO operates in three
operating segments which, together with the operating subsidiaries within each segment, are as
follows:
Communications:
Distribution Control Systems, Inc. (“DCSI”)
Distribution Control Systems Caribe, Inc.
Hexagram, Inc. (“Hexagram”)
Nexus Energy Software, Inc. (“Nexus”)
Comtrak Technologies, L.L.C. (“Comtrak”)
Filtration/Fluid Flow (“Filtration”):
Filtertek Inc.
Filtertek BV
Filtertek do Brasil Industria E Commercio Ltda.
Filtertek SA
Filtertek De Mexico, S.A. de C.V.
PTI Technologies Inc. (“PTI”)
VACCO Industries (“VACCO”)
TekPackaging LLC
RF Shielding and Test (“Test”):
ETS-Lindgren L.P.
Lindgren RF Enclosures, Inc.
ETS-Lindgren OY
ETS-Lindgren Limited
Beijing Lindgren ElectronMagnetic Technology Co., Ltd.
ETS-Lindgren Japan, Inc.
All of the Filtertek entities listed above are hereinafter collectively referred to as
“Filtertek”. All of the Test segment entities listed above are hereinafter collectively referred
to as “ETS-Lindgren”.
On November 25, 2007, the Company completed the sale of the Filtertek businesses to Illinois
Tool Works Inc. for approximately $77.5 million in cash, subject to closing working capital
adjustments. The net cash proceeds from the sale, estimated at $70 million after taxes and
expenses, will be used to pay down a portion of the debt associated with the Doble Engineering
Company acquisition, mentioned below.
The above operating subsidiaries are engaged primarily in the research, development,
manufacture, sale and support of the products and systems described below, and are subsidiaries of
ESCO Technologies Holding Inc., a wholly-owned direct subsidiary of ESCO. ESCO and its direct and
indirect subsidiaries are hereinafter referred to collectively as the “Company”. The Company’s
businesses are subject to a number of risks and uncertainties, including without limitation those
discussed in Item 1A below. See also “Management’s Discussion and Analysis” appearing in the 2007
Annual Report, which is herein incorporated by reference, and “Forward-Looking Information” below.
On August 10, 2007 ESCO acquired the assets and certain liabilities of Wintec, LLC (Wintec)
for a purchase price of $6 million. Wintec produces metallic filtration products and its business
has been incorporated into VACCO’s operations.
On November 7, 2007, ESCO announced an agreement to acquire the stock of Doble Engineering
Company, headquartered in Watertown, Massachusetts, for $319 million in cash, subject
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to adjustment
for differences in working capital and cash on hand at closing. The Company intends to
fund the acquisition by a combination of existing cash and borrowings under a new credit
facility to be entered into with a group led by National City Bank. The acquisition is expected to
close in the quarter ending December 31, 2007.
PRODUCTS
The Company’s products are described below. See Note 14 of the Notes to Consolidated Financial
Statements in the 2007 Annual Report for financial information regarding segments, which Note is
herein incorporated by reference.
COMMUNICATIONS
The Communications segment accounted for approximately 37%, 34% and 32% of the Company’s total
revenue in fiscal years 2007, 2006 and 2005, respectively.
DCSI is a leading manufacturer of two-way power line communication systems for the electric
utility industry (the “TWACS® systems”), which are composed of equipment (primarily
meter modules and equipment for central stations and substations), software and support services.
The TWACS Network Gateway (“TWACS NG”) software is being developed with technical assistance from a
third-party contractor. This development continued in fiscal 2007, leading to the commercial
release of its third version, which was delivered to the customer, and has been undergoing
operational testing. Additional versions of this software are currently under development and are
scheduled for commercial release in fiscal 2008. The TWACS systems provide electric utilities with
a proprietary communication technology for automatic meter reading, load control, interval data,
outage assessment/restoration monitoring, remote service disconnect/connect, time-of-use data for
critical peak pricing, tamper/theft detection and pre-paid metering. Revenue from the TWACS
systems, which may be considered a class of similar products, accounted for approximately 24%, 26%
and 28% of the Company’s total revenue in fiscal years 2007, 2006 and 2005, respectively. In
November 2005, DCSI entered into a contract to provide equipment, software and services to Pacific
Gas & Electric (PG&E) in support of the electric portion of PG&E’s Advanced Metering Infrastructure
(AMI) project. The contract value was initially expected to total approximately $310 million over a
five-year period; however, during the third quarter of fiscal 2007, PG&E announced its plans to
request proposals from a small group of vendors in order to evaluate such vendors’ ability to
address potential future functionality requirements for the electric portion of its service
territory currently included in DCSI’s contract. For further discussion of this contract and
certain related contingencies and uncertainties, see Item 1.A Risk Factors and “Management’s
Discussion and Analysis — Pacific Gas & Electric” appearing in the 2007 Annual Report.
Hexagram provides, through its STAR® network, wireless RF data communications
systems, primarily to gas and water utilities for automatic meter reading applications. In
November 2005, Hexagram entered into a contract with PG&E to provide its communications system for
the gas meter portion of PG&E’s AMI Project. The total anticipated contract revenue through the
full five-year deployment is approximately $225 million. This contract is subject to contingencies
and uncertainties similar to those associated with the DCSI — PG&E contract described above,
except that the TWACS NG software is not applicable to this contract. PG&E is currently evaluating
Hexagram’s technology for possible use in the electric portion of its AMI project.
Nexus provides energy companies with software solutions that add value to their existing
billing and metering infrastructure to allow both the energy company and its customers to better
manage energy-driven transactions and decision-making. Nexus’ analytics-based software applications
are used by over 100 major energy organizations worldwide.
Comtrak manufactures advanced video security monitoring systems for commercial and industrial
applications. Comtrak is continuing to work jointly with ADT Security Services, Inc., who is
selling this system under its SecurVision® trademark to a variety of markets.
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FILTRATION
The Filtration segment accounted for approximately 36%, 38% and 40% of the Company’s total
revenue in fiscal years 2007, 2006 and 2005, respectively.
PTI is a leading supplier of filtration products serving the commercial aerospace, military
aerospace and various industrial markets. The industrial markets include chemical processing,
automotive and mobile equipment. Products include filter elements, assemblies, modules, indicators
and other related components. All products must meet stringent quality requirements and withstand
severe operating conditions. Product applications include aircraft and mobile equipment hydraulic
systems, aircraft engines, plant equipment and automotive transmissions. PTI supplies products
worldwide to original equipment manufacturers and the U.S. government under long term contracts,
and to the commercial aftermarkets through distribution channels.
VACCO supplies flow control products, valves and filters to the space, defense and commercial
industries for use in aircraft, satellite propulsion systems, satellite launch vehicles, the space
shuttle and its successor, Project Constellation. VACCO also uses its etched disc technology to
produce quiet valves and manifolds for U.S. Navy applications.
TekPackaging LLC produces highly engineered thermal-formed and security packaging products for
medical, food and electronics products.
As previously noted in this report, the Filtertek businesses were sold as of November 25,
2007. Filtertek develops and manufactures a broad range of specialized filtration and fluid/flow
products at its facilities in North America, South America and Europe. Filtertek’s products, which
are centered around its insert injection-molding technology wherein a filter medium is inserted
into the tooling prior to injection-molding of the filter housing, have widespread applications in
the medical and healthcare, automotive fluid system, consumer appliance and other commercial and
industrial markets. Typical Filtertek customers may require daily production of thousands of units,
at very high levels of quality, that are generally produced in highly-automated manufacturing
cells. Many of Filtertek’s products are produced utilizing patented designs or proprietary product
or process design, or both. Filtertek’s products are typically supplied to original equipment
manufacturers under long-term contracts.
TEST
The Test segment accounted for approximately 27%, 28% and 28% of the Company’s total revenue
in fiscal years 2007, 2006 and 2005, respectively.
ETS-Lindgren designs and manufactures products to measure and contain magnetic,
electromagnetic and acoustic energy. It supplies customers with a broad range of isolated
environments including RF test enclosures, acoustic test enclosures, RF and magnetically shielded
rooms, secure communication facilities and broadcast and recording studios. Many of these
facilities include proprietary features such as shielded doors and windows. ETS-Lindgren also
provides the design, program management, installation and integration services required to
successfully complete these types of facilities.
ETS-Lindgren also supplies customers with a broad range of components including RF absorptive
materials, RF filters, active compensation systems, antennas, antenna masts, turntables and
electric and magnetic probes, RF test cells, proprietary measurement software and other test
accessories required to perform a variety of tests. ETS-Lindgren also offers a variety of services
including calibration for antennas and field probes, chamber certification, field surveys, customer
training and a variety of product tests. ETS-Lindgren operates the following accredited test labs:
American Association for Laboratory Accreditation (“A2LA”), National Voluntary Laboratory
Accreditation Program (“NAVLAP”) and CATL (CTIA-The Wireless Association (“CTIA”) Accredited Test
Lab). In addition, ETS-Lindgren serves the acoustics, medical, health and safety, electronics,
wireless communications, automotive and defense markets.
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MARKETING AND SALES
The Filtration and Test segments’ products generally are distributed to customers through a
domestic and foreign network of distributors, sales representatives and in-house salespersons. DCSI’s
sales to investor-owned utilities are made directly to the utilities through its sales team. DCSI
utilizes distributors and direct sales representatives to sell its systems to the electric utility
cooperative and municipal markets. Hexagram utilizes distributors and direct sales representatives
to sell its systems to electric, gas, water and combination utilities. Nexus markets its products
utilizing its in-house sales force.
The Company’s international sales accounted for approximately 23%, 22% and 24% of the
Company’s total sales in the fiscal years ended September 30, 2007, 2006 and 2005, respectively.
See Note 14 of the Notes to Consolidated Financial Statements in the 2007 Annual Report for
financial information regarding geographic areas, which Note is herein incorporated by reference.
See also Item 1.A Risk Factors for a discussion of risks of the Company’s international operations.
Some of the Company’s products are sold directly or indirectly to the U.S. Government under
contracts with the Army, Navy and Air Force and subcontracts with prime contractors of such
entities. Direct and indirect sales to the U.S. Government accounted for approximately 6%, 6% and
8% of the Company’s total sales in the fiscal years ended September 30, 2007, 2006 and 2005,
respectively.
INTELLECTUAL PROPERTY
The Company owns or has 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 growing industrial and commercial markets, the Company
emphasizes developing intellectual property and protecting its rights therein. However, the scope
of protection afforded by intellectual property rights, including those of the Company, is often
uncertain and involves complex legal and factual issues. Some intellectual property rights, such
as patents, have only a limited term. Also, there can be no assurance that third parties will not
infringe or design around the Company’s intellectual property. Policing unauthorized use of
intellectual property is difficult, and copyright infringement is a persistent problem for many
companies, particularly in some international markets. In addition, the Company may not elect to
pursue an unauthorized user due to the high costs and uncertainties associated with litigation.
Further, there can be no assurance that courts will ultimately hold issued patents valid and
enforceable. See Item 1.A Risk Factors.
In the Communications segment, many of the products are based on patented or otherwise
proprietary technology, including the Company’s TWACS technology. The TWACS systems are protected
primarily by a number of patents expiring on various dates ending in 2017. Patents covering
significant aspects of the TWACS technology will expire in 2010 for outbound signal reception and
in 2017 for inbound signal generation. Other patents covering inbound and outbound signal
detection have expired in 2007. The Communications segment policy is to seek patent and/or other
forms of intellectual property protection on new and improved products, components of products and
methods of operation for its businesses, as such developments are made. The Company plans to
protect the TWACS NG software code as a trade secret, although certain discrete features and
functionality may be patented. Hexagram holds two significant patents which cover the operation of
its STAR® network communications systems. These will expire in 2015 and 2016.
With respect to the Filtration segment, an increasing number of products are based on patented
or otherwise proprietary technology that sets them apart from the competition. VACCO’s proprietary
quieting technology, which it protects as trade secrets, is a significant differentiator for
products supplied to the U.S. Navy submarine fleet.
In the Test segment, patent protection has been sought for significant inventions. Examples
of such inventions include novel designs for window and door assemblies used in shielded enclosures
and anechoic chambers, improved acoustic techniques for sound isolation and a variety of unique
antennas.
The Company considers its patent and other intellectual property to be of significant value in
each of
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its segments. The Communications segment owns intellectual property, including its TWACS
technology, which it deems necessary or desirable for the manufacture, use or sale of its products.
See the references to the TWACS NG software above in this section and in “Communications” on page
2 of this report. No other segment is materially dependent on any single patent, group of patents
or other intellectual property.
BACKLOG
Total Company backlog, including Filtertek, at September 30, 2007 was $288.1 million,
representing an increase of $34.7 million (13.7%) from the beginning of the fiscal year backlog of
$253.4 million. The backlog of firm orders at September 30, 2007 and September 30, 2006,
respectively, was: $104.9 million and $78.6 million for Filtration (of which, $30.5 million and
$21.3 million, respectively, was for Filtertek); $123.2 million and $119.0 million for
Communications; and $60.0 million and $55.8 million for Test. As of September 30, 2007, it is
estimated that, excluding Filtertek, domestic customers accounted for approximately 83% of the
Company’s total firm orders, and international customers accounted for approximately 17%. Of the
Company’s total backlog of orders at September 30, 2007, excluding Filtertek, approximately 85% is
expected to be completed in the fiscal year ending September 30, 2008.
PURCHASED COMPONENTS AND RAW MATERIALS
The Company’s products require a wide variety of components and materials. Although the
Company has multiple sources of supply for most of its materials requirements, certain components
and raw materials are supplied by sole-source vendors, and the Company’s ability to perform certain
contracts depends on their performance. In the past, these required raw materials and various
purchased components generally have been available in sufficient quantities. However, in each of
the Company’s segments, there are instances of some risk of shortages of materials or components
due to reliance on sole or limited source of supply. See Item 1.A Risk Factors.
In the Communications segment, DCSI has arrangements with three independent manufacturers
which produce and supply substantially all of DCSI’s end-products. Two of these manufacturers are
industry leaders with worldwide operations. Each of these manufacturers is directed by DCSI to
purchase certain unique raw material components from suppliers designated by DCSI. DCSI also has
contracts with certain of the raw material suppliers, directing them to supply such raw materials
to DCSI’s manufacturers. Hexagram has contracts with two independent manufacturers which produce
and supply substantially all of Hexagram’s end-products, as well as contracts with several of the
suppliers of the raw materials that are incorporated into such end-products. Hexagram also utilizes
one of the primary suppliers used by DCSI, which is another source for the production of Hexagram’s
end-products. The Company believes that the above-described manufacturers and suppliers will be
reliable sources for DCSI’s and Hexagram’s end-products for the foreseeable future.
The Filtration segment purchases supplies from a wide array of vendors. In most instances,
multiple vendors of raw materials are screened during a qualification process to ensure that there
will not be an interruption of supply should one of them discontinue operations. 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.
The Test segment is a vertically integrated supplier of EM shielding products, producing most
of its critical RF components. However, this segment purchases significant quantities of raw
materials such as steel, copper, nickel and wood. Accordingly, the segment is subject to price
fluctuations in the worldwide raw materials markets. In fiscal 2007, this segment experienced
significant price increases in the metal markets as compared to the prior year.
COMPETITION
Competition in the Company’s major markets is broadly based and global in scope. The Company
faces intense competition from a large number of companies for nearly all of its products.
Competition can be
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particularly intense during periods of economic slowdown, and this has been
experienced in the past in some of the Filtration markets. Although the Company is a leading
supplier in several of the markets it serves, it maintains a relatively small share of the business
in many of the other markets it serves. Individual competitors range in size from annual revenues
of less than $1 million to billion dollar enterprises. Because of the specialized nature of the
Company’s products, its competitive position with respect to its products cannot be precisely
stated. However, DCSI and Hexagram are believed to be leading suppliers in the fixed network
segment of the automatic meter reading (“AMR”) market. This fixed network segment comprises a
substantial part of the total AMR market for utilities. Substantial efforts are required in order
to maintain existing business levels. In the Company’s major served markets, competition is driven
primarily by quality, technology, price and delivery performance. See Item 1.A Risk Factors.
Primary competitors of the Communications segment in the utility communications market include
Itron, Inc., Cellnet+Hunt, Cannon Technologies Inc., Sensus Metering Systems Inc., Elster
Electricity, L.L.C, Comverge, Inc. e-Meter Corporation and Oracle Corporation.
Pall Corporation and SoFrance are the primary competitors in the Filtration markets. Other
significant competitors in these markets include Clarcor Inc. and Moog Inc.
The Test segment is the global leader in the EM shielding market. Significant competitors in
this served market include TDK RF Solutions Inc., Albatross GmbH, IMEDCO AG and Cuming Corporation.
RESEARCH AND DEVELOPMENT
Research and development and the Company’s technological expertise are important factors in
the Company’s business. Research and development programs are designed to develop technology for
new products or to extend or upgrade the capability of existing products, and to enhance their
commercial potential.
The Company performs research and development at its own expense, and also engages in research
and development funded by customers. For the fiscal years ended September 30, 2007, 2006 and 2005,
total Company-sponsored research and development expenses were approximately $25.4 million, $20.0
million and $16.8 million, respectively. Total customer-sponsored research and development expenses
were approximately $7.6 million, $6.3 million and $5.7 million for the fiscal years ended September
30, 2007, 2006 and 2005, respectively. All of the foregoing expense amounts exclude certain
engineering costs primarily associated with product line extensions, modifications and maintenance,
which amounted to approximately $9.1 million, $9.1 million and $7.8 million for the fiscal years
ended September 30, 2007, 2006 and 2005, respectively.
ENVIRONMENTAL MATTERS
The Company is involved in various stages of investigation and cleanup relating to
environmental matters. It is very difficult to estimate the potential costs of such matters and
the possible impact of these costs on the Company at this time due in part to: the uncertainty
regarding the extent of pollution; the complexity of Government laws and regulations and their
interpretations; the varying costs and effectiveness of alternative cleanup technologies and
methods; the uncertain level of insurance or other types of cost recovery; and in the case of
off-site waste disposal facilities, the uncertain level of the Company’s relative involvement and
the possibility of joint and several liability with other contributors under applicable law. Based
on information currently available, the Company does not believe that the aggregate costs involved
in the resolution of any of its environmental matters will have a material adverse effect on the
Company’s financial statements.
GOVERNMENT CONTRACTS
The Company’s contracts with the U.S. Government and subcontracts with prime contractors of
the U.S. Government are primarily 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. Therefore,
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unless the customer actually or constructively alters or impedes the work
performed, all risk of loss due to cost overruns is borne by the Company. However, VACCO has had
an increasing number of “cost plus fixed fee” contracts awarded. All Government prime contracts
and virtually all of the Company’s subcontracts provide that they may be terminated at the
convenience of the Government. Upon such termination, the Company is normally entitled to receive
equitable compensation. See “Marketing And Sales” in this Item 1 and Item 1.A Risk Factors for
additional information regarding Government contracts.
EMPLOYEES
As of October 31, 2007, the Company employed approximately 2,700 persons.
FINANCING
On October 6, 2004, the Company entered into a $100 million five-year revolving credit
facility with a $50 million increase option. This facility is available for direct borrowings
and/or the issuance of letters of credit, and is provided by a group of six banks, led by Wells
Fargo Bank as agent, with a maturity of October 6, 2009. The facility is secured by the unlimited
guaranty of the Company’s material domestic subsidiaries and a 65% pledge of the material foreign
subsidiaries’ share equity. See “Management’s Discussion and Analysis — Capital Resources and
Liquidity” in the 2007 Annual Report, and Note 9 of the Notes to Consolidated Financial Statements
in the 2007 Annual Report, which information is herein incorporated by reference.
Subsequent to September 30, 2007, the Company announced its intention to enter into a new
credit facility led by National City Bank in connection with the Company’s anticipated acquisition
of Doble Engineering Company.
HISTORY OF THE BUSINESS
ESCO was incorporated in Missouri in August 1990 as a wholly-owned subsidiary of Emerson
Electric Co. (“Emerson”) to be the indirect holding company for several Emerson subsidiaries, which
were primarily in the defense business. Ownership of ESCO and its subsidiaries was distributed on
October 19, 1990 by Emerson to its shareholders through a special distribution. Since that time,
through a series of acquisitions and divestitures, the Company has shifted its primary focus from
defense contracting to the supply of engineered products marketed to industrial and commercial
users. Effective July 10, 2000, ESCO changed its name from ESCO Electronics Corporation to ESCO
Technologies Inc.
AVAILABLE INFORMATION
The Company makes available free of charge through its Internet website,
www.escotechnologies.com, its 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 soon as reasonably practicable after
such material is electronically filed with or furnished to the Securities and Exchange Commission.
Item 1A. Risk Factors
This Form 10-K, including Item 1 “Business,” Item 2 “Properties”, Item 3 “Legal Proceedings” and
Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
(incorporated by reference to “Management’s Discussion and Analysis” appearing in the 2007 Annual
Report), contains “forward-looking statements” within the meaning of the safe harbor provisions of
the federal securities laws. In addition to the risks and uncertainties discussed elsewhere in
this Form 10-K, the following are important risk factors which could cause actual results and
events to differ materially from those contained in any forward-looking statements.
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A SIGNIFICANT PORTION OF COMMUNICATIONS SEGMENT REVENUES IS GENERATED BY A LIMITED NUMBER OF LARGE
CONTRACTS.
A significant portion of the Communications segment’s business is dependent on several large
contracts with customers. The largest of these are two contracts to separately sell electric and
gas automatic meter reading systems to PG&E for its AMI project over a period of approximately five
years. These contracts, which represent a potential high source of revenue, are subject to
cancellation or reduction in volume by PG&E, delays, regulatory actions and the Company’s ability to develop advanced products and
successfully perform the contracts. In the third quarter of fiscal 2007, PG&E announced that it
was going to evaluate other suppliers’ technologies for use in the electric portion of its AMI
project. Currently, PG&E has not completed its evaluation. There is no assurance that PG&E will
purchase DCSI’s systems for all of its electric meters. The loss of revenue which would result
from PG&E’s selection of other suppliers, cancellations, delays, reductions, regulatory actions or
the Company’s failure to perform in connection with these contracts could have a material adverse
effect on the Company’s business, results of operations and financial condition as a whole.
FAILURE OR DELAY IN NEW PRODUCT DEVELOPMENT COULD REDUCE THE COMPANY’S FUTURE SALES.
Much of the Company’s business is dependent on the continuous development of new products and
technologies to meet the changing needs of the Company’s markets on a cost-effective basis. Many of
these markets are highly technical from an engineering standpoint, and the relevant technologies
are subject to rapid change. For example, the continued development of the TWACS NG software is
critical to the continued sales growth of DCSI. Failure to deliver the final version of the TWACS
NG software, to which DCSI has committed under the PG&E contract, could constitute an event of
default and adversely impact expected revenues.
If the Company fails to timely enhance existing products or develop new products, sales
opportunities could be lost, which would adversely affect business. In addition, in some existing
contracts with customers, the Company has made commitments to develop and deliver new products. If
the Company fails to meet these commitments, the default could result in the imposition of
contractual penalties including termination. The inability to enhance existing products in a
timely manner could make the products less competitive, while the inability to successfully develop
new products may limit growth opportunities. Delays in product development may also require greater
investment in research and development. Increased costs associated with new product development
and product enhancements could adversely affect operating results. The costs of new product
development may not be recoverable if demand for the products is not as anticipated.
A SIGNIFICANT PORTION OF THE COMPANY’S CAPITALIZED SOFTWARE IS SUBJECT TO IMPAIRMENT RISK BASED ON
THE ABILITY TO MARKET THE SOFTWARE
A significant portion of the Company’s capitalized software value is contingent on the future
sales of TWACS NG software. Failure to generate sufficient sales to recoup costs could result in
the impairment of the capitalized software costs.
CERTAIN MANUFACTURING OPERATIONS ARE DEPENDENT ON A SMALL NUMBER OF THIRD-PARTY SUPPLIERS
A significant part of the Communications segment’s manufacturing operations relies on a small
number of third-party manufacturers to supply the segment’s products. For example, DCSI has
arrangements with three manufacturers which produce and supply substantially all of DCSI’s
end-products. Two of these suppliers produce these end-products in Mexico. A significant
disruption (for example, a strike) in the supply of those products could negatively affect the
timely delivery of DCSI’s products to customers and future sales. Comtrak currently relies on a
single source for a major portion of its products.
Certain of the Company’s other businesses are dependent upon sole source or a limited number
of third-party manufacturers of parts and components. Many of these suppliers are small
businesses. Since alternative supply sources are limited, this increases the risk of adverse
impacts on the Company’s production schedules and profits if the Company’s suppliers default in
fulfilling their price, quality or delivery obligations.
8
MOST COMMUNICATIONS SEGMENT SALES ARE TO OR FOR THE UTILITY INDUSTRY, KNOWN FOR LONG SALES CYCLES
AND UNCERTAINTY, WHICH COULD AFFECT THE TIMING OF REVENUE
Most of the Communications segment’s sales are to or for the utility industry, where sales
cycles are long and unpredictable. Most sales involve large dollar amounts, and are marked by
extended and complex competitive procurements. These factors often cause delays in the timing of
sales, and such delays could result in order postponement, reduction in size or cancellation,
thereby reducing the Company’s future revenue.
PRODUCT DEFECTS COULD RESULT IN COSTLY FIXES, LITIGATION AND DAMAGES
If there are claims related to defective products (under warranty or otherwise), particularly
in a product recall situation, the Company could be faced with significant expenses in replacing or
repairing the product. For example, the DCSI and Hexagram meter modules are installed in thousands
of residences and other buildings. The replacement/repair costs for such problems could have a
material adverse effect on the Company’s financial condition. In addition, if a dispute over
product claims cannot be settled, arbitration or litigation may result, involving attorneys’ fees
and the potential of damage awards.
INCREASES IN RAW MATERIAL PRICES AND AVAILABILITY OF RAW MATERIALS COULD ADVERSELY AFFECT THE
COMPANY’S BUSINESS.
The cost of raw materials is a major element of the total cost of many of the Company’s
products. For example, the Test segment’s critical components rely on purchases of raw materials
from third parties. Increases in the prices of raw materials (such as steel, copper, nickel, zinc,
wood and petrochemical products) could have an adverse impact on business by, among other things,
increasing costs and reducing margins.
In addition, the Company’s reliance on sole or limited sources of supply of raw materials in
each of its segments could adversely affect the business. Weather-created disruptions in supply,
in addition to affecting costs, could impact the Company’s ability to procure an adequate supply of
these raw materials and delay or prevent deliveries of products to customers.
CHANGES IN TEST STANDARDS COULD ADVERSELY IMPACT TEST SEGMENT SALES
A significant portion of the Test segment’s business involves sales to technology customers,
which results from these customers needing to meet specific international and domestic test
standards. If demand for product testing from these customers decreases, the Company’s business
could be adversely affected. Likewise, if regulatory agencies eliminate or reduce certain domestic
or international test standards, the Company’s sales could be adversely affected. For example, if
it were determined that there is no need to include Wi-Fi technology in mobile phones, there may be
no need for certain testing on mobile phones. Also, if a regulatory authority relaxes the test
standards for certain electronic devices because they do not interfere with the broadcast spectrum,
sales of certain Test products could be reduced.
ECONOMIC, POLITICAL AND OTHER RISKS OF THE COMPANY’S INTERNATIONAL OPERATIONS COULD ADVERSELY
AFFECT BUSINESS
In fiscal 2007, approximately 23% of the Company’s sales were made to international customers.
An economic downturn or an adverse change in the political situation in certain foreign countries
in which the Company does business could cause a decline in revenues and adversely affect the
Company’s financial condition. For example, the Test segment does significant business in Asia.
Changes in the Asian political climate or political changes in specific Asian countries could
negatively affect the Company’s business. Softness in the European economy could have a significant
adverse effect on the Company’s European revenues.
The Company’s international sales are also subject to other risks inherent in foreign
commerce, including currency fluctuations and devaluations, the risk of war and terrorism,
differences in foreign laws, uncertainties as to enforcement of contract rights, and difficulties
in negotiating and resolving disputes with
9
foreign customers.
SALES OF GOVERNMENT PRODUCTS DEPEND UPON CONTINUED GOVERNMENT FUNDING.
During the past three years, from 6% to 8% of the Company’s revenues has been generated from
sales to the U.S. Government or its contractors. These sales are dependent on continuous
government funding of its programs. There could be reductions or terminations of the government
funding on programs which are applicable to the Company or its customers. These funding effects
could severely affect the Company’s sales and profit, and could bring about a major restructuring
of Company operations, which could result in an adverse effect on its financial results.
For example, a significant part of VACCO’s sales involve major government defense and space
programs. Government reduction in spending on these programs could have a significant adverse
impact on Company financial results.
THE END OF CUSTOMER PRODUCT LIFE CYCLES COULD NEGATIVELY AFFECT FILTRATION SEGMENT RESULTS.
Many of the Company’s filtration products are sold to be components in the customers’
end-products. If a customer discontinues a certain end-product line, the ability of the Company to
continue to sell those components will be reduced or eliminated. The result could be a significant
decrease in Company sales and revenue.
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, there could be
a corresponding decrease in sales and revenue associated with the Company’s current products. Such
a decrease could adversely affect the Company’s operating results. In addition, if the Government
cuts back the space program, VACCO’s sales of space products would be reduced, and its revenues
could be adversely affected.
ACQUISITIONS OF OTHER COMPANIES CARRY RISK.
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. Although management will attempt to evaluate the risks inherent in
any particular transaction, no assurances can be made that the Company will properly ascertain all
such risks.
DESPITE ITS EFFORTS, THE COMPANY MAY BE UNABLE TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY.
Despite the Company’s efforts to protect its intellectual property, unauthorized parties or
competitors may copy or otherwise obtain and use the Company’s products and technology,
particularly in foreign countries where the laws may not protect the Company’s proprietary rights
as fully as in the United States. Current and future actions to enforce the Company’s proprietary
rights may result in substantial costs and diversion of resources. No assurances can be made that
any such actions will be successful. In addition, the Company may not elect to pursue an
unauthorized user due to the high costs and uncertainties associated with litigation. The Company
may also face exposure to claims by others challenging its intellectual property rights.
DISPUTES WITH CONTRACTORS COULD ADVERSELY AFFECT THE TEST SEGMENT’S COSTS.
A major portion of the Test segment’s business involves working in conjunction with
contractors to produce the end-product, such as an electronic test chamber. If there are
performance problems caused by either the Company or a contractor, these often result in cost
overruns and may lead to a dispute as to which party is responsible. The resolution of such
disputes can result in arbitration or litigation, and could involve significant expense including
attorneys’ fees. In addition, these disputes may result in reduction in revenue or
10
even a loss to the Company on a particular project.
CHANGES IN ENVIRONMENTAL OR REGULATORY REQUIREMENTS COULD INCREASE EXPENSES AND ADVERSELY AFFECT
PROFITABILITY.
The Company’s operations and properties are subject to U.S. and foreign environmental laws and
regulations governing, among other things, the generation, storage, emission, discharge,
transportation, treatment and disposal of hazardous materials and the clean up of contaminated
properties. Changes in such requirements could increase the cost of compliance. Failure to comply
could result in the imposition of significant fines, suspension of production, alteration of
product processes, cessation of operations or other actions, which could materially and adversely
affect the Company’s business, financial condition and results of operations.
COMPETITION IS BROADLY BASED AND GLOBAL IN SCOPE.
The Company faces competition from a large number of manufacturers and distributors for nearly
all of its products. Some of the Company’s competitors are larger, more diversified corporations
with greater financial, marketing, production and research and development resources. If the
Company cannot compete successfully against current or future competitors, it could have a material
adverse effect on the Company’s business, financial condition and results of operations.
FORWARD-LOOKING INFORMATION
Statements contained in this Form 10-K regarding future events and the Company’s future
results that are based on current expectations, estimates, forecasts and projections about the
Company’s performance and the industries in which the Company operates, the Company’s ability to
utilize NOLs, adequacy of the Company’s credit facilities and future cash flows, estimates of
anticipated contract costs and revenues, the timing, amount and success of claims for research
credits, the timing and success of software development efforts and resulting costs, acceptance by
PG&E of the final version of DCSI’s TWACS NG software, the anticipated value of the PG&E contract,
timing of closing the Doble acquisition, the outcome of current litigation, claims and charges,
recoverability of deferred tax assets, continued reinvestment of foreign earnings, the impact of
FIN 48 and SFAS 157, future costs relating to environmental matters, share repurchases,
investments, sustained performance improvement, performance improvement initiatives, growth
opportunities, new product development, the Company’s ability to increase shareholder value,
acquisitions, 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. Words such as expects, anticipates, targets, goals, projects, intends,
plans, believes, estimates, variations of such words, and similar expressions are intended to
identify such forward-looking statements. Investors are cautioned that such statements are only
predictions, speak only as of the date of this report, 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: those described in this “Item
1A. Risk Factors;” actions by the California Public Utility Commission, PG&E’s Board of Directors
or PG&E’s management impacting PG&E’s AMI projects; the timing and success of DCSI’s software
development efforts; the timing and content of purchase order releases under the PG&E contracts;
DCSI’s and Hexagram’s successful performance of the PG&E contracts; satisfaction of closing
conditions to the Doble acquisition; the timing and execution of real estate sales; termination for
convenience of customer contracts; timing and magnitude of future contract awards; weakening of
economic conditions in served markets; the success of the Company’s
competitors; changes in customer demands or customer insolvencies; competition; intellectual
property rights; technical difficulties; the availability of selected acquisitions; the timing,
pricing and availability of shares offered for sale; delivery delays or defaults by customers;
performance issues with key customers, suppliers and subcontractors; material changes in the costs
of certain raw materials; the successful sale of the Company’s Puerto Rico facility; collective
bargaining and labor disputes; changes in laws and regulations including but not limited to changes
in accounting standards and taxation requirements; costs relating to environmental matters; litigation
11
uncertainty; and the Company’s successful execution of internal operating plans.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
The Company’s principal buildings contain approximately 913,700 square feet of floor space.
Approximately 357,300 square feet are owned by the Company and approximately 556,400 square feet
are leased. See Note 7 of the Notes to Consolidated Financial Statements in the 2007 Annual
Report, which information is herein incorporated by reference. The principal plants and offices
are as follows*:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Sq. Ft. |
|
Lease Expiration |
|
Principal Use |
| Location |
|
Size (Sq. Ft.) |
|
Owned/Leased |
|
Date |
|
(Operating Segment) |
|
|
|
|
|
|
|
|
|
South El Monte, CA |
|
132,100 |
|
Owned-100,100 |
|
1-2-2008 |
|
Management, |
|
|
|
|
Leased — 32,000 |
|
|
|
Engineering and |
|
|
|
|
|
|
|
|
Manufacturing |
|
|
|
|
|
|
|
|
(Filtration) |
|
|
|
|
|
|
|
|
|
Oxnard, CA |
|
127,400 |
|
Owned |
|
|
|
Management, |
|
|
|
|
|
|
|
|
Engineering and |
|
|
|
|
|
|
|
|
Manufacturing |
|
|
|
|
|
|
|
|
(Filtration) |
|
|
|
|
|
|
|
|
|
Durant, OK |
|
100,000 |
|
Owned |
|
|
|
Manufacturing (Test) |
|
|
|
|
|
|
|
|
|
St. Louis, MO |
|
86,800 |
|
Leased |
|
3-31-2013 |
|
Management and |
|
|
|
|
|
|
(one 5-year renewal |
|
Engineering |
|
|
|
|
|
|
option) |
|
(Communications) |
|
|
|
|
|
|
|
|
|
Huntley, IL |
|
85,000 |
|
Owned |
|
|
|
Management and |
|
|
|
|
|
|
|
|
Manufacturing |
|
|
|
|
|
|
|
|
(Filtration) |
|
|
|
|
|
|
|
|
|
Cedar Park, TX |
|
70,000 |
|
Owned |
|
|
|
Management, |
|
|
|
|
|
|
|
|
Engineering and |
|
|
|
|
|
|
|
|
Manufacturing (Test) |
|
|
|
|
|
|
|
|
|
Cleveland, OH |
|
59,600 |
|
Leased |
|
1-31-2011 |
|
Management, |
|
|
|
|
|
|
(four 3-year renewal |
|
Engineering and |
|
|
|
|
|
|
options) |
|
Manufacturing |
|
|
|
|
|
|
|
|
(Communications) |
|
|
|
|
|
|
|
|
|
Glendale Heights, IL |
|
59,400 |
|
Leased |
|
3-31-2010 |
|
Management, |
|
|
|
|
|
|
(three 3-year |
|
Engineering and |
|
|
|
|
|
|
renewal options) |
|
Manufacturing (Test) |
|
|
|
|
|
|
|
|
|
Eura, Finland |
|
40,900 |
|
Owned |
|
|
|
Management, |
|
|
|
|
|
|
|
|
Engineering and |
|
|
|
|
|
|
|
|
Manufacturing (Test) |
|
|
|
|
|
|
|
|
|
Beijing, China |
|
39,600 |
|
Leased |
|
4,600 sq. ft. Office |
|
Manufacturing (Test) |
|
|
|
|
|
|
8-30-2010 |
|
|
|
|
|
|
|
|
35,000 sq. ft. Plant |
|
|
|
|
|
|
|
|
12-31-2009 |
|
|
|
|
|
|
|
|
|
|
|
St. Louis, MO |
|
33,000 |
|
Owned |
|
|
|
Management and |
|
|
|
|
|
|
|
|
Engineering |
|
|
|
|
|
|
|
|
(Communications) |
|
|
|
|
|
|
|
|
|
Minocqua, WI |
|
30,200 |
|
Leased |
|
3-31-2010 |
|
Engineering and |
|
|
|
|
|
|
(three 3-year |
|
Manufacturing (Test) |
|
|
|
|
|
|
renewal options) |
|
|
|
|
|
|
|
|
|
|
|
12
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Sq. Ft. |
|
Lease Expiration |
|
Principal Use |
| Location |
|
Size (Sq. Ft.) |
|
Owned/Leased |
|
Date |
|
(Operating Segment) |
|
|
|
|
|
|
|
|
|
St. Louis, MO |
|
19,000 |
|
Leased |
|
8-31-2015 |
|
ESCO Headquarters |
|
|
|
|
|
|
(one 5-year renewal |
|
|
|
|
|
|
|
|
option) |
|
|
|
|
|
|
|
|
|
|
|
Wellesley, MA |
|
18,500 |
|
Leased |
|
9-30-2012 |
|
Management and |
|
|
|
|
|
|
|
|
Engineering |
|
|
|
|
|
|
|
|
(Communications) |
|
|
|
|
|
|
|
|
|
Stevenage, England |
|
12,200 |
|
Leased |
|
8-11-2017 |
|
Management, |
|
|
|
|
|
|
(Option to terminate |
|
Engineering and |
|
|
|
|
|
|
in 2012) |
|
Manufacturing (Test) |
|
|
|
| * |
|
The table does not include an owned vacant facility in Patillas, Puerto Rico, consisting of a
building of approximately 77,300 square feet, that was formerly used as a Filtration manufacturing
facility. The Company ceased operations in this facility in March 2004, and is currently marketing
it for sale. |
The Company believes its buildings, machinery and equipment have been generally well
maintained, are in good operating condition and are adequate for the Company’s current production
requirements.
Item 3. Legal Proceedings
As a normal incident of the businesses in which the Company is engaged, various claims,
charges and litigation are asserted or commenced from time to time against the Company. With
respect to claims and litigation asserted or commenced against the Company, it is the opinion of
management that final judgments, if any, which might be rendered against the Company are adequately
reserved or covered by insurance, and are not likely to have a material adverse effect on its
financial condition or results of operation.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
The following sets forth certain information as of November 26, 2007 with respect to ESCO’s
executive officers. These officers have been elected to terms which expire at the first meeting of
the Board of Directors after the next annual meeting of Stockholders.
| |
|
|
|
|
|
|
| Name |
|
Age |
|
Position(s) |
| |
Victor L. Richey, Jr.*
|
|
|
50 |
|
|
Chairman, President, Chief Executive Officer and Director |
Gary E. Muenster
|
|
|
47 |
|
|
Senior Vice President and Chief Financial Officer |
Alyson S. Barclay
|
|
|
48 |
|
|
Vice President, Secretary and General Counsel |
|
|
|
| * |
|
Also Chairman of the Executive Committee of the Board of Directors. |
There are no family relationships among any of the executive officers and directors.
Since October 2002, Mr. Richey has been Chief Executive Officer of ESCO, and since April 2003
he has also been Chairman. Since October 2006, he has also been President.
13
Mr. Muenster was Vice President and Chief Financial Officer of ESCO from October 2002 until
November 2005. Since the latter date, he has been Senior Vice President and Chief Financial
Officer.
Ms. Barclay has been Vice President, Secretary and General Counsel of ESCO since October 1999.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
The information required by this item is incorporated herein by reference to Notes 10 and 11
of the Notes to Consolidated Financial Statements, “Common Stock Market Price” and “Shareholders’
Summary—Capital Stock Information” appearing in the 2007 Annual Report. As of November 15, 2007,
there were approximately 2,700 record holders of Common Stock (including Company employees holding
shares under the Employee Stock Purchase Plan). ESCO does not anticipate, currently or in the
foreseeable future, paying cash dividends on the Common Stock, although it reserves the right to do
so to the extent permitted by applicable law and agreements. ESCO’s dividend policy will be
reviewed by the Board of Directors at such future time as may be appropriate in light of relevant
factors at that time, based on ESCO’s earnings and financial position and such other business
considerations as the Board deems relevant. See Item 12 for equity compensation plan information.
ISSUER PURCHASES OF EQUITY SECURITIES*:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Total Number of |
|
Maximum Number of |
| |
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
Shares that May Yet |
| |
|
|
|
|
|
|
|
|
|
as Part of Publicly |
|
Be Purchased Under |
| |
|
Total Number of |
|
Average Price Paid |
|
Announced Plans or |
|
the Plans or |
| Period |
|
Shares Purchased |
|
per Share |
|
Programs |
|
Programs |
July 1-31, 2007 |
|
|
165,000 |
|
|
$ |
38.54 |
|
|
|
165,000 |
|
|
|
0 |
|
August 1-31, 2007 |
|
|
0 |
|
|
|
N.A. |
|
|
|
0 |
|
|
|
0 |
|
Sep. 1-30, 2007 |
|
|
0 |
|
|
|
N.A. |
|
|
|
0 |
|
|
|
0 |
|
Total |
|
|
165,000 |
|
|
$ |
38.54 |
|
|
|
165,000 |
|
|
|
935,000 |
|
|
|
|
| * |
|
On August 8, 2006, the Board of Directors announced a new common stock repurchase program (the
“2006 Program”) for a maximum of 1,200,000 shares. The 2006 Program will expire September 30,
2008. There currently is no repurchase program which the Company has determined to terminate
prior to the program’s expiration, or under which the Company does not intend to make further
purchases. |
Item 6. Selected Financial Data
The information required by this item is incorporated herein by reference to “Five-Year
Financial Summary” and Note 2 of the Notes to Consolidated Financial Statements appearing in the
2007 Annual Report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The information required by this item is incorporated herein by reference to “Management’s
Discussion and Analysis” appearing in the 2007 Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is incorporated herein by reference to “Market Risk
Analysis” and
14
“Quantitative And Qualitative Disclosures About Market Risk” in “Management’s Discussion and
Analysis” appearing in the 2007 Annual Report.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference to the Consolidated
Financial Statements of the Company on pages 23 through 42 and the report thereon of KPMG LLP, an
independent registered public accounting firm, appearing on page 44 of the 2007 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item 9A. Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of the
Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company’s disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d—15(e) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Based upon that evaluation, the Company’s Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were
effective as of September 30, 2007. Disclosure controls and procedures are controls and procedures
that are designed to ensure that information required to be disclosed in Company reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms. Management’s Report
on Internal Control Over Financial Reporting and the attestation report thereon of KPMG LLP are
incorporated herein by reference to pages 43 and 45, respectively, in the 2007 Annual Report.
There were no changes in the Company’s internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2007 that
have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding nominees and directors appearing under “Nominees and Continuing
Directors” in the 2008 Proxy Statement is hereby incorporated by reference. Information regarding
executive officers is set forth in Part I of this Form 10-K. Information regarding the Audit and
Finance Committee and its members appearing under “Board of Directors and Committees” in the 2008
Proxy Statement is hereby incorporated by reference.
Information appearing under “Section 16(a) Beneficial Ownership Reporting Compliance” in the
2008 Proxy Statement is hereby incorporated by reference.
The Company has adopted codes of ethics which apply to its chief executive officer, its chief
financial officer and all other senior executives, as well as all Company employees. The following
documents are available free of charge through the Company’s internet website at
www.escotechnologies.com and in print to any person who requests them: Corporate Governance
Guidelines; Charters of the Audit and Finance Committee, Human Resources and Compensation
Committee, and Nominating and Corporate Governance Committee; Code of Business Conduct and Ethics;
and Code of Ethics for Senior Financial Officers.
15
Item 11. Executive Compensation
Information appearing under “Board of Directors and Committees,” “Executive Compensation,”
“Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report”
in the 2008 Proxy Statement is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The information regarding beneficial ownership of shares of common stock by nominees and
directors, by executive officers, by directors and executive officers as a group and by any known
five percent stockholders appearing under “Security Ownership of Directors and Executive Officers”
and “Security Ownership of Certain Beneficial Owners” in the 2008 Proxy Statement is hereby
incorporated by reference.
Equity Compensation Plan Information:
The following table summarizes certain information regarding Common Shares that may be issued
by the Company pursuant to its equity compensation plans existing as of September 30, 2007.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Number of securities |
| |
|
|
|
|
|
|
|
|
|
remaining available for |
| |
|
|
|
|
|
|
|
|
|
future issuance under |
| |
|
Number of securities to |
|
Weighted-average |
|
equity compensation |
| |
|
be issued upon exercise |
|
exercise price of |
|
plans (excluding |
| |
|
of outstanding options, |
|
outstanding options, |
|
securities reflected in |
| Plan Category |
|
warrants and rights(1) |
|
warrants and rights |
|
column (a))(1) |
| |
|
(a) |
|
(b) |
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans approved by
security holders
(2) |
|
|
1,723,001 |
(3) |
|
$ |
30.35 |
(4) |
|
|
1,749,874 |
(5)(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved
by security holders |
|
|
0 |
|
|
|
N/A |
|
|
|
257,498 |
(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,723,001 |
|
|
$ |
30.35 |
|
|
|
2,007,372 |
|
|
|
|
| (1) |
|
Number of Common Shares is subject to adjustment for any future changes in capitalization for
stock splits, stock dividends and similar events. |
| |
| (2) |
|
Consists of the Company’s 1990, 1994 and 1999 Stock Option Plans, the 2001 Stock Incentive
Plan and the 2004 Incentive Compensation Plan. Each of the above-cited Plans has been amended
without Stockholder approval in accordance with its terms, as follows: the Company’s 1990,
1994 and 1999 Stock Option Plans have been amended to provide for tax withholding, to provide
for adjustment upon a special distribution and in certain other respects; the 1994 and 1999
Stock Option Plans have been amended to reflect the change of the Company’s name and the
elimination of the Company’s common stock trust receipts; the 1994 Stock Option Plan was
amended to authorize the Human Resources and Compensation Committee (the “Committee”), in its
discretion, to: (i) permit an optionee who terminates employment with the approval of the
Company to exercise his stock option at any time within three months after termination, but
before ten years from the date of grant, and (ii) direct that an option award agreement may
permit an optionee who terminates employment on account of retirement on or after age 60 to
exercise his stock option up to five years after retirement, but before ten years from the
date of grant; the 1990, 1994 and 1999 Stock Option Plans and the 2001 Stock Incentive Plan
were amended to authorize the Committee to delegate to any employee the power to extend a
stock option beyond termination of employment for persons who are not “officers” as defined
in Rule 16a-1 under the Exchange Act; the 1994 and 1999 Stock Option Plans and the 2001 Stock
Incentive Plan have been amended to authorize the Committee to delegate to the Chief Executive |
16
|
|
|
| |
|
Officer the power to grant stock options to persons who are not such “officers”, with the
limitation of 10,000 shares per award and 100,000 shares awarded in the aggregate in any
fiscal year; the 2001 Stock Incentive Plan and the 2004 Incentive Compensation Plan were
amended with respect to Performance Share distributions to: (i) eliminate the participant’s
option to pay cash for tax withholding and receive all shares due, and (ii) eliminate the
participant’s option to defer the distribution; the 2004 Incentive Compensation Plan was
amended with respect to Performance Share distributions to eliminate the Committee’s
discretion to determine the percentage of the distribution to be made in shares or to be
withheld for tax payments; and, subsequent to September 30, 2007, the 1999 Stock Option
Plan, the 2001 Stock Incentive Plan and the 2004 Incentive Compensation Plan were amended
in accordance with Section 409A of the Internal Revenue Code of 1986, as amended, to
eliminate the
Committee’s discretion to grant to stock option holders additional alternative stock
appreciation rights covering additional shares, under certain circumstances; and in the case of
the 2004 Plan, to restrict the payment of dividend equivalents to participants in restricted
stock awards to the time when the shares to which the dividend equivalents apply are delivered
to the participant. |
| |
| (3) |
|
Includes 164,060 Common Shares issuable in connection with the vesting and distribution of
outstanding performance-accelerated restricted share awards under the Company’s 2001 Stock
Incentive Plan. |
| |
| (4) |
|
Does not include 164,060 Common Shares issuable in connection with the vesting and
distribution of outstanding performance-accelerated restricted share awards under the 2001
Stock Incentive Plan, for which there are no exercise prices. |
| |
| (5) |
|
Comprises 4,144 Common Shares under the 1999 Stock Option Plan, 278,987 Common Shares under
the 2001 Stock Incentive Plan and 1,466,743 Common Shares under the 2004 Incentive
Compensation Plan. |
| |
| (6) |
|
Does not include shares that may be purchased on the open market pursuant to the Company’s
Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, participants may elect to have up
to 10% of their current salary or wages withheld and contributed to one or more independent
trustees for the purchase of Common Shares. At the discretion of an officer of the Company,
the Company or a domestic subsidiary or division may contribute cash in an amount not to
exceed 20% of the amounts contributed by participants. The total number of Common Shares
purchased with the Company’s matching contributions, however, may not exceed 183,446. As of
September 30, 2007, 36,307 shares had been purchased with the Company’s matching funds. |
| |
| (7) |
|
Represents Common Shares issuable pursuant to the Compensation Plan for Non-Employee
Directors (the “Compensation Plan”), which provides for each director to be paid (in
addition to other fees) an annual retainer fee payable partially in cash and partially in
Common Shares. Periodically, the Human Resources and Compensation Committee of the Board
of Directors determines the amount of the retainer fee and the allocation of the fee
between cash and Common Shares. The maximum number of Common Shares available for
distribution under the Compensation Plan is 400,000 shares. The stock portion of the
retainer fee is distributable in quarterly installments. Directors may elect to defer
receipt of all of their cash compensation and/or all of the stock portion of the retainer
fee. The deferred amounts are credited to the director’s deferred compensation account in
stock equivalents. Deferred amounts are distributed in Common Shares or cash at such
future dates as specified by the director unless distribution is accelerated in certain
circumstances, including a change in control of the Company. The stock portion which has
been deferred may only be distributed in Common Shares. |
Item 13. Certain Relationships and Related Transactions and Director Independence
Information regarding the Company’s directors, nominees for directors and members of the
committees of the board of directors, and their status of independence appearing under “Board of
Directors and Committees” in the 2008 Proxy Statement is hereby incorporated by reference.
There was no transaction since the beginning of the Company’s last fiscal year, or any
currently proposed transaction, in which the Company was or is to be a participant and the amount
involved exceeds $120,000, and in which any related person had or will have a direct or indirect
material interest.
17
The Company has implemented a written policy to ensure that all “Interested Transactions” with
“Related Parties” will be at arm’s length and on terms generally available to an unaffiliated
third-party under the same or similar circumstances. Interested Transactions are any Company
transactions in which any Related Party has or will have a direct or indirect interest. Related
Parties are executive officers, directors, director nominees and persons owning more than 5% of
Company common stock, or any immediate
family member of such parties. The policy contains procedures requiring Related Parties to
notify the Company of potential Interested Transactions and for the Nominating and Corporate
Governance Committee (Committee) to review and approve or disapprove of such transaction. The
Committee will consider whether the Interested Transaction with a Related Party is on terms no less
favorable than terms generally available to an unaffiliated third-party under the same or similar
circumstances. If advance Committee approval is not feasible or is not obtained, the policy
requires submission to the Committee after the fact, and the Committee is empowered to approve,
ratify, amend, rescind or terminate the transaction. In such event, the Committee may also request
the General Counsel to evaluate the Company’s controls and procedures to ascertain whether any
changes to the policy are recommended.
Item 14. Principal Accounting Fees and Services
Information regarding the Company’s independent auditors, their fees and services, and the
Company’s Audit and Finance Committee’s pre-approval policies and procedures regarding such fees
and services appearing under “Independent Public Accountants” in the 2008 Proxy Statement is
hereby incorporated by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as a part of this report:
| |
1. |
|
The Consolidated Financial Statements of the Company
on pages 23 through 42 and the Reports of Independent Registered
Public Accounting Firm thereon of KPMG LLP appearing on pages 44
and 45 of the 2007 Annual Report. |
| |
| |
2. |
|
Financial statement schedules have been omitted
because the subject matter is disclosed elsewhere in the financial
statements and notes thereto, not required or not applicable, or
the amounts are not sufficient to require submission. |
| |
| |
3. |
|
Exhibits: |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Filed Herewith or Incorporated by |
|
| Exhibit |
|
|
|
|
|
Reference to Document Indicated By |
|
| Number |
|
Description |
|
|
Footnote |
|
|
|
|
|
|
|
|
|
|
18
3. Exhibits:
| |
|
|
|
|
| |
|
|
|
Filed Herewith or Incorporated by |
| Exhibit |
|
|
|
Reference to Document Indicated By |
| Number |
|
Description |
|
Footnote |
|
|
|
|
|
3.1
|
|
Restated Articles of Incorporation
|
|
Incorporated by Reference,
Exhibit 3(a)[1] |
|
|
|
|
|
3.2
|
|
Amended Certificate of Designation,
Preferences and Rights of Series A
Participating Cumulative Preferred Stock
of the Registrant
|
|
Incorporated by Reference,
Exhibit 4(e)[2] |
|
|
|
|
|
3.3
|
|
Articles of Merger effective July 10, 2000
|
|
Incorporated by Reference, Exhibit 3(c)[3] |
|
|
|
|
|
3.4
|
|
Bylaws, as amended and restated
|
|
Incorporated by Reference,
Exhibit 3.4[4] |
|
|
|
|
|
3.5
|
|
Amendment to Bylaws effective November 9,
2007
|
|
Incorporated by Reference,
Exhibit 3.1[23] |
|
|
|
|
|
4.1
|
|
Specimen Common Stock Certificate
|
|
Incorporated by Reference,
Exhibit 4(a)[3] |
|
|
|
|
|
4.2
|
|
Specimen Rights Certificate
|
|
Incorporated by Reference, Exhibit
B to Exhibit 4.1[5] |
|
|
|
|
|
4.3
|
|
Rights Agreement dated as of September 24,
1990 (as amended and restated as of
February 3, 2000) between the Registrant
and Registrar and Transfer Company, as
successor Rights Agent
|
|
Incorporated by Reference,
Exhibit 4.1[5] |
|
|
|
|
|
4.4
|
|
Credit Agreement dated as of October 6,
2004, among the Registrant, Wells Fargo
Bank, N.A., as agent, and the lenders
listed therein
|
|
Incorporated by Reference,
Exhibit 4.4[6] |
|
|
|
|
|
4.5
|
|
Consent and waiver to Credit Agreement
(listed as 4.4, above) dated as of January
20, 2006
|
|
Incorporated by Reference,
Exhibit 4.1[21] |
|
|
|
|
|
10.1
|
|
Form of Indemnification Agreement with
each of ESCO’s directors
|
|
Incorporated by Reference,
Exhibit 10(k)[7] |
|
|
|
|
|
10.2
|
|
Supplemental Executive Retirement Plan as
amended and restated as of August 2, 1993*
|
|
Incorporated by Reference,
Exhibit 10(n)[8] |
|
|
|
|
|
10.3
|
|
Second Amendment to Supplemental Executive
Retirement Plan effective May 1, 2001*
|
|
Incorporated by Reference,
Exhibit 10.4[9] |
19
| |
|
|
|
|
| |
|
|
|
Filed Herewith or Incorporated by |
| Exhibit |
|
|
|
Reference to Document Indicated By |
| Number |
|
Description |
|
Footnote |
|
|
|
|
|
10.4
|
|
Directors’ Extended Compensation Plan*
|
|
Incorporated by Reference,
Exhibit 10(o)[8] |
|
|
|
|
|
10.5
|
|
First Amendment to Directors’ Extended
Compensation Plan effective January 1,
2000*
|
|
Incorporated by Reference,
Exhibit 10.11[10] |
|
|
|
|
|
10.6
|
|
Second Amendment to Directors’ Extended
Compensation Plan effective April 1, 2001*
|
|
Incorporated by Reference,
Exhibit 10.7[9] |
|
|
|
|
|
10.7
|
|
1994 Stock Option Plan (as amended and
restated effective October 16, 2000)*
|
|
Incorporated by Reference,
Exhibit 10.1[11] |
|
|
|
|
|
10.8
|
|
Amendment to 1994 Stock Option Plan
effective July 18, 2002*
|
|
Incorporated by Reference,
Exhibit 10(b)[12] |
|
|
|
|
|
10.9
|
|
Form of Incentive Stock Option Agreement*
|
|
Incorporated by Reference,
Exhibit 10.15[10] |
|
|
|
|
|
10.10
|
|
Severance Plan adopted as of August 10,
1995 (as restated February 5, 2002)*
|
|
Incorporated by Reference,
Exhibit 10[13] |
|
|
|
|
|
10.11
|
|
Amendment to 1994 Stock Option Plan
effective August 7, 2003*
|
|
Incorporated by Reference,
Exhibit 10.12[4] |
|
|
|
|
|
10.12
|
|
1999 Stock Option Plan (as amended and
restated effective October 16, 2000)*
|
|
Incorporated by Reference,
Exhibit 10.2[11] |
|
|
|
|
|
10.13
|
|
Form of Incentive Stock Option Agreement*
|
|
Incorporated by Reference,
Exhibit 10.3[11] |
|
|
|
|
|
10.14
|
|
Amendment to 1999 Stock Option Plan
effective August 7, 2003*
|
|
Incorporated by Reference,
Exhibit 10.15[4] |
|
|
|
|
|
10.15
|
|
Employment Agreement with Executive
Officer*[14]
|
|
Incorporated by Reference,
Exhibit 10(bb)[1] |
|
|
|
|
|
10.16
|
|
Amendment to Employment Agreement with
Executive Officer*[15]
|
|
Incorporated by Reference,
Exhibit 10.18[9] |
|
|
|
|
|
10.17
|
|
Executive Stock Purchase Plan*
|
|
Incorporated by Reference,
Exhibit 10.24[10] |
|
|
|
|
|
10.18
|
|
Compensation Plan For Non-Employee
Directors*
|
|
Incorporated by Reference,
Exhibit 10.22[9] |
|
|
|
|
|
10.19
|
|
2001 Stock Incentive Plan*
|
|
Incorporated by Reference,
Exhibit B[16] |
|
|
|
|
|
10.20
|
|
Form of Incentive Stock Option Agreement*
|
|
Incorporated by Reference,
Exhibit 10.24[17] |
|
|
|
|
|
10.21
|
|
Form of Non-qualified Stock Option
Agreement*
|
|
Incorporated by Reference,
Exhibit 10.25[17] |
|
|
|
|
|
10.22
|
|
Form of Notice of Award—Performance—
Accelerated Restricted Stock *
|
|
Incorporated by Reference,
Exhibit 10.26[17] |
20
| |
|
|
|
|
| |
|
|
|
Filed Herewith or Incorporated by |
| Exhibit |
|
|
|
Reference to Document Indicated By |
| Number |
|
Description |
|
Footnote |
|
|
|
|
|
10.23
|
|
Form of Supplemental Executive Retirement
Plan Agreement *
|
|
Incorporated by Reference,
Exhibit 10.28[17] |
|
|
|
|
|
10.24
|
|
Amendment to 2001 Stock Incentive Plan
effective August 7, 2003*
|
|
Incorporated by Reference,
Exhibit 10.29[4] |
|
|
|
|
|
10.25
|
|
Sixth Amendment and Restatement of
Employee Stock Purchase Plan effective as
of October 15, 2003*
|
|
Incorporated by Reference,
Appendix C[18] |
|
|
|
|
|
10.26
|
|
Second Amendment to Employment Agreement
with V.L. Richey, Jr.
|
|
Incorporated by Reference,
Exhibit 10.1[19] |
|
|
|
|
|
10.27
|
|
Second Amendment to Employment Agreement
with G.E. Muenster (identical document
with A.S. Barclay)*
|
|
Incorporated by Reference,
Exhibit 10.2[19] |
|
|
|
|
|
10.28
|
|
Notice of Award — restricted stock award
to V.L. Richey, Jr. (identical documents
except for number of shares awarded for:
|
|
Incorporated by Reference,
Exhibit 10.3[19] |
|
|
C.J. Kretschmer — 4,750 shares; G.E.
Muenster — 2,400 shares; A.S. Barclay —
1,800 shares)* |
|
|
|
|
|
|
|
10.29
|
|
2004 Incentive Compensation Plan*
|
|
Incorporated by Reference,
Appendix B[18] |
|
|
|
|
|
10.30
|
|
Summary of Non-Employee Directors’
Compensation*
|
|
Incorporated by Reference,
Exhibit 10.1[20] |
|
|
|
|
|
10.31
|
|
Performance Compensation Plan Amended and
Restated as of November 25, 2002*
|
|
Incorporated by Reference,
Exhibit 10.2[20] |
|
|
|
|
|
10.32
|
|
2005 Performance Measures and Evaluation
Criteria under Performance Compensation
Plan*
|
|
Incorporated by Reference,
Exhibit 10.3[20] |
|
|
|
|
|
10.33
|
|
Awards to Executive Officers Not Reported
on Form 8-K, October 4, 2004*
|
|
Incorporated by Reference,
Exhibit 10.4[20] |
|
|
|
|
|
10.34
|
|
Form of Notice of
Award—Performance-Accelerated Restricted
Stock under 2001 Stock Incentive Plan*
|
|
Incorporated by Reference,
Exhibit 10.5[20] |
|
|
|
|
|
10.35
|
|
Form of Incentive Stock Option Agreement
under 2004 Incentive Compensation Plan*
|
|
Incorporated by Reference,
Exhibit 10.6[20] |
|
|
|
|
|
10.36
|
|
Form of Nonqualified Stock Option
Agreement under 2004 Incentive
Compensation Plan*
|
|
Incorporated by Reference,
Exhibit 10.7[20] |
|
|
|
|
|
10.37
|
|
Form of Incentive Stock Option Agreement
under 2001 Stock Incentive Plan*
|
|
Incorporated by Reference,
Exhibit 10.8[20] |
|
|
|
|
|
10.38
|
|
Form of Nonqualified Stock Option
Agreement under 2001 Stock Incentive Plan*
|
|
Incorporated by Reference,
Exhibit 10.9[20] |
|
|
|
|
|
10.39
|
|
Second Amendment to 2001 Stock Incentive
Plan effective August 3, 2006*
|
|
Incorporated by Reference,
Exhibit 10.39[22] |
21
| |
|
|
|
|
| |
|
|
|
Filed Herewith or Incorporated by |
| Exhibit |
|
|
|
Reference to Document Indicated By |
| Number |
|
Description |
|
Footnote |
|
|
|
|
|
10.40
|
|
First Amendment to 2004 Incentive
Compensation Plan effective August 3, 2006*
|
|
Incorporated by Reference,
Exhibit 10.40[22] |
|
|
|
|
|
10.41
|
|
Employment Agreement with C.J. Kretschmer
effective October 1, 2006*
|
|
Incorporated by Reference,
Exhibit 10.41[22] |
|
|
|
|
|
10.42
|
|
Form of Exhibits (“Non-Compete” and
“Change of Control”) to Option Agreements
listed as 10.35 and 10.36, above* |
|
|
|
|
|
|
|
10.43
|
|
Third Amendment to Directors’ Extended
Compensation Plan effective October 3,
2007* |
|
|
|
|
|
|
|
10.44
|
|
Second Amendment to 2004 Incentive
Compensation Plan effective October 3,
2007* |
|
|
|
|
|
|
|
10.45
|
|
Third Amendment to 2001 Stock Incentive
Plan effective October 3, 2007* |
|
|
|
|
|
|
|
10.46
|
|
First Amendment to Incentive Compensation
Plan for Executive Officers effective
October 3, 2007* |
|
|
|
|
|
|
|
10.47
|
|
Amendment to 1999 Stock Option Plan
effective October 3, 2007* |
|
|
|
|
|
|
|
10.48
|
|
Amendment to Severance Plan effective
October 3, 2007* |
|
|
|
|
|
|
|
10.49
|
|
Amendment to Performance Compensation Plan
effective October 3, 2007* |
|
|
|
|
|
|
|
10.50
|
|
Amendment to Compensation Plan for
Non-Employee Directors effective October
3, 2007* |
|
|
|
|
|
|
|
13
|
|
The following-listed sections of the
Annual Report to Stockholders for the year
ended September 30, 2007: |
|
|
| |
• |
|
Management’s Discussion and
Analysis (pgs. 12-22) |
|
| |
| |
• |
|
Consolidated Financial Statements
(pgs. 23-42) and Report of Independent
Registered Public Accounting Firm (p. 44) |
|
| |
| |
• |
|
Management’s Report on Internal
Control over Financial Reporting (p. 43) |
|
| |
| |
• |
|
Report of Independent Registered
Public Accounting Firm (p.45) |
|
| |
| |
• |
|
Five-year Financial Summary (p. 46) |
|
| |
| |
• |
|
Common Stock Market Price (p. 46) |
|
| |
| |
• |
|
Shareholders’ Summary—Capital
Stock Information (p. 48) |
|
22
| |
|
|
|
|
| |
|
|
|
Filed Herewith or Incorporated by |
| Exhibit |
|
|
|
Reference to Document Indicated By |
| Number |
|
Description |
|
Footnote |
|
|
|
|
|
21
|
|
Subsidiaries of ESCO |
|
|
|
23
|
|
Consent of Independent Registered Public
Accounting Firm |
|
|
|
31.1
|
|
Certification of Chief Executive Officer |
|
|
|
31.2
|
|
Certification of Chief Financial Officer |
|
|
|
32
|
|
Certification of Chief Executive Officer
and Chief Financial Officer |
|
|
|
| |
|
[1] Incorporated by reference to Form 10-K for the fiscal year ended September 30, 1999,
at the Exhibit indicated. |
| |
| |
|
[2] Incorporated by reference to Form 10-Q for the fiscal quarter ended March 31, 2000,
at the Exhibit indicated. |
| |
| |
|
[3] Incorporated by reference to Form 10-Q for the fiscal quarter ended June 30, 2000,
at the Exhibit indicated. |
| |
| |
|
[4] Incorporated by reference to Form 10-K for the fiscal year ended September 30, 2003,
at the Exhibit indicated. |
| |
| |
|
[5] Incorporated by reference to Current Report on Form 8-K dated February 3, 2000, at
the Exhibit indicated. |
| |
| |
|
[6] Incorporated by reference to Form 10-K for the fiscal year ended September 30, 2004,
at the Exhibit indicated. |
| |
| |
|
[7] Incorporated by reference to Form l0-K for the fiscal year ended September 30, l991,
at the Exhibit indicated. |
| |
| |
|
[8] Incorporated by reference to Form 10-K for the fiscal year ended September 30, 1993,
at the Exhibit indicated. |
| |
| |
|
[9] Incorporated by reference to Form 10-K for the fiscal year ended September 30, 2001,
at the Exhibit indicated. |
| |
| |
|
[10] Incorporated by reference to Form 10-K for the fiscal year ended September 30,
2000, at the Exhibit indicated. |
| |
| |
|
[11] Incorporated by reference to Form 10-Q for the fiscal quarter ended December 31,
2000, at the Exhibit indicated. |
| |
| |
|
[12] Incorporated by reference to Form 10-Q for the fiscal quarter ended June 30, 2002,
at the Exhibit indicated. |
| |
| |
|
[13] Incorporated by reference to Form 10-Q for the fiscal quarter ended March 31, 2002,
at the Exhibit indicated. |
| |
| |
|
[14] Identical Employment Agreements between ESCO and executive officers A.S. Barclay,
G.E. Muenster and V.L. Richey, Jr., except that in the cases of Ms. Barclay and Mr.
Muenster the minimum annual salary is $94,000 and $108,000, respectively. |
| |
| |
|
[15] Identical Amendments to Employment Agreements between ESCO and executive officers
A.S. Barclay, G.E. Muenster and V.L. Richey, Jr. |
23
|
|
|
| |
|
[16] Incorporated by reference to Notice of Annual Meeting of the Stockholders and Proxy
Statement dated December 11, 2000, at the Exhibit indicated. |
| |
| |
|
[17] Incorporated by reference to Form 10-K for the fiscal year ended September 30,
2002, at the Exhibit indicated. |
| |
| |
|
[18] Incorporated by reference to Notice of Annual Meeting of the Stockholders and Proxy
Statement dated December 29, 2003, at the Appendix indicated. |
| |
| |
|
[19] Incorporated by reference to Form 10-Q for the fiscal quarter ended June 30, 2004,
at the Exhibit indicated. |
| |
| |
|
[20] Incorporated by reference to Form 10-Q for the fiscal quarter ended December 31,
2004, at the Exhibit indicated. |
| |
| |
|
[21] Incorporated by reference to Current Report on Form 8-K dated February 2, 2006, at
the Exhibit indicated. |
| |
| |
|
[22] Incorporated by reference to Form 10-K for the fiscal year ended September 30,
2006, at the Exhibit indicated. |
| |
| |
|
[23] Incorporated by reference to Current Report on Form 8-K dated November 12, 2007, at
the Exhibit indicated. |
| |
| * |
|
Represents a management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 15(c) of this Part IV. |
| |
| (b) |
|
Exhibits: Reference is made to the list of exhibits in this Part IV, Item 15(a)3 above. |
| |
| (c) |
|
Financial Statement Schedules: Reference is made to Part IV, Item 15(a)2 above. |
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(D) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| |
|
|
|
|
| |
ESCO TECHNOLOGIES INC.
|
|
| Date: November 26, 2007 |
By |
/s/ V.L. Richey, Jr.
|
|
| |
|
V.L. Richey, Jr. |
|
| |
|
Chief Executive Officer |
|
| |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below effective November 26, 2007, by the following persons on behalf of the registrant and
in the capacities indicated.
| |
|
|
| SIGNATURE |
|
TITLE |
|
|
|
/s/ V.L. Richey, Jr.
V.L. Richey, Jr.
|
|
Chairman, President, Chief Executive Officer and Director |
|
|
|
/s/ G.E. Muenster
G.E. Muenster
|
|
Senior Vice President and Chief Financial Officer,
Principal Accounting Officer |
|
|
|
/s/ J.M. McConnell
J.M. McConnell
|
|
Director |
|
|
|
/s/ L.W. Solley
L.W. Solley
|
|
Director |
|
|
|
/s/ J.M. Stolze
J.M. Stolze
|
|
Director |
|
|
|
/s/ D.C. Trauscht
D.C. Trauscht
|
|
Director |
|
|
|
/s/ J.D. Woods
J.D. Woods
|
|
Director |
25
INDEX TO EXHIBITS
Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K.
| |
|
|
| Exhibit No. |
|
Exhibit |
|
|
|
10.42
|
|
Form of Exhibits (“Non-Compete” and “Change of Control”) to Option
Agreements |
|
|
|
10.43
|
|
Third Amendment to Directors’ Extended Compensation Plan effective
October 3, 2007 |
|
|
|
10.44
|
|
Second Amendment to 2004 Incentive Compensation Plan effective
October 3, 2007 |
|
|
|
10.45
|
|
Third Amendment to 2001 Stock Incentive Plan effective October 3,
2007 |
|
|
|
10.46
|
|
First Amendment to Incentive Compensation Plan for Executive
Officers effective October 3, 2007 |
|
|
|
10.47
|
|
Amendment to 1999 Stock Option Plan effective October 3, 2007 |
|
|
|
10.48
|
|
Amendment to Severance Plan effective October 3, 2007 |
|
|
|
10.49
|
|
Amendment to Performance Compensation Plan effective October 3, 2007 |
|
|
|
10.50
|
|
Amendment to Compensation Plan for Non-Employee Directors effective
October 3, 2007 |
|
|
|
13
|
|
The following-listed sections of the Annual Report to Stockholders
for the year ended September 30, 2007: |
| |
• |
|
Management’s Discussion and Analysis (pgs. 12-22) |
| |
| |
• |
|
Consolidated Financial Statements (pgs. 23-42) and Report of
Independent Registered Public Accounting Firm (p. 44) |
| |
| |
• |
|
Management’s Report on Internal Control over Financial
Reporting (p. 43) |
| |
| |
• |
|
Report of Independent Registered Public Accounting Firm
(p.45) |
| |
| |
• |
|
Five-year Financial Summary (p. 46) |
| |
| |
• |
|
Common Stock Market Price (p. 46) |
| |
| |
• |
|
Shareholders’ Summary—Capital Stock Information (p. 48) |
| |
|
|
21
|
|
Subsidiaries of ESCO |
|
|
|
23
|
|
Consent of Independent Registered Public Accounting Firm |
|
|
|
31.1
|
|
Certification of Chief Executive Officer |
|
|
|
31.2
|
|
Certification of Chief Financial Officer |
26
| |
|
|
| Exhibit No. |
|
Exhibit |
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer |
See Item 15(a)3 for a list of exhibits incorporated by reference.
27