ESCO Technologies Inc. (NYSE:ESE) Q4 2019 Earnings Conference Call - Final Transcript

Nov 19, 2019 • 05:00 pm ET


ESCO Technologies Inc. (NYSE:ESE) Q4 2019 Earnings Conference Call - Final Transcript


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Good day and welcome to the ESCO Fourth Quarter 2019 Earnings Conference Call. Today's call is being recorded. With us today are Vic Richey, Chairman and CEO; Gary Muenster, Vice President and CFO. And now to present the forward-looking statement, I would like to turn the call over to Kate Lowrey, Director of Investor Relations. Please go ahead.

Kate Lowrey

Thank you. Statements made during this call regarding the amounts and timing of 2020 and beyond, revenues, EPS, adjusted EPS, EBITDA, adjusted EBITDA, debt, growth, profitability, ROIC, timing of the divestiture, tax rates, shareholder value, success in completing additional acquisitions and other statements, which are not strictly historical are forward-looking statements within the meaning of the safe harbor provisions of the federal securities laws.

These statements are based on current expectations and assumptions, and actual results may differ materially from those projected in the forward-looking statements. Due to risks and uncertainties that exist in the Company's operations and business environment, including, but not limited to, the risk factors referenced in the Company's press release issued today, which will be included as an exhibit to the Company's Form 8-K to be filed.

We undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, during this call, the Company may discuss some non-GAAP financial measures in describing the Company's operating results. A reconciliation of these measures to the most comparable GAAP measures can be found in the press release issued today and found on the Company's website at, under the link Investor Relations.

Now I'll turn the call over to Vic.

Vic Richey

Thanks. Kate and good afternoon. Gary will describe our fourth quarter and full-year financial results in detail after my comments. So I'm going to take a few minutes to discuss the sale of our technical packaging business, and share our thinking around the strategic aspect of this divestiture.

Five or six months ago, we were not contemplating selling our packaging assets as we saw a clear path for this business to expand its contribution within ESCO. Given their identified prospects for growth, we made some meaningful capital investments in 2019, both domestically and internationally to support this outlook. But given the robust valuations we were seeing in the market, coupled with our strong presence in the medical -- medical device and pharmaceutical markets, we knew we had an attractive set of packaging assets that would command a solid valuation if offered for sale, and yesterday's announcement of the transaction proved we were right.

After a thoughtful analysis of our options, we came to the conclusion that monetizing our technical packaging assets at a strong valuation was strategically positive and financially prudent. This transaction makes a lot of sense for a lot of reasons. It allows us to delever by paying down our outstanding debt, which creates additional debt capacity and liquidity for future M&A spending in our other segments.

The transaction also streamlines our business and simplifies our portfolio, which