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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period to
---------- ----------
Commission file number: 1-10596
ESCO Technologies Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Missouri 43-1554045
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8888 Ladue Road, Ste. 200
St. Louis, Missouri 63124-2056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(314) 213-7200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each
Exchange on
Title of Each Class Which Registered
------------------- ----------------
Common Stock, par value $0.01 per New York Stock
share Exchange, Inc.
Preferred Stock Purchase Rights New York Stock
Exchange, Inc.
(Cover page 1 of 2 pages)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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 filing requirements
for the past 90 days. Yes X No
--- ---
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. [X]
Aggregate market value of the Common Stock held by non-affiliates of the
registrant as of close of business on December 19, 2000: $224,246,425*
* 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 December 19, 2000: 12,297,846
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the registrant's Annual Report to Stockholders for fiscal year
ended September 30, 2000 (the "2000 Annual Report") (Parts I and II).
2. Portions of the registrant's Proxy Statement dated December 11, 2000
(Part III).
(Cover page 2 of 2 pages)
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ESCO TECHNOLOGIES INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
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Item Description Page
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Part I
1. Business....................................................................... 1
The Company............................................................. 1
Products................................................................ 1
Marketing and Sales..................................................... 3
Intellectual Property................................................... 4
Backlog................................................................. 4
Purchased Components and Raw Materials.................................. 4
Competition............................................................. 4
Research and Development................................................ 5
Environmental Matters................................................... 5
Government Contracts.................................................... 5
Employees............................................................... 6
Financing............................................................... 6
History of the Business................................................. 6
Forward-Looking Information............................................. 6
2. Properties..................................................................... 7
3. Legal Proceedings.............................................................. 8
4. Submission of Matters to a Vote of Security Holders............................ 8
Executive Officers of the Registrant...................................................... 9
Part II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................................ 9
6. Selected Financial Data........................................................ 9
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................... 10
7A. Quantitative and Qualitative Disclosures About Market Risk..................... 10
8. Financial Statements and Supplementary Data.................................... 10
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................... 10
</TABLE>
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<TABLE>
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Item Description Page
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Part III
10. Directors and Executive Officers of the Registrant............................. 10
11. Executive Compensation......................................................... 10
12. Security Ownership of Certain Beneficial Owners and Management................. 10
13. Certain Relationships and Related Transactions................................. 10
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 11
SIGNATURES ............................................................................... 15
INDEX TO EXHIBITS ........................................................................ 16
</TABLE>
II
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ITEM 1. BUSINESS
THE COMPANY
ESCO Technologies Inc. ("ESCO") is a producer of engineered products and
systems for industrial and commercial applications sold to customers world-wide.
ESCO operates in four industry segments which, together with the operating
subsidiaries within each segment, are as follows:
Filtration/Fluid Flow:
PTI Technologies Inc.
PTI Advanced Filtration Inc.
PTI Technologies Limited
Filtertek Inc.
Filtertek BV
Filtertek de Puerto Rico, Inc.
Filtertek do Brazil
Filtertek SA
VACCO Industries ("VACCO")
ESCO Electronica De Mexico, S.A. de C.V.
Test:
EMC Test Systems, L.P. ("ETS")
The Curran Company, d/b/a Lindgren R.F. Enclosures, Inc. ("Lindgren")
Rayproof Ltd.
Euroshield OY
Holaday Industries, Inc. ("Holaday")
Communications:
Distribution Control Systems, Inc. ("DCSI")
Distribution Control Systems Caribe, Inc. ("DCSI-Caribe")
Comtrak Technologies, L.L.C. ("Comtrak")
Other:
Rantec Power Systems Inc. ("Rantec")
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 below. See "Management's Discussion and Analysis" appearing in
the 2000 Annual Report.
PRODUCTS
The Company's products are described below. See Note 11 of the Notes to
Consolidated Financial Statements in the 2000 Annual Report, which Note is
herein incorporated by reference.
FILTRATION/FLUID FLOW
The Company's Filtration/Fluid Flow segment accounted for approximately
61% of the Company's total revenues in fiscal year 2000.
PTI Technologies Inc., PTI Advanced Filtration Inc. and PTI Technologies
Limited develop and manufacture a wide range of filtration products. PTI
Technologies Inc. is a leading supplier of filters to the commercial aerospace
and industrial markets. The industrial business also includes the supply of
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filtration products for process and mobile fluid power applications. PTI
Advanced Filtration Inc. produces microfiltration products for applications in
microelectronic, food and beverage, and pharmaceutical markets. Membrane
separation products and systems are also produced by PTI Advanced Filtration
Inc. for use in the dairy industry and industrial coatings applications. PTI
Technologies Limited manufactures and distributes filter products primarily in
the European industrial marketplace. In fiscal year 1998, PTI Technologies Inc.
formed a joint venture in India, known as SANMAR-PTI Filters Limited, with
SANMAR Engineering Corporation to manufacture and sell filtration products in
India and other international markets. VACCO and PTI Technologies Inc. develop
and manufacture industrial filtration elements and systems primarily used within
the petrochemical and nuclear industries, where a premium is placed on superior
performance in very harsh environments. VACCO supplies flow control products to
the aerospace industry for use in aircraft, satellite propulsion systems,
satellite launch vehicles and the space shuttle. VACCO also uses its etched disc
technology to produce quiet valves and manifolds for U.S. Navy and severe
service industrial applications.
All of the Filtertek entities listed above under "THE COMPANY" are
hereinafter collectively referred to as "Filtertek". Filtertek develops and
manufactures a broad range of high-volume filtration 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 health care markets, automotive
fluid system market, and other commercial and industrial markets. Typical
Filtertek customers may require daily production of many 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 technology or incorporate proprietary product or process design, or
both. Filtertek's products are typically supplied to original equipment
manufacturers under long-term contracts. In fiscal year 2000, Filtertek
introduced a number of new products including automotive power steering,
suspension and brake reservoir filters, medical filtration devices and
industrial products, such as spray painting filters.
TEST
The Company's Test segment accounted for approximately 21% of the
Company's total revenues in fiscal year 2000.
ETS designs and manufactures electromagnetic compatibility ("EMC") test
equipment. It also supplies controlled radio frequency testing environments
(anechoic chambers), shielded rooms for high security data processing and secure
communication, and electromagnetic absorption materials. ETS's products include
antennas, antenna masts, turntables, current probes, field probes, TEM
(transverse electromagnetic) cells, GTEM (gigahertz transverse electromagnetic)
cells, microwave absorber, calibration equipment and other test accessories
required to do EMC testing. ETS also provides all the design, program management
and integration services required to supply customers with turnkey EMC
solutions. In fiscal year 1999, ETS was awarded a contract by General Motors,
valued at more than $20 million, to design and equip an EMC test facility.
Revenues from this contract amounted to approximately 21% of total revenues for
the Test segment in fiscal year 2000. It is expected that in fiscal year 2001
revenues from this contract will constitute approximately 5% of total revenues
for the Test segment. This project is expected to be completed in fiscal year
2001.
Lindgren designs, manufactures, installs and services electromagnetic
("EM") shielding systems used by manufacturers of medical equipment,
communications systems and electronic products. Lindgren's products include
shielding for magnetic resonance imaging ("MRI") rooms, shielded test
enclosures, RF filters, fiber optic interface components and a line of
proprietary doors designed specifically for EM isolation, containment and
measurement applications. Lindgren also supplies shielded rooms for high
security data processing and secure communications.
Euroshield OY designs and manufactures a broad range of modular shielding
systems and shielded doors, some of which are proprietary, for the world market.
It also provides the design, program management and integration services to
supply the European market with turnkey EMC solutions.
Holaday designs and manufactures specialty measurement probes for use in
broadband and EMC test, health and safety, and microwave detection products.
Holaday's products include probes, meters, analysis
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software, personal protection equipment and components used by original
equipment manufacturers and service professionals. Holaday also performs
calibration certification services for its probes and meters.
COMMUNICATIONS
In fiscal year 2000, approximately 14% of the Company's total revenues
was derived from its Communications segment.
DCSI is a leading manufacturer of two-way power line communication
systems for the utility industry. These systems provide electric utilities with
a patented communication technology for automatic meter reading capabilities,
demand-side management and distribution automation (the TWACS(R) system). During
fiscal year 2000, DCSI (through its subsidiary, DCSI-Caribe) received
substantial revenue from shipments of an automatic meter reading ("AMR") system
to the Puerto Rico Electric Power Authority ("PREPA") under a multi-year
contract signed in fiscal year 1998. Revenue from this contract amounted to
approximately 46% of total Communications segment revenues in fiscal year 2000,
and is expected to constitute approximately 40% to 45% of total segment revenues
in fiscal year 2001. This contract will expire in fiscal year 2001; however,
PREPA has recently awarded DCSI-Caribe a follow-on contract running from fiscal
2001 to fiscal 2004 which has a value of approximately $50 million. The loss of
this contract, which is not anticipated, would have a material adverse effect on
the Communications segment. During 1999, DCSI was chosen to supply the first
phase of an AMR project to Wisconsin Public Service Co. ("WPS") which covers
roughly 17% of WPS' customer base. DCSI anticipates possible expansion of this
system in fiscal years 2001-2003.
Comtrak has developed an advanced video security monitoring system, which
has applications in commercial and industrial security systems. Currently,
Comtrak is working jointly with ADT Security Services, Inc., who is selling this
system under its SecurVision(R) trademark to a variety of markets.
OTHER
The Company's Other products segment represented approximately 4% of the
Company's total revenues in fiscal year 2000. On February 18, 2000, ESCO
completed the sale of its Rantec microwave antenna business.
Rantec designs and manufactures high voltage and low voltage power
supplies, DC to DC converters and power systems, which are marketed to a broad
range of customers worldwide. Applications include medical and avionics CRT
displays, as well as ground-based, shipboard and airborne power systems for a
wide variety of military platforms. Rantec has continued its development of
state-of-the art, patented, miniature high voltage technology, which provides
the same basic functions of today's high voltage power supplies and reduces
package size by 80%. These products are well suited for a broad range of display
applications, from hand-held devices and notebook computers to helmet-mounted
displays and military avionics. Additionally, Rantec has continued to develop
its line of High Density DC to DC converters increasing power densities and
developing unique application-specific models that distinguish this product line
in this market segment.
MARKETING AND SALES
The following comments relate to the Company's business in general:
The Company's products generally are distributed to customers through a
domestic and foreign network of distributors, sales representatives and factory
salespersons. Utility communication systems are primarily sold directly to the
electric utilities.
International sales (excluding sales of ESCO's former Systems &
Electronics Inc. ("SEI") subsidiary which was sold on September 30, 1999)
accounted for approximately 23%, 13% and 14% of the Company's total sales in the
fiscal years ended September 30, 2000, 1999 and 1998, respectively. The increase
in fiscal year 2000 was primarily due to increased sales at ETS and Filtertek
and the acquisition of Lindgren. See Note 11 of the Notes to Consolidated
Financial Statements in the 2000 Annual Report. Historically, the majority of
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these international sales involved defense products. With the divestiture of
SEI, international sales are now derived primarily from industrial and
commercial products.
The Company's international sales are subject to risks inherent in
foreign commerce, including currency fluctuations and devaluations, the risk of
war, changes in foreign governments and their policies, differences in foreign
laws, uncertainties as to enforcement of contract rights, and difficulties in
negotiating and litigating with foreign customers.
The Company's defense 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, as well as to
international customers. Excluding SEI results, direct and indirect sales to the
U.S. Government accounted for approximately 8%, 10% and 15% of the Company's
total sales in the fiscal years ended September 30, 2000, 1999 and 1998,
respectively. See Note 11 of the Notes to Consolidated Financial Statements in
the 2000 Annual Report, which Note is herein incorporated by reference.
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. An increasing number of
the Company's products are based on patented or otherwise proprietary technology
that sets them apart from the competition. The Company believes that this
emphasis better positions the Company to secure new business and protect
existing business. Although the Company considers its patents and other
intellectual property to be of significant value in its operations, none of its
business segments is materially dependent on any single patent, group of patents
or other intellectual property.
BACKLOG
The backlog of firm orders was approximately $145.4 million at September
30, 2000 and approximately $142.9 million at September 30, 1999. As of September
30, 2000, it is estimated that: (i) commercial business accounted for
approximately 92% of the firm orders and defense business accounted for
approximately 8%, and (ii) domestic customers accounted for approximately 76% of
the firm orders and international customers accounted for approximately 24%. Of
the total backlog of orders at September 30, 2000, approximately 94% is expected
to be completed in the fiscal year ending September 30, 2001.
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
material requirements, certain components 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. In the
Communications segment, DCSI utilizes a single source or a limited number of
sources to produce substantially all of DCSI's end-products. Although the
Company believes alternative suppliers of components and end-products are
available, the inability of DCSI to develop alternative sources quickly or
cost-effectively could have a material adverse effect on the Communications
segment.
COMPETITION
The following comments apply to each of the Company's four segments: The
Company faces intense competition from a large number of firms for nearly all of
its products. Although the Company is a leading supplier in several of the
markets it serves, and is the global leader in the EM shielding market, the
Company maintains a relatively small share of the business in many of the
markets in which it participates. Because of the specialized nature of the
Company's products, it is impossible to state precisely its competitive position
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with respect to its products. Substantial efforts are required in order to
maintain existing business levels. In the Company's major served markets,
competition is driven primarily by quality, price, technology and delivery
performance.
Competition in the Company's major markets is broadly based and global in
scope. Individual competitors range in size from annual revenues of less than $1
million to billion dollar enterprises, such as Pall Corporation, a major
competitor in the filtration/fluid flow market. Competition can be particularly
intense during periods of economic slowdown, a situation which the Company
experienced in the past in some of its filtration/fluid flow markets.
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 assess their commercial potential.
The following information excludes expenses attributable to SEI. 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, 2000, 1999 and 1998, total Company-sponsored research and
development expenses were approximately $6.2 million, $6.3 million and $4.5
million, respectively. Total customer-sponsored research and development
expenses were approximately $4.0 million, $8.3 million and $10.2 million for the
fiscal years ended September 30, 2000, 1999 and 1998, respectively. The decrease
in fiscal year 2000 for customer-sponsored research and development expenses was
due to decreased activity at Filtertek and Rantec as well as the sale of the
Rantec microwave antenna business. The decrease in fiscal year 1999 for such
research and development expenses was due to decreased activity at Rantec,
partially offset by an increase at Filtertek.
ENVIRONMENTAL MATTERS
The Company is involved in various stages of investigation and cleanup
relating to environmental matters. The most significant of these matters relates
to a former Company facility located in Newbury Park, California. Textron, Inc.
has indemnified the Company in respect of the cleanup expenses at that facility,
which the Company formerly leased from a third party. 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
Sales related to defense contracts with the U.S. Government and
subcontracts with prime contractors of the U.S. Government accounted for
approximately 8% of Company total revenues in fiscal year 2000. These contracts
are 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, 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. 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 the purchase price for delivered items, reimbursement for allowable
costs incurred and allocable to the contract (which do not include many ordinary
costs of doing business in a commercial context) and an allowance for profit on
the allowable costs incurred or adjustment for loss if completion of
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performance would have resulted in a loss. The Company is also normally entitled
to reimbursement of the cost it incurs to prepare and to negotiate a settlement
of the termination for convenience.
EMPLOYEES
As of November 30, 2000, the Company employed approximately 2,275
persons.
FINANCING
On April 11, 2000, the Company entered into a new $75 million revolving
credit facility replacing its previous $40 million credit facility. The Company
has the option to increase the credit facility to $100 million through April 11,
2002. The credit facility is available for direct borrowings and/or the issuance
of letters of credit. The credit facility will mature and expire on April 11,
2005, and contains customary events of default, including change in control of
the Company. The credit facility is provided by a group of five banks, led by
Bank of America. Substantially all of the assets of the Company are pledged
under the credit facility. See "Management's Discussion and Analysis--Capital
Resources & Liquidity" in the 2000 Annual Report, and Note 7 of the Notes to
Consolidated Financial Statements in the 2000 Annual Report, which Note is
herein incorporated by reference.
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 .
On September 30, 1999, ESCO sold 100% of the capital stock of SEI to
Engineered Systems and Electronics, Inc. On February 18, 2000, the Company sold
its Rantec microwave antenna business to Rantec Microwave Systems, Inc. On March
31, 2000, the Company purchased the assets of the Space Products business of
Eaton Corporation located in El Segundo, California, and integrated this
business into the Company's VACCO subsidiary.
On April 9, 2000, the Company acquired the stock of The Curran Company
(doing business as Lindgren R.F. Enclosures, Inc.) and Lindgren, Inc. (doing
business through its subsidiary, Rayproof Ltd., located in England). On June 2,
2000, the Company acquired the stock of Holaday Industries, Inc.
Effective July 10, 2000, ESCO changed its corporate name from ESCO
Electronics Corporation to ESCO Technologies Inc.
In December 1999, the Company sold property located in Riverhead, New
York which had been retained after the divestiture of Hazeltine Corporation in
1996. Also, in September 2000, the Company sold property in Calabasas,
California which was retained after the sale of the Rantec microwave antenna
business.
FORWARD-LOOKING INFORMATION
The statements contained in this Item 1. "Business" and in Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" concerning the Company's future revenues, profitability, financial
resources, utilization of net deferred tax assets, product mix, production and
deliveries, market demand, product development, competitive position, impact of
environmental matters and statements containing phrases such as "believes",
"anticipates", "may", "could", "should", and "is expected to" are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. 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: changing economic
conditions in served markets; changes
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in customer demands; competition; intellectual property matters; integration of
recently acquired businesses; delivery delays or defaults by customers;
performance issues with key suppliers and subcontractors; and the Company's
successful execution of internal operating plans.
ITEM 2. PROPERTIES
The Company's principal buildings contain approximately 1,288,900 square
feet of floor space. Approximately 681,900 square feet are owned by the Company
and approximately 607,000 square feet are leased. Substantially all of the
Company's owned properties are encumbered in connection with the Company's
credit facility. See Item 1. "Business--Financing" and Note 7 of the Notes to
Consolidated Financial Statements in the 2000 Annual Report. The principal
plants and offices are as follows:
<TABLE>
<CAPTION>
SQ. FT. LEASE
SIZE OWNED/ EXPIRATION PRINCIPAL USE
LOCATION (SQ. FT.) LEASED DATE (INDUSTRY SEGMENT)
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<S> <C> <C> <C> <C>
Oxnard, CA 127,400 Leased 2-10-04 Management, Engineering and
Manufacturing (Filtration/Fluid
Flow)
Oxnard, CA 125,000 Leased 3-21-04 Management, Engineering and
Manufacturing (Filtration/Fluid
Flow)
Patillas, PR 110,000 Owned Manufacturing (Filtration/Fluid
Flow)
Durant, OK 100,000 Owned Manufacturing (Test)
Hebron, IL 99,800 Owned Management, Engineering and
Manufacturing (Filtration/Fluid
Flow)
Huntley, IL 85,000 Owned Manufacturing (Filtration/Fluid
Flow)
South El Monte, CA 80,800 Owned Management, Engineering and
Manufacturing (Filtration/Fluid
Flow)
Glendale Heights, IL 59,400 Leased 3-31-05 Management, Engineering and
(w/one 5-year Manufacturing (Test)
and three 3-year
renewal options)
Stockton, CA 55,000 Leased 5/21/03 Manufacturing (Filtration/Fluid
(w/two 5-year Flow)
renewal options)
Austin, TX 50,000 Leased 1-20-02 Management, Engineering and
(w/one 5-year Manufacturing (Test)
renewal option)
Stevenage, England 47,100 Leased 8-11-17 Management, Engineering and
(w/option to Manufacturing (Test)
terminate on
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
8-12-07)
Los Osos, CA 40,000 Owned Management, Engineering and
Manufacturing
(Other Products)
Newcastle West, 37,000 Owned Manufacturing (Filtration/Fluid
Ireland Flow)
St. Louis, MO 35,000 Owned Management, Engineering and
Manufacturing (Communications)
Juarez, Mexico 34,400 Leased 12-31-01 Engineering and Manufacturing
(w/one 3-year (Filtration/Fluid Flow)
renewal option)
Sheffield, England 33,500 Owned Management, Engineering and
Manufacturing (Filtration/Fluid
Flow)
Plailly, France 33,000 Owned Engineering and Manufacturing
(Filtration/Fluid Flow)
Sao Paulo, Brazil 31,000 Leased 12-14-02 Manufacturing (Filtration/Fluid
Flow)
Eden Prairie, MN 29,700 Leased 5-31-08 Engineering and Manufacturing
(option to (Test)
terminate after
5-31-98)
Eura, Finland 27,800 Owned Management, Engineering and
Manufacturing (Test)
Minocqua, WI 26,200 Leased 3-31-05 Manufacturing (Test)
(w/one 5-year,
and three 3-
year renewal
options)
St. Louis, MO 21,800 Leased 8-31-05 ESCO Headquarters
(w/two 5-year
renewal options)
</TABLE>
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
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information as of December 13, 2000 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.
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
Dennis J. Moore * 62 Chairman, President and Chief Executive Officer
Charles J. Kretschmer 44 Senior Vice President and Chief Financial Officer
Victor L. Richey, Jr. 43 Senior Vice President and Group Executive
Alyson S. Barclay 41 Vice President, Secretary and General Counsel
</TABLE>
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* Also a director and 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 1992, Mr. Moore has been Chairman, President and Chief
Executive Officer of ESCO.
Mr. Kretschmer was Vice President of ESCO from February 9, 1999 until
October 11, 1999, Vice President and Chief Financial Officer from October 11,
1999 until October 1, 2000, and Senior Vice President and Chief Financial
Officer since the latter date.
Mr. Richey was Vice President, Administration of ESCO from May 7, 1998
until October 1, 2000, and Senior Vice President and Group Executive since the
latter date.
Ms. Barclay has been Vice President, Secretary and General Counsel of ESCO
since October 11, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference
to Note 8 of the Notes to Consolidated Financial Statements, "Common Stock
Market Prices" and "Shareholders' Summary--Capital Stock Information" appearing
in the 2000 Annual Report. A special cash distribution of $3.00 per share was
paid to Stockholders in September 1996. No other cash dividends have been
declared on the Common Stock, and 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.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item, with respect to selected financial
data, is incorporated herein by reference to "Five-Year Financial Summary" and
Note 2 of the Notes to Consolidated Financial Statements appearing in the 2000
Annual Report.
9
<PAGE> 14
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 2000 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated herein by reference
to "Management's Discussion and Analysis - Market Risk Analysis" appearing in
the 2000 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 21 through 41
and the report thereon of KPMG LLP, independent certified public accountants,
appearing on page 43 of the 2000 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding nominees and directors appearing under "Nominees and
Continuing Directors" in ESCO's Notice of the Annual Meeting of the Stockholders
and Proxy Statement dated December 11, 2000 (the "2001 Proxy Statement") is
hereby incorporated by reference. Information regarding executive officers is
set forth in Part I of this Form 10-K.
Information appearing under "Section 16(a) Beneficial Ownership Reporting
Compliance" in the 2001 Proxy Statement is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under "Board of Directors and Committees" and
"Executive Compensation" (except for the "Report of the Human Resources And
Ethics Committee On Executive Compensation" and the "Performance Graph") in the
2001 Proxy Statement is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 five percent stockholders appearing under
"Security Ownership of Management" and "Security Ownership of Certain Beneficial
Owners" in the 2001 Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information appearing under "Transactions With Management" in the 2001
Proxy Statement is hereby incorporated by reference.
10
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report:
1. The Consolidated Financial Statements of the Company on pages
21 through 41 and the Independent Auditors' Report thereon of
KPMG LLP appearing on page 43 of the 2000 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
<TABLE>
<CAPTION>
Filed Herewith or Incorporated by
Exhibit Reference to Document Indicated By
Number Description Footnote
------ ----------- --------
<S> <C> <C>
2 Stock Purchase Agreement dated as of August 23, Incorporated by Reference, Exhibit 2 [1]
1999, as amended September 23, 1999 and September
30, 1999, among Engineered Systems and
Electronics, Inc., ESCO and Defense Holding Corp.
3.1 Restated Articles of Incorporation Incorporated by Reference, Exhibit 3(a)[2]
3.2 Amended Certificate of Designation, Preferences Incorporated by Reference, Exhibit 4(e)[3]
and Rights of Series A Participating Cumulative
Preferred Stock of the Registrant
3.3 Articles of Merger effective July 10, 2000 Incorporated by Reference, Exhibit 3(c)[4]
3.4 Bylaws, as amended Incorporated by Reference, Exhibit 3(d)[4]
4.1 Specimen Common Stock Certificate Incorporated by reference, Exhibit 4(a)[4]
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 Incorporated by Reference, Exhibit 4.1[5]
(as amended and restated as of February 3, 2000)
between the Registrant and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent
4.4 Credit Agreement dated as of April 11, 2000, among Incorporated by Reference, Exhibit 4(d)[4]
the Registrant, Bank of America, N.A., as agent,
and the lenders listed therein
10.1 1990 Stock Option Plan* Incorporated by Reference,Exhibit 10.3 [6]
</TABLE>
11
<PAGE> 16
<TABLE>
<S> <C> <C>
10.2 Amendment to 1990 Stock Option Plan dated as of Incorporated by Reference, Exhibit
September 4, 1996* 10(c)(ii) [7]
10.3 Form of Incentive Stock Option Agreement* Incorporated by Reference, Exhibit 10(g) [8]
10.4 Form of Incentive Stock Option Agreement - Incorporated by Reference, Exhibit 10(h) [8]
Alternative*
10.5 Form of Non-Qualified Stock Option Agreement* Incorporated by Reference, Exhibit 10(i) [8]
10.6 Form of Split Dollar Agreement* Incorporated by Reference, Exhibit 10(j) [9]
10.7 Form of Indemnification Agreement with each of Incorporated by Reference, Exhibit 10(k) [9]
ESCO's directors.
10.8 Stock Purchase Agreement dated as of August 20, Incorporated by Reference, Exhibit 10(l) [10]
1992 by and between Textron, Inc. and ESCO
10.9 Supplemental Executive Retirement Plan as amended Incorporated by Reference, Exhibit 10(n) [11]
and restated as of August 2, 1993*
10.10 Directors' Extended Compensation Plan* Incorporated by Reference, Exhibit 10(o) [11]
10.11 First Amendment to Directors' Extended
Compensation Plan*
10.12 1994 Stock Option Plan* Incorporated by Reference [12]
10.13 Amendment to 1994 Stock Option Plan dated as of Incorporated by Reference, Exhibit
September 4, 1996* 10(m)(ii) [7]
10.14 Amendment to section 8 of 1994 Stock Option Plan
effective May 7, 1998*
10.15 Form of Incentive Stock Option Agreement*
10.16 Severance Plan* Incorporated by Reference, Exhibit
10(p)[13]
10.17 Performance Compensation Plan dated as of August Incorporated by Reference, Exhibit 10(q) [7]
2, 1993 (as amended and restated as of October 1,
1995)*
10.18 1997 Performance Share Plan* Incorporated by Reference [14]
10.19 Notice Of Award--stock award to executive officer* Incorporated by Reference, Exhibit
10(s)[15]
10.20 1999 Stock Option Plan* Incorporated by Reference, Exhibit 4d[16]
10.21 Amendment to section 6 of 1999 Stock
</TABLE>
12
<PAGE> 17
<TABLE>
<S> <C> <C>
Option Plan effective May 4, 2000*
10.22 Employment Agreement with Executive Officer* Incorporated by Reference, Exhibit
10(aa)[2]
10.23 Employment Agreement with Executive Officer*[17] Incorporated by Reference, Exhibit
10(bb)[2]
10.24 Executive Stock Purchase Plan*
10.25 Notice of Award - stock award to executive officer*
13 The following-listed sections of the Annual Report
to Stockholders for the year ended September 30,
2000:
Five-Year Financial Summary (p. 44)
Management's Discussion and Analysis
(pgs. 12-20)
Consolidated Financial Statements (pgs.
21-41) and Independent Auditors' Report (p. 43)
Shareholders' Summary--Capital Stock
Information (p. 45)
Common Stock Market Prices (p. 44)
21 Subsidiaries of ESCO
23 Independent Auditors' Consent
27 Financial Data Schedule
</TABLE>
---------------
[1] Incorporated by reference to Current Report on Form 8-K--date of
earliest event reported: September 30, 1999, at the Exhibit indicated.
[2] Incorporated by reference to Form 10-K for the fiscal year ended
September 30, 1999, at the Exhibit indicated.
[3] Incorporated by reference to Form 10-Q for the fiscal quarter ended
March 31, 2000, at the Exhibit indicated.
[4] Incorporated by reference to Form 10-Q for the fiscal quarter ended
June 30, 2000, 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 Registration Statement on Form 10, as
amended on Form 8 filed September 27, 1990, at the Exhibit indicated.
[7] Incorporated by reference to Form 10-K for the fiscal year ended
September 30, 1996, at the Exhibit indicated.
[8] Incorporated by reference to Form 10-K for the fiscal year ended
September 30, 1990, at the Exhibit Indicated.
13
<PAGE> 18
[9] Incorporated by reference to Form l0-K for the fiscal year ended
September 30, l991, at the Exhibit indicated.
[10] Incorporated by reference to Form 10-K for the fiscal year ended
September 30, 1992, at the Exhibit indicated.
[11] Incorporated by reference to Form 10-K for the fiscal year ended
September 30, 1993, at the Exhibit indicated.
[12] Incorporated by reference to Notice of the Annual Meeting of the
Stockholders and Proxy Statement dated December 8, 1994.
[13] Incorporated by reference to Form 10-K for the fiscal year ended
September 30, 1995, at the Exhibit indicated.
[14] Incorporated by reference to Notice of the Annual Meeting of the
Stockholders and Proxy Statement dated December 6, 1996.
{15] Incorporated by reference to Form 10-K for the fiscal year ended
September 30, 1997, at the Exhibit indicated.
[16] Incorporated by reference to Form S-8 Registration Statement filed
December 17, 1999, at the Exhibit indicated.
[17] Identical Employment Agreements between ESCO and executive
officers Alyson S. Barclay and Victor L. Richey, Jr., except that in the
case of Ms. Barclay the minimum annual salary is $94,000.
* Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-K pursuant to Item
14(c) of this Part IV.
(b) No report on Form 8-K was filed during the quarter ended September
30, 2000.
(c) Exhibits: Reference is made to the list of exhibits in this Part
IV, Item 14(a)3 above.
(d) Financial Statement Schedules: Reference is made to Part IV, Item
14(a)2 above.
14
<PAGE> 19
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.
By (s) D. J. Moore
-----------------------------
D.J. Moore
Chairman, President and
Chief Executive Officer
Dated: December 19, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below effective December 19, 2000, by the following
persons on behalf of the registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
(s) D. J. Moore Chairman, President, Chief
---------------------------------------------- Executive Officer and Director
D.J. Moore
(s) C.J. Kretschmer Sr. Vice President and Chief
---------------------------------------------- Financial Officer
C.J. Kretschmer
(s) G.E. Muenster Vice President and Principal
---------------------------------------------- Accounting Officer
G.E. Muenster
(s) W.S. Antle III Director
----------------------------------------------
W.S. Antle III
(s) J.J. Carey Director
----------------------------------------------
J.J. Carey
(s) J.M. McConnell Director
----------------------------------------------
J.M. McConnell
(s) L.W. Solley Director
----------------------------------------------
L.W. Solley
(s)J.M. Stolze Director
----------------------------------------------
J.M. Stolze
(s) D.C. Trauscht Director
----------------------------------------------
D.C. Trauscht
</TABLE>
15
<PAGE> 20
INDEX TO EXHIBITS
Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in
Regulation S-K.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
10.11 First Amendment to Directors' Extended Compensation Plan
10.14 Amendment to section 8 of 1994 Stock Option Plan effective May 7, 1998
10.15 Form of Incentive Stock Option Agreement
10.21 Amendment to section 6 of 1999 Stock Option Plan effective May 4, 2000
10.24 Executive Stock Purchase Plan
10.25 Notice of Award -- stock award to executive officer
13 The following-listed sections of the Annual Report to
Stockholders for the year ended September 30, 2000:
Five-year Financial Summary (p. 44)
Management's Discussion and Analysis (pgs. 12-20)
Consolidated Financial Statements (pgs. 21-41) and Independent
Auditors' Report (p. 43)
Shareholders' Summary--Capital Stock Information (p. 45)
Common Stock Market Prices (p. 44)
21 Subsidiaries of ESCO
23 Independent Auditors' Consent
27 Financial Data Schedule
</TABLE>
See Item 14(a)3 for a list of exhibits incorporated by reference
16
