UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~DECEMBER 3031, 2024


☐	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)

MISSOURI	43-1554045
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

9900A CLAYTON ROAD
ST. LOUIS, MISSOURI	63124-1186
(Address of principal executive offices)	(Zip Code)

(314) 213-7200

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ESE	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Shares outstanding at ~~July~~January 31, ~~2024~~2025
Common stock, $.01 par value per share		25,~~752~~806,~~712~~033

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)


	Three Months Ended
	~~June~~December 3031,
	2024		2023
Net sales	$	~~260~~247,~~783~~026	~~248~~218,~~749~~314
Costs and expenses:
Cost of sales		~~157~~148,~~435~~642	~~147~~134,~~274~~151
Selling, general and administrative expenses		5458,~~955~~784	5553,~~376~~968
Amortization of intangible assets		87,~~145~~993	7,~~132~~868
Interest expense, net		32,~~335~~257	2,~~495~~667
Other expenses (income), net		(259)	966
Other (income) expenses, net		(591)	206
Total costs and expenses		~~223~~217,~~611~~085	~~213~~198,~~243~~860

Earnings before income taxes		3729,~~172~~941	3519,~~506~~454
Income tax expense		76,~~942~~468	74,~~563~~285
Net earnings	$	2923,~~230~~473	2715,~~943~~169

Earnings per share:
Basic - Net earnings	$	10.1491	10.0859

Diluted - Net earnings	$	10.1391	10.0859

See accompanying notes to ~~condensed~~ consolidated financial statements.

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands~~, except per share amounts~~)


	~~Nine~~Three Months Ended
	~~June~~December 3031,
	2024		2023

Net earnings	$	23,473	15,169
Net sales	$	728,226		683,386
Other comprehensive income (loss), net of tax:
Costs and expenses:
Foreign currency translation adjustments		(18,028)	9,414
Cost of sales		443,933		415,953
Total other comprehensive income (loss), net of tax		(18,028)	9,414
Selling, general and administrative expenses		164,020		160,555
Comprehensive income	$	5,445	24,583
Amortization of intangible assets		24,585		21,023
Interest expense, net		9,228		6,422
Other expenses, net		613		1,678
Total costs and expenses		642,379		605,631

Earnings before income taxes		85,847		77,755
Income tax expense		18,229		17,207
Net earnings	$	67,618		60,548

Earnings per share:
Basic — Net earnings	$	2.62		2.35

Diluted — Net earnings	$	2.62		2.34

See accompanying notes to ~~condensed~~ consolidated financial statements.

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS~~BALANCE ~~OF COMPREHENSIVE INCOME~~SHEETS

(Unaudited)

(Dollars in thousands)


	~~Three~~December ~~Months Ended~~31,		September 30,		~~Nine Months Ended~~
	~~June 30,~~2024		2024		~~June 30,~~
	2024		2023		2024	2023
ASSETS
Net earnings	$	29,230	27,943		67,618	60,548
Current assets:
Other comprehensive income (loss), net of tax:
Cash and cash equivalents	$	71,284		65,963
Foreign currency translation adjustments		(1,001)	(821)		3,668	12,926
Accounts receivable, net of allowance for credit losses of $2,775 and $2,734, respectively		202,661		240,680
Total other comprehensive income (loss), net of tax		(1,001)	(821)		3,668	12,926
Contract assets, net		131,404		130,534
Comprehensive income	$	28,229	27,122		71,286	73,474
Inventories		219,383		209,164
Other current assets		20,779		22,308
Total current assets		645,511		668,649
Property, plant and equipment, net of accumulated depreciation of $200,478 and $197,265, respectively		168,468		170,596
Intangible assets, net of accumulated amortization of $245,595 and $237,686, respectively		396,302		407,602
Goodwill		532,312		539,899
Operating lease assets		38,710		37,744
Other assets		13,761		14,130
Total assets	$	1,795,064		1,838,620

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and short-term borrowings	$	20,000		20,000
Accounts payable		75,881		98,371
Contract liabilities, net		129,737		124,845
Accrued salaries		39,991		47,651
Accrued other expenses		50,500		58,987
Total current liabilities		316,109		349,854
Deferred tax liabilities		75,520		75,333
Non-current operating lease liabilities		36,400		34,810
Other liabilities		38,102		39,273
Long-term debt		92,000		102,000
Total liabilities		558,131		601,270
Shareholders’ equity:
Preferred stock, par value $.01 per share, authorized 10,000,000 shares		—		—
Common stock, par value $.01 per share, authorized 50,000,000 shares, issued 30,862,538 and 30,809,483 shares, respectively		309		308
Additional paid-in capital		308,143		311,942
Retained earnings		1,104,359		1,082,950
Accumulated other comprehensive loss, net of tax		(28,803)		(10,775)
		1,384,008		1,384,425
Less treasury stock, at cost: 5,056,771 and 5,056,771 common shares, respectively		(147,075)		(147,075)
Total shareholders’ equity		1,236,933		1,237,350
Total liabilities and shareholders’ equity	$	1,795,064		1,838,620

See accompanying notes to ~~condensed~~ consolidated financial statements.

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)


	June 30,		September 30,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	63,042		41,866
Accounts receivable, net of allowance for credit losses of $2,387 and $2,264, respectively		213,592		198,557
Contract assets		134,637		138,633
Inventories		219,312		184,067
Other current assets		22,312		17,972
Total current assets		652,895		581,095
Property, plant and equipment, net of accumulated depreciation of $190,738 and $174,698, respectively		164,749		155,484
Intangible assets, net of accumulated amortization of $229,467 and $204,881, respectively		408,981		392,124
Goodwill		535,372		503,177
Operating lease assets		37,716		39,839
Other assets		11,342		11,495
Total assets	$	1,811,055		1,683,214

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	20,000		20,000
Accounts payable		83,411		86,973
Contract liabilities		113,653		112,277
Accrued salaries		42,662		43,814
Accrued other expenses		51,481		51,587
Total current liabilities		311,207		314,651
Deferred tax liabilities		77,570		75,531
Non-current operating lease liabilities		35,148		36,554
Other liabilities		40,444		43,336
Long-term debt		153,000		82,000
Total liabilities		617,369		552,072
Shareholders’ equity:
Preferred stock, par value $.01 per share, authorized 10,000,000 shares		—		—
Common stock, par value $.01 per share, authorized 50,000,000 shares, issued 30,809,483 and 30,781,699 shares, respectively		308		308
Additional paid-in capital		309,982		304,850
Retained earnings		1,050,748		989,315
Accumulated other comprehensive loss, net of tax		(20,301)		(23,969)
		1,340,737		1,270,504
Less treasury stock, at cost: 5,056,771 and 4,995,414 common shares, respectively		(147,051)		(139,362)
Total shareholders’ equity		1,193,686		1,131,142
Total liabilities and shareholders’ equity	$	1,811,055		1,683,214

See accompanying notes to condensed consolidated financial statements.

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	~~Nine~~Three Months Ended
	~~June~~December 3031,
	2024		2023
Cash flows from operating activities:
Net earnings	$	6723,~~618~~473	6015,~~548~~169
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		4113,~~358~~807	3713,~~699~~452
Stock compensation expense		62,~~369~~524	72,~~007~~180
Changes in assets and liabilities		(537,~~839~~151)	(7222,~~346~~539)
Effect of deferred taxes		(61,~~052)~~521	~~(3,706)~~484
Net cash provided by operating activities		5534,~~454~~174	298,~~202~~746
Cash flows from investing activities:
Acquisition of business, net of cash acquired		~~(56,383)~~—	(1756,~~694~~179)
Additions to capitalized software and other		(8,556)	(9,263)
Additions to capitalized software		(2,587)	(2,942)
Capital expenditures		(245,~~949~~208)	(167,~~993~~848)
Net cash used by investing activities		(897,~~888~~795)	(4366,~~950~~969)
Cash flows from financing activities:
Proceeds from long-term debt and short-term borrowings		~~193~~42,000	8899,000
Principal payments on long-term debt and short-term borrowings		(~~122~~52,000)	(9329,000)
Purchases of common stock into treasury		(7,998)	(12,401)
Dividends paid		(2,064)	(2,064)
Dividends paid		(6,185)	(6,189)
Purchases of common stock into treasury		—	—
Other		(16,~~516~~031)	(21,~~557~~432)
Net cash provided (used) by financing activities		55(18,~~301~~095)	~~(26~~66,~~147)~~504
Effect of exchange rate changes on cash and cash equivalents		~~309~~(2,963)	~~(777)~~1,249
Net increase (decrease) in cash and cash equivalents		21,176	(41,672)
Net increase in cash and cash equivalents		5,321	9,530
Cash and cash equivalents, beginning of period		4165,~~866~~963	9741,~~724~~866
Cash and cash equivalents, end of period	$	6371,~~042~~284	5651,~~052~~396

Supplemental cash flow information:
Interest paid	$	82,~~430~~567	52,~~564~~520
Income taxes paid (including state and foreign)		25,952	18,313
Income taxes paid		222	246

See accompanying notes to ~~condensed~~ consolidated financial statements.

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying ~~unaudited condensed~~ consolidated financial statements, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The ~~unaudited condensed~~ consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures required for annual financial statements by accounting principles generally accepted in the United States of America (GAAP) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC on November 29, 2023.

The Company’s results for the three-month period ended ~~June~~December 3031, 2024 are not necessarily indicative of the results for the entire ~~2024~~2025 fiscal year. References to the ~~third~~first quarters of ~~2024~~2025 and ~~2023~~2024 represent the fiscal quarters ended ~~June~~December 3031, 2024 and 2023, respectively. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. ~~Certain prior period amounts have been reclassified to conform to the current period presentation.~~

2. EARNINGS PER SHARE (EPS)

Basic EPS is calculated using the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the weighted average number of common shares outstanding during the period plus shares issuable upon the assumed exercise of dilutive common share options and vesting of ~~restricted~~performance-based share unit awards and ~~performance~~time-vested ~~shares~~restricted share unit awards by using the treasury stock method. The number of shares used in the calculation of earnings per share for each period presented is as follows (in thousands):


	Three Months		~~Nine Months~~
	Ended ~~June~~December 3031,		~~Ended June 30,~~
	2024	2023	~~2024~~	~~2023~~
Weighted Average Shares Outstanding — Basic	25,~~753~~781	25,~~757~~797	~~25,781~~	~~25,808~~
Dilutive Restricted and Performance Shares	87	70	63	82
Dilutive Restricted Shares	53	49
Adjusted Shares — Diluted	25,~~840~~834	25,~~827~~846	~~25,844~~	~~25,890~~

3. ~~ACQUISITION~~SHARE-BASED COMPENSATION

OnThe ~~November~~Company 9,provides ~~2023,~~compensation ~~the~~benefits ~~Company~~to ~~acquired~~certain ~~MPE~~key ~~Limited~~employees ~~(MPE),~~under several share-based inplans ~~the~~providing ~~United Kingdom,~~ for a ~~purchase~~combination ~~price~~ of ~~approximately $56.2 million, net of cash acquired. MPE is a leading global manufacturer of high-~~performance-based ~~EMC/EMP~~share ~~filters~~unit ~~and~~(PSU) ~~capacitor~~awards ~~products for military, utility, telecommunication,~~ and ~~other critical infrastructure applications. Since the date of acquisition, the operating results for the MPE business have been included as part of ETS~~time-~~Lindgren~~vested inrestricted ~~the~~share ~~Test~~unit ~~segment.~~(RSU) ~~The acquisition date fair value of the assets acquired and liabilities assumed primarily were as follows: approximately $0.4 million of accounts receivable~~awards, ~~$1.1 million of inventory, $1.7 million of property, plant~~ and ~~equipment,~~to ~~$0.7~~non-employee ~~million~~directors ofunder ~~accounts~~a ~~payable~~separate ~~and~~compensation ~~accrued expenses, $7~~plan.8 ~~million~~Prior ofto ~~deferred~~fiscal ~~tax liabilities~~2021, and $31.1 million of identifiable intangible assets, mainly consisting of customer relationships totaling $29.1 million. The acquired goodwill of $30.3 million related to excess value associated with opportunities to expand the ~~services and products that the~~ Company ~~can~~provided ~~offer~~certain tokey ~~its~~employees ~~customers.~~with ~~The~~performance-accelerated ~~Company~~restricted ~~does~~share ~~not~~(PARS) ~~anticipate~~awards, ~~that~~ the ~~goodwill~~last ~~will~~of bewhich ~~deductible~~vested ~~for~~during ~~tax purposes. The Company paid a $0.2 million working capital settlement in~~ the ~~third~~first quarter of fiscal 2024.

~~4. SHARE-BASED~~RSU, ~~COMPENSATION~~PSU and PARS Awards

~~The~~Compensation ~~Company~~expense ~~provides~~related ~~compensation benefits~~ to ~~certain~~these ~~key~~awards ~~employees~~was ~~under~~$2.2 ~~several~~million ~~share-based~~and ~~plans~~$1.9 ~~providing~~million for ~~performance-accelerated~~the ~~and/or time~~three-~~vested~~month ~~restricted~~periods ~~stock~~ended ~~unit~~December ~~awards~~31, 2024 and to2023, respectively. There were 209,274 non-~~employee~~vested ~~directors~~shares ~~under~~outstanding aas ~~separate~~of ~~compensation~~December ~~plan~~31, 2024.

Performance-Accelerated Restricted Stock Unit (PARS) Awards and Time-Vested Restricted Stock Unit (RSU) Awards, and Performance Share Unit (PSU) Awards

Compensation expense related to these awards was $2.0 million and $5.5 million for the three and nine-month periods ended June 30, 2024, respectively, and $1.4 million and $6.0 million for the corresponding periods in 2023. As of June 30, 2024, there were 221,595 unvested stock units outstanding.

Non-Employee Directors Plan

Compensation expense related to the non-employee director grants was $0.3 million and $0.93 million for the three ~~and nine~~-month periods ended ~~June~~December 3031, 2024, ~~respectively,~~ and ~~$0.3~~2023, ~~million and $1~~respectively.~~0 million for the corresponding periods in 2023.~~

The total share-based compensation cost that has been recognized in the results of operations and included within selling, general and administrative expenses (SG&A) was $2.25 million and $62.42 million for the three ~~and nine~~-month periods ended ~~June~~December 3031, 2024, ~~respectively,~~ and ~~$1.7~~2023, ~~million and $7~~respectively.0 ~~million for the corresponding periods in 2023.~~ The total income tax benefit recognized in results of operations for share-based compensation arrangements was $0.58 million and $10.42 million for the three ~~and nine~~-month periods ended ~~June~~December 3031, 2024, ~~respectively,~~ and ~~$0.2~~2023, ~~million and $0~~respectively.9 ~~million for the corresponding periods in 2023.~~ As of ~~June~~December 3031, 2024, there was $1117.07 million of total unrecognized compensation cost related to share-based compensation arrangements. That cost is expected to be recognized over a remaining weighted-average period of 12.50 years.

~~5. INVENTORIES~~6

4. INVENTORIES

Inventories consist of the following:


	~~June~~December 3031,		September 30,
(In thousands)	2024		~~2023~~2024
Finished goods	$	4153,~~955~~839	3446,~~577~~586
Work in process		5947,~~837~~836	4247,~~178~~903
Raw materials		117,~~520~~708	~~107~~114,~~312~~675
Total inventories	$	219,~~312~~383	~~184~~209,~~067~~164

65. GOODWILL AND OTHER INTANGIBLE ASSETS

Included on the Company’s Consolidated Balance Sheets at ~~June~~December 3031, 2024 and September 30, ~~2023~~2024 are the following intangible assets gross carrying amounts and accumulated amortization from continuing operations:


	December 31,		September 30,
(Dollars in thousands)	2024		2024
Goodwill	$	532,312	539,899

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,635	2,638
Less: accumulated amortization		1,467	1,415
Net	$	1,168	1,223

Capitalized software
Gross carrying amount	$	136,634	134,119
Less: accumulated amortization		95,844	92,878
Net	$	40,790	41,241

Customer relationships
Gross carrying amount	$	326,027	330,328
Less: accumulated amortization		136,922	132,135
Net	$	189,105	198,193

Other
Gross carrying amount	$	14,917	15,182
Less: accumulated amortization		11,361	11,173
Net	$	3,556	4,009
Intangible assets with indefinite lives:
Trade names	$	161,683	162,936


	June 30,		September 30,
(Dollars in thousands)	2024		2023
Goodwill	$	535,372	503,177

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,551	2,516
Less: accumulated amortization		1,322	1,218
Net	$	1,229	1,298

Capitalized software
Gross carrying amount	$	130,648	121,883
Less: accumulated amortization		89,737	80,774
Net	$	40,911	41,109

Customer relationships
Gross carrying amount	$	327,537	296,927
Less: accumulated amortization		127,322	113,311
Net	$	200,215	183,616

Other
Gross carrying amount	$	15,122	14,232
Less: accumulated amortization		11,085	9,578
Net	$	4,037	4,654
Intangible assets with indefinite lives:
Trade names	$	162,589	161,447

The changes in the carrying amount of goodwill attributable to each business segment for the ~~nine~~three months ended ~~June~~December 3031, 2024 isare as follows:


					~~Aerospace~~
(Dollars in millions)	USG		Test		A& ~~Defense~~D	Total
Balance as of September 30, 2023	$	353.6		34.0	115.6	503.2
Balance as of September 30, 2024	$	356.9		67.4	115.6	539.9
Acquisition activity		—		30.5	—	30.5
Foreign currency translation		(5.5)		(2.1)	—	(7.6)
Foreign currency translation		0.9		0.8	—	1.7
Balance as of December 31, 2024	$	351.4		65.3	115.6	532.3
Balance as of June 30, 2024	$	354.5		65.3	115.6	535.4

76. BUSINESS SEGMENT INFORMATION

The Company is organized based on the products and services that it offers and classifies its ~~continuing~~ business operations in three reportable segments for financial reporting purposes: Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test ~~and~~& Measurement (Test). The A&D segment’s operations consist of PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair), Globe Composite Solutions, LLC (Globe) and Mayday Manufacturing Co. (Mayday). The companies

The Aerospace & Defense segment’s operations consist of PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair), Globe Composite Solutions, LLC (Globe) and Mayday Manufacturing Co. (Mayday). The companies within this segment primarily design and manufacture specialty filtration, fluid control and naval products, including hydraulic filter elements and fluid control devices used in aerospace and defense applications; unique filter mechanisms used in micro-propulsion devices for satellites, custom designed filters for manned aircraft and submarines; products and systems to reduce vibration and/or acoustic signatures and otherwise reduce or obscure a vessel’s signature, and other communications, sealing, surface control and hydrodynamic related applications to enhance U.S. Navy maritime survivability; precision-tolerance machined components for the aerospace and defense industry; metal processing services; and miniature electro-explosive devices utilized in mission-critical defense and aerospace applications.7

~~The~~within ~~USG~~this segment’s ~~operations~~primarily ~~consist~~design ~~primarily~~and ofmanufacture ~~Doble~~specialty ~~Engineering~~filtration, ~~Company~~fluid control and ~~related~~naval ~~subsidiaries~~products, including ~~Morgan~~hydraulic ~~Schaffer~~filter elements and ~~Altanova~~fluid ~~(collectively,~~control ~~Doble),~~devices ~~and~~used ~~NRG~~in ~~Systems,~~aerospace ~~Inc.~~and ~~(NRG).~~defense ~~Doble~~applications; isunique anfilter ~~industry~~mechanisms ~~leader~~used in ~~the~~micro-propulsion ~~development,~~devices ~~manufacture~~for ~~and~~satellites, ~~delivery~~custom ofdesigned ~~diagnostic~~filters ~~testing~~for ~~solutions~~manned ~~that~~aircraft ~~enable~~and ~~electric~~submarines, ~~power~~products ~~grid~~and ~~operators~~systems to ~~assess~~reduce ~~the~~vibration ~~integrity~~and/or ofacoustic ~~high~~signatures ~~voltage~~and ~~power~~otherwise ~~delivery~~reduce ~~equipment.~~or Itobscure ~~combines~~a ~~three~~vessel’s ~~core~~signature, ~~elements~~and ~~for~~other ~~customers~~communications, –sealing, ~~diagnostic~~surface ~~test~~control and ~~condition~~hydrodynamic ~~monitoring~~related ~~instruments,~~applications ~~expert~~to ~~consulting,~~enhance U.S. Navy maritime survivability; precision-tolerance machined components for the aerospace and ~~testing~~defense ~~services~~industry; –metal processing services; and ~~provides~~miniature ~~access~~electro-explosive todevices ~~its~~utilized ~~large~~in ~~reserve~~mission-critical ofdefense ~~related~~and ~~empirical~~aerospace ~~knowledge~~applications.

9The USG segment’s operations consist primarily of Doble Engineering Company and related subsidiaries including Morgan Schaffer and Altanova (collectively, Doble), and NRG Systems, Inc. (NRG). Doble is an industry leader in the development, manufacture and delivery of diagnostic testing and data management solutions that enable electric power grid operators to assess the integrity of high voltage power delivery equipment. It combines three core elements for customers – diagnostic test and condition monitoring instruments, expert consulting, and testing services – and provides access to its large reserve of related empirical knowledge. NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar.

NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar.

The Test segment’s operations consist primarily of ETS-Lindgren Inc. and related subsidiaries (ETS-Lindgren). ETS-Lindgren is an industry leader in designing and manufacturing products and systems to measure and control RF and acoustic energy. It serves the acoustics, medical, health and safety, electronics, wireless communications, automotive and defense markets, supplying a broad range of turnkey systems, including RF test facilities and measurement systems, acoustic test enclosures, RF and magnetically shielded rooms and secure communication facilities, and providing the design, program management, installation and integration services required to successfully complete these types of facilities. It also provides a broad range of components including RF absorptive materials, filters, antennas, field probes, test cells, proprietary measurement software and other test accessories required to perform a variety of tests and measurements, and offers a variety of services including calibration and product tests.

Management evaluates and measures the performance of its reportable segments based on “Net Sales” and “EBIT”, which are detailed in the table below. EBIT is defined as earnings before interest and taxes.


	Three Months			~~Nine Months~~
	Ended ~~June~~December 3031,			~~Ended June 30,~~
(In thousands)	2024		2023	~~2024~~	~~2023~~
NET SALES
Aerospace & Defense	$	114,450	103,469	323,884	285,434
A&D	$	114,301	94,733
USG		9086,~~277~~660	8982,~~966~~984	~~260,570~~	~~240,172~~
Test		5646,~~056~~065	5540,~~314~~597	~~143,772~~	~~157,780~~
Consolidated totals	$	~~260~~247,~~783~~026	~~248~~218,~~749~~314	~~728,226~~	~~683,386~~

EBIT
Aerospace & Defense	$	21,356	21,665	61,396	52,996
A&D	$	21,596	16,663
USG		2220,~~155~~489	2017,~~351~~625	~~57,355~~	~~50,543~~
Test		94,~~292~~422	81,~~643~~779	~~16,614~~	~~21,280~~
Corporate (loss)		(1214,~~296~~309)	(1213,~~658~~946)	~~(40,290)~~	~~(40,642)~~
Consolidated EBIT		4032,~~507~~198	3822,~~001~~121	~~95,075~~	~~84,177~~
Less: Interest expense		(32,~~335~~257)	(2,~~495~~667)	~~(9,228)~~	~~(6,422)~~
Earnings before income taxes	$	3729,~~172~~941	3519,~~506~~454	~~85,847~~	~~77,755~~

Non-GAAP Financial Measures

The financial measure “EBIT” is presented in the above table and elsewhere in this Report. EBIT on a consolidated basis is a non-GAAP financial measure. Management believes that EBIT is useful in assessing the operational profitability of the Company’s business segments because it excludes interest and taxes, which are generally accounted for across the entire Company on a consolidated basis. EBIT is also one of the measures used by management in determining resource allocations within the Company as well as incentive compensation. A reconciliation of EBIT to net earnings is set forth in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – EBIT.

The Company believes that the presentation of EBIT provides important supplemental information to investors to facilitate comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. However, the Company’s non-GAAP financial measures may not be comparable to other companies’ non-GAAP financial ~~performance measures. Furthermore, the use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.~~

performance measures. Furthermore, the use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.

87. DEBT

The Company’s debt is summarized as follows:


	~~June~~December 3031,		September 30,
(In thousands)	2024		~~2023~~2024
Total borrowings	$	~~173~~112,000	~~102~~122,000
Current portion of long-term debt		(20,000)	(20,000)
Total long-term debt, less current portion	$	~~153~~92,000	82102,000

The Credit Facility includes a $500 million revolving line of credit as well as provisions allowing for the increase of the credit facility commitment amount by an additional $250 million, if necessary, with the consent of the lenders. The bank syndication supporting the facility is comprised of a diverse group of seven banks led by JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and Commerce Bank and TD Bank, N.A. as co-documentation agents. The Credit Facility matures August 30, 2028, with balance due by this date.

AtOn ~~June~~August 305, 2024, the Company ~~had~~and ~~approximately~~certain ~~$321~~of ~~million~~its ~~available~~subsidiaries toentered ~~borrow~~into ~~under~~Amendment No. 1 (the “Amendment”) to the Credit Facility which, ~~plus~~among ~~the~~other ~~$250~~things, ~~million~~(i) ~~increase~~implements ~~option~~a ~~subject~~senior toincremental ~~the~~delayed ~~lenders’~~draw ~~consent,~~term loan credit facility in ~~addition~~an aggregate principal amount of up to $~~63.0~~375 million ~~cash~~(the on“Incremental ~~hand.~~Facility”), ~~The~~and ~~Company~~(ii) ~~classified~~permits ~~$20~~the ~~million~~direct asor indirect acquisition by the ~~current~~Registrant ~~portion~~or certain of ~~long-term~~its ~~debt~~subsidiaries asof all the issued and outstanding shares of ~~June~~Ultra 30PMES Limited, ~~2024~~Measurement Systems, asInc., EMS Development Corporation, and DNE Technologies, Inc. (the ~~Company~~“SM&P ~~intends~~Acquisition”), pursuant to ~~repay~~and ~~this~~in ~~amount~~accordance ~~within~~with the ~~next~~terms ~~twelve~~and ~~months;~~conditions ~~however~~of that certain Sale and Purchase Agreement, ~~the~~dated ~~Company~~July ~~has~~8, no2024, ~~contractual~~among ~~obligation~~Ultra toElectronics ~~repay~~Holdings ~~such~~Limited, ~~amount~~as ~~during~~parent seller, the ~~next~~Registrant, ~~twelve~~as ~~months~~guarantor, and certain of the Registrant’s subsidiaries as buyers. The ~~letters~~proceeds of ~~credit~~the ~~issued~~loans ~~and~~drawn ~~outstanding~~ under the ~~Credit~~Incremental Facility ~~totaled~~will ~~$5.5~~be ~~million~~applied atto ~~June~~pay 30a portion of the cash consideration for the SM&P Acquisition and other customary fees, ~~2024~~premiums, expenses and costs incurred in connection with the SM&P Acquisition.

~~Interest~~At onDecember ~~borrowings~~31, ~~under~~2024, the ~~Credit~~Company ~~Facility~~had isapproximately ~~calculated~~$383 atmillion aavailable ~~spread~~to ~~over~~borrow ~~either~~under anthe ~~Adjusted~~Credit ~~Term SOFR Rate~~Facility, ~~Adjusted~~excluding ~~EURIBOR~~the ~~Rate,~~Incremental ~~Adjusted CDOR Rate~~Facility, ~~Alternate~~plus ~~Base~~the ~~Rate~~$250 ormillion ~~Daily~~increase ~~Simple~~option ~~RFR,~~subject atto the ~~Company~~lenders’s ~~election.~~consent, ~~The~~in ~~Credit~~addition ~~Facility~~to ~~also~~$71.3 ~~requires~~million acash ~~facility~~on ~~fee ranging from 12~~hand.5 toThe 25Company ~~basis~~classified ~~points~~$20 ~~per~~million ~~annum~~as on the ~~unused~~current portion. ~~The~~of ~~interest~~long-term ~~rate~~debt ~~spreads~~as ~~and~~of ~~the~~December ~~facility~~31, ~~fee~~2024, ~~are~~as ~~subject~~the toCompany ~~increase~~intends orto ~~decrease~~repay ~~depending~~this onamount within the ~~Company’s~~next ~~leverage~~twelve ~~ratio.~~months; ~~The~~however, ~~weighted~~the ~~average~~Company ~~interest~~has ~~rates~~no ~~were~~contractual ~~6.7%~~obligation ~~and~~to ~~6.8%~~repay ~~for~~such ~~the~~amount ~~three~~during ~~and~~the ~~nine-month~~next ~~periods~~twelve ~~ending~~months. ~~June~~The ~~30,~~letters ~~2024,~~of ~~respectively,~~credit ~~and~~issued ~~6.05%~~ and ~~5.57%~~outstanding ~~for~~under the ~~three~~Credit ~~and~~Facility ~~nine-month~~totaled ~~periods ending June 30, 2023~~$4.8 Asmillion ofat ~~June~~December 3031, 2024~~, the Company was in compliance with all covenants~~.

Interest on borrowings under the Credit Facility is calculated at a spread over either an Adjusted Term SOFR Rate, Adjusted EURIBOR Rate, Adjusted CDOR Rate, Alternate Base Rate or Daily Simple RFR, at the Company’s election. The Credit Facility also requires a facility fee ranging from 12.5 to 25 basis points per annum on the unused portion. The interest rate spreads and the facility fee are subject to increase or decrease depending on the Company’s leverage ratio. The weighted average interest rates were 6.1% and 6.8% for the three-month periods ending December 31, 2024 and 2023, respectively. As of December 31, 2024, the Company was in compliance with all covenants.

98. INCOME TAX EXPENSE

The ~~third~~first quarter ~~2024~~2025 effective income tax rate was 21.46% compared to 2122.30% in the ~~third~~first quarter of ~~2023. The effective income tax rate in the first nine months of~~ 2024 ~~was 21~~.2% ~~compared to 22.1% for the first nine months of 2023.~~ Income tax expense in the first ~~nine~~quarter ~~months~~ of ~~2024~~2025 was favorably impacted by ~~discrete~~additional ~~events that occurred during the second quarter of 2024 including the release of a foreign valuation allowance and excess~~ tax ~~benefit~~benefits related to the vesting of share-based ~~director~~ compensation awards.

119

109. SHAREHOLDERS’ EQUITY

The change in shareholders’ equity for the first three ~~and~~months ~~nine~~ended ~~months~~December of31, 2024 and 2023 is shown below (in thousands):


	Three Months Ended ~~June~~December 3031,				~~Nine Months Ended June 30,~~
	2024		~~2023~~	2023	~~2024~~	~~2023~~
Common stock
Beginning balance	~~308~~$	308	~~308~~	308	~~308~~	~~307~~
Stock plans	—	1	—	—	—	1
Ending balance	~~308~~	309	~~308~~	308	~~308~~	~~308~~

Additional paid-in-capital
Beginning balance	~~308,065~~	311,942	~~304,184~~	304,850	~~304,850~~	~~301,553~~
Stock plans	~~1,917~~	(3,799)	~~1,371~~	433	~~5,132~~	~~4,002~~
Ending balance	~~309,982~~	308,143	~~305,555~~	305,283	~~309,982~~	~~305,555~~

Retained earnings
Beginning balance	~~1,023,578~~	1,082,950	~~933,499~~	989,315	~~989,315~~	~~905,022~~
Net earnings common stockholders	~~29,230~~	23,473	~~27,943~~	15,169	~~67,618~~	~~60,548~~
Dividends paid	~~(2,060)~~	(2,064)	~~(2,061)~~	(2,064)	~~(6,185)~~	~~(6,189)~~
Ending balance	~~1,050,748~~	1,104,359	~~959,381~~	1,002,420	~~1,050,748~~	~~959,381~~

Accumulated other comprehensive income (loss)
Beginning balance	~~(19,300)~~	(10,775)	~~(18,018)~~	(23,969)	~~(23,969)~~	~~(31,764)~~
Foreign currency translation	~~(1,001)~~	(18,028)	~~(821)~~	9,414	~~3,668~~	~~12,925~~
Ending balance	~~(20,301)~~	(28,803)	~~(18,839)~~	(14,555)	~~(20,301)~~	~~(18,839)~~

Treasury stock
Beginning balance	~~(146,241)~~	(147,075)	~~(139,178)~~	(139,362)	~~(139,362)~~	~~(126,961)~~
Share repurchases, net	(810)		(184)		(7,689)	(12,401)
Share repurchases		—		—
Ending balance	~~(147,051)~~	(147,075)	~~(139,362)~~	(139,362)	~~(147,051)~~	~~(139,362)~~

Total equity	~~1,193,686~~$	1,236,933	~~1,107,043~~	1,154,094	~~1,193,686~~	~~1,107,043~~

1110. FAIR VALUE MEASUREMENTS

The accounting guidance establishes a three-level hierarchy for disclosure of fair value measurements, based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:

●

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial Assets and Liabilities

The Company has estimated the fair value of its financial instruments as of ~~June~~December 3031, 2024 and September 30, ~~2023~~2024 using available market information or other appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, receivables, inventories, payables, and other current assets and liabilities approximate fair value because of the short maturity of those instruments.

1210

Fair Value of Financial Instruments

The Company’s forward contracts and interest rate swaps are classified within Level 2 of the valuation hierarchy in accordance with FASB Accounting Standards Codification (ASC) 825, and are immaterial.

Nonfinancial Assets and Liabilities

The Company’s nonfinancial assets such as property, plant and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. No impairments were recorded during the three ~~and nine~~-month ~~periods~~period ended ~~June~~December 3031, 2024.

1211. REVENUES

Disaggregation of Revenues

Revenues by customer type, geographic location, and revenue recognition method for the three ~~and nine~~-month ~~periods~~period ended ~~June~~December 3031, 2024 are presented in the ~~tables~~table below as the Company deems it best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors. The ~~tables~~table below also ~~include~~includes a reconciliation of the disaggregated revenue within each reportable segment.

Three months ended June 30, 2024

Aerospace

(In thousands)

A& ~~Defense~~D

USG

Test

Total

Customer type:

Commercial

4547,~~404~~500

8884,~~076~~279

4236,~~327~~349

~~175~~168,~~807~~128

Government

6966,~~046~~801

2,~~201~~381

139,~~729~~716

8478,~~976~~898

Total revenues

114,~~450~~301

9086,~~277~~660

5646,~~056~~065

~~260~~247,~~783~~026

Geographic location:

United States

9596,~~265~~703

5459,~~063~~917

3228,~~575~~630

~~181~~185,~~903~~250

International

1917,~~185~~598

3626,~~214~~743

2317,~~481~~435

7861,~~880~~776

Total revenues

114,~~450~~301

9086,~~277~~660

5646,~~056~~065

~~260~~247,~~783~~026

Revenue recognition method:

Point in time

5350,~~148~~126

7269,~~985~~278

119,~~426~~791

~~137~~129,~~559~~195

Over time

6164,~~302~~175

17,~~292~~382

4436,~~630~~274

~~123~~117,~~224~~831

Total revenues

114,~~450~~301

9086,~~277~~660

5646,~~056~~065

~~260~~247,~~783~~026

Revenues by customer type, geographic location, and revenue recognition method for the three-month period ended December 31, 2023 are presented in the table below:



(In thousands)	A&D		USG		Test		Total
Customer type:
Commercial	$	37,209	$	81,469	$	35,087	$	153,765
Government		57,524		1,515		5,510		64,549
Total revenues	$	94,733	$	82,984	$	40,597	$	218,314

Geographic location:
United States	$	79,901	$	55,961	$	22,252	$	158,114
International		14,832		27,023		18,345		60,200
Total revenues	$	94,733	$	82,984	$	40,597	$	218,314

Revenue recognition method:
Point in time	$	39,465	$	66,703	$	7,980	$	114,148
Over time		55,268		16,281		32,617		104,166
Total revenues	$	94,733	$	82,984	$	40,597	$	218,314

1311


Nine months ended June 30, 2024	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	131,993	$	254,765	$	111,951	$	498,709
Government		191,891		5,805		31,821		229,517
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226

Geographic location:
United States	$	267,325	$	165,789	$	82,370	$	515,484
International		56,559		94,781		61,402		212,742
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226

Revenue recognition method:
Point in time	$	146,076	$	209,973	$	29,706	$	385,755
Over time		177,808		50,597		114,066		342,471
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226

Revenues by customer type, geographic location, and revenue recognition method for the three and nine-month periods ended June 30, 2023 are presented in the tables below.


Three months ended June 30, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	45,574	$	88,442	$	48,407	$	182,423
Government		57,895		1,524		6,907		66,326
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749

Geographic location:
United States	$	86,031	$	55,011	$	32,246	$	173,288
International		17,438		34,955		23,068		75,461
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749

Revenue recognition method:
Point in time	$	48,496	$	74,128	$	11,496	$	134,120
Over time		54,973		15,838		43,818		114,629
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749


Nine months ended June 30, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	128,016	$	236,715	$	137,587	$	502,318
Government		157,418		3,457		20,193		181,068
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386

Geographic location:
United States	$	237,481	$	154,410	$	87,253	$	479,144
International		47,953		85,762		70,527		204,242
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386

Revenue recognition method:
Point in time	$	129,355	$	194,240	$	32,565	$	356,160
Over time		156,079		45,932		125,215		327,226
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386

Revenue Recognition

Payment terms with our customers vary by the type and location of the customer and the products or services offered. Arrangements with customers that include payment terms extending beyond one year are not significant. The transaction price for these contracts reflects our estimate of returns and discounts, which are based on historical, current and forecasted information to determine the expected amount to which we will be entitled in exchange for transferring the promised goods or services to the customer. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from one to two years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Under the typical payment terms of our long term fixed price contracts, the customer pays us either performance-based or progress payments. Performance-based payments represent interim payments based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments of costs incurred as the work progresses.

For our overtime revenue recognized using the output method of costs incurred, contract cost is estimated utilizing current contract specifications and expected engineering requirements. Contract costs typically are incurred over a period of several months to one or more years, and the estimation of these costs requires judgment. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our projections of costs quarterly or more frequently when circumstances significantly change. In addition, in the USG segment, we recognize revenue as a series of distinct services based on each day of providing services (straight-line over the contract term) for certain of our USG segment contracts. Under the typical payment terms of our service contracts, the customer pays us in advance of when services are performed. In addition, in the Test segment, we use milestones to measure progress for our Test segment contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts.

Remaining Performance Obligations

Remaining performance obligations, which is the equivalent of backlog, represent the expected transaction price allocated to ~~contracts~~performance obligations that the Company expects to recognize as revenue in future periods when the Company performs under the contracts. These remaining obligations include amounts that have been formally appropriated under contracts with the U.S. Government, and exclude unexercised contract options and potential orders under ordering-type contracts such as Indefinite Delivery, Indefinite Quantity contracts. At ~~June~~December 3031, 2024, the Company had $~~888~~906.79 million in remaining performance obligations of which the Company expects to recognize revenues of approximately 6872% in the next twelve months.

Contract assets, contract liabilities and accounts receivable

Assets and liabilities related to contracts with customers are reported on a contract-by-contract basis at the end of each reporting period. At ~~June~~December 3031, 2024, contract assets, contract liabilities and accounts receivable totaled $~~134~~131.64 million, $~~123~~138.54 million and $~~213~~202.67 million, respectively. During the first ~~nine~~quarter ~~months~~ of ~~2024~~2025, the Company recognized approximately $5435.1 million in revenues that were included in the contract liabilities balance at September 30, ~~2023~~2024. At September 30, ~~2023~~2024, contract assets, contract liabilities and accounts receivable totaled $~~138~~130.65 million, $~~123~~134.13 million and $~~198~~240.67 million, respectively.

~~13. LEASES~~12

12. LEASES

The Company determines at lease inception whether an arrangement that provides control over the use of an asset is a lease. The Company recognizes at lease commencement a right-of-use (ROU) asset and lease liability based on the present value of the future lease payments over the lease term. The Company has elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. Certain of the Company’s leases include options to extend the term of the lease for up to 20 years. When it is reasonably certain that the Company will exercise the option, Management includes the impact of the option in the lease term for purposes of determining total future lease payments. As most of the Company’s lease agreements do not explicitly state the discount rate implicit in the lease, Management uses the Company’s incremental borrowing rate on the commencement date to calculate the present value of future payments based on the tenor of each arrangement.

The Company’s leases for real estate commonly include escalating payments. These variable lease payments are included in the calculation of the ROU asset and lease liability. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any deferred rent, lease pre-payments and initial direct costs of obtaining the lease.

15In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. Non-lease components are excluded from ROU assets and lease liabilities and expensed as incurred.

In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. Non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred.

The Company’s leases are for office space, manufacturing facilities, and machinery and equipment.

The components of lease costs are shown below:


	Three Months Ended		Three Months Ended
	~~June~~December 3031,		~~June~~December 3031,
(Dollars in thousands)	2024		2023
Finance lease cost
Amortization of right-of-use assets	$	372	$	393
Interest on lease liabilities		~~213~~206		~~230~~223
Operating lease cost		1,~~937~~983		1,~~858~~864
Total lease costs	$	2,~~522~~561	$	2,~~481~~480


	Nine Months Ended		Nine Months Ended
	June 30,		June 30,
(Dollars in thousands)	2024		2023
Finance lease cost
Amortization of right-of-use assets	$	1,137	$	1,179
Interest on lease liabilities		652		698
Operating lease cost		5,675		5,356
Total lease costs	$	7,464	$	7,233

Additional information related to leases are shown below:


	Three Months Ended		Three Months Ended
	~~June~~December 3031,		~~June~~December 3031,
(Dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,~~867~~914	$	1,~~792~~819
Operating cash flows from finance leases		~~213~~206		~~230~~223
Financing cash flows from finance leases		~~331~~351		~~334~~355
Right-of-use assets obtained in exchange for operating lease liabilities		515		402
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	1,776		—


	Nine Months Ended		Nine Months Ended
	June 30,		June 30,
(Dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,510	$	5,172
Operating cash flows from finance leases		652		698
Financing cash flows from finance leases		1,013		991
Right-of-use assets obtained in exchange for operating lease liabilities		2,194		14,984


	June 30, 2024		June 30, 2023
Weighted-average remaining lease term
Operating leases	10.8	years	11.4	years
Finance leases	11.1	years	11.3	years
Weighted-average discount rate
Operating leases	4.56	%	4.42	%
Finance leases	4.69	%	4.62	%


	Three Months Ended		Three Months Ended
	December 31,		December 31,
	2024		2023
Weighted-average remaining lease term
Operating leases	8.5	years	11.1	years
Finance leases	10.2	years	11.1	years
Weighted-average discount rate
Operating leases	4.4	%	4.5	%
Finance leases	4.7	%	4.7	%

16The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on the Consolidated Balance Sheet on December 31, 2024:

The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on our condensed Consolidated Balance Sheet on June 30, 2024:


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2024 (excluding the nine months ended June 30, 2024)	$	1,569	547
2025 (excluding the three months ended December 31, 2024)	$	4,807	1,676
2025		6,108	2,233
2026		5,241	2,297
2026		4,865	2,297
2027		4,965	2,357
2027		4,620	2,357
2028		4,883	2,417
2028 and thereafter		33,915	16,470
2029 and thereafter		32,623	14,052
Total minimum lease payments		5152,~~077~~519	2322,~~904~~799
Less: amounts representing interest		11,~~334~~637	5,~~582~~167
Present value of net minimum lease payments	$	3940,~~743~~882	1817,~~322~~632
Less: current portion of lease obligations		4,~~595~~482	1,~~403~~461
Non-current portion of lease obligations	$	3536,~~148~~400	16,~~919~~171

ROU assets	$	3738,~~716~~710	1413,~~055~~311

Operating lease liabilities are included inon the ~~condensed~~ Consolidated Balance Sheet in accrued other expenses (current portion) and as a caption on the ~~condensed~~ Consolidated Balance Sheet (long-term portion). Finance lease liabilities are included on the ~~condensed~~ Consolidated Balance Sheet in accrued other expenses (current portion) and other liabilities (long-term portion). Operating lease ROU assets are included as a caption on the ~~condensed~~ Consolidated Balance Sheet and finance lease ROU assets are included in Property, plant and equipment on the ~~condensed~~ Consolidated Balance sheet.

1413. ~~NEW~~RECENT ACCOUNTING PRONOUNCEMENTS

In November ~~2023~~2024, the FASB issued ASU ~~2023~~2024-0703, “~~Segment~~Disaggregation ~~Reporting~~of ~~(Topic~~Income ~~280):~~Statement ~~Improvements to Reportable Segment Disclosures~~Expenses,” which ~~expands~~requires ~~annual~~disaggregated ~~and~~disclosure ~~interim~~of ~~disclosure~~income ~~requirements~~statement expenses for ~~reportable~~public ~~segments,~~business ~~primarily~~entities. ~~through~~The ~~enhanced~~ASU ~~disclosures~~does ~~about~~not ~~significant~~change ~~expenses.~~the ~~The~~expense ~~new~~captions ~~segment~~an ~~disclosures~~entity ~~are~~presents ~~effective~~on ~~for~~the ~~fiscal~~face ~~years~~of ~~beginning~~the ~~after~~income ~~December~~statement; 15rather, ~~2023,~~it ~~and~~requires ~~interim~~disaggregation ~~periods~~of ~~within~~certain ~~fiscal~~expense ~~years~~captions ~~beginning~~into ~~after~~specified ~~December~~categories ~~15,~~in ~~2024.~~disclosures ~~Management~~within ~~will~~the ~~review~~footnotes to the ~~extent~~financial ofstatements. ~~new~~This ~~disclosures~~ASU ~~necessary~~will inbe ~~the~~effective ~~coming~~for ~~quarters~~fiscal years beginning after December 15, ~~prior~~2026 toand ~~implementation~~interim inperiods ~~our~~within fiscal ~~year~~years ~~2025~~beginning after December 15, 2027. Other than additional disclosure, we do not expect a change to our consolidated statements of operations, financial position, or cash flows.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures. This ASU will be effective for fiscal years beginning after December 15, 2024. ~~Management will review the extent of new disclosures necessary in the coming quarters, prior to implementation in our fiscal year 2026.~~ Other than additional disclosure, we do not expect a change to our consolidated statements of operations, financial position, or cash flows.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant expenses. The new segment disclosures are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Other than additional disclosure, we do not expect a change to our consolidated statements of operations, financial position, or cash flows.

15. SUBSEQUENT EVENT

On July 8, 2024, the Company announced that it has agreed to acquire the Signature Management & Power (or the “Business”) business of Ultra Maritime for a purchase price of approximately $550 million. The transaction will be funded through cash on hand and incremental debt, with committed financing in place. Signature Management & Power is a provider of mission-critical signature and power management solutions for submarines and surface ships for the U.S. and UK naval defense markets. The Business is headquartered in Long Island, New York, operates out of four facilities based in the U.S. and the UK, and has approximately 410 employees. Signature Management & Power will become part of ESCO’s Aerospace & Defense segment and is expected to have approximately $175 million of revenue in calendar year 2024. The closing of the transaction is subject to certain conditions, including the (i) expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S. and (ii) receipt of clearance under the UK National Security and Investment Act of 2021.

Registrant or certain of its subsidiaries of all of the issued and outstanding shares of Ultra PMES Limited, Measurement Systems, Inc., EMS Development Corporation, and DNE Technologies, Inc. (the “Transaction”), pursuant to and in accordance with the terms and conditions of that certain Sale and Purchase Agreement, dated July 8, 2024, among Ultra Electronics Holdings Limited, as parent seller, the Registrant, as guarantor, and certain of the Registrant’s subsidiaries as buyers. The proceeds of the loans drawn under the Incremental Facility will be applied to pay a portion of the cash consideration for the Transaction and other customary fees, premiums, expenses and costs incurred in connection with the Transaction. See further discussion of the transaction and financing arrangements in the Company’s Form 8-K’s filed on July 8, 2024 and August 7, 2024.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

References to the ~~third~~first quarters of ~~2024~~2025 and ~~2023~~2024 represent the three-month periods ended ~~June~~December 3031, 2024 and 2023, respectively.

OVERVIEW

~~In the third quarter of 2024~~Sales, ~~sales,~~ net earnings and diluted earnings per share were $~~260~~247.80 million, $2923.25 million and $10.1391 per share, respectively, ~~compared to $248.7 million, $27.9 million and $1.08 per share, respectively,~~ in the ~~third~~first quarter of ~~2023.~~2025 ~~In the first nine months of 2024, sales, net earnings and diluted earnings per share were $728.2 million, $67.6 million and $2.62 per share, respectively,~~ compared to $~~683~~218.43 million, $6015.52 million and $20.3459 per share, respectively, in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024.

NET SALES

InNet ~~the third quarter of 2024, net~~ sales ofincreased $~~260~~28.87 million ~~were $12.1 million~~, or 413.82%, ~~higher~~to ~~than the~~ $~~248~~247.70 million in the ~~third~~first quarter of ~~2023.~~2025 Infrom ~~the first nine months of 2024, net sales of~~ $~~728~~218.23 million ~~were $44.8 million, or 6.6%, higher than the $683.4 million~~ in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. The increase in net sales in the ~~third~~first quarter of ~~2024~~2025 as compared to the ~~third~~first quarter of ~~2023~~2024 was due to ana $1119.05 million increase in the A&D segment, a $05.85 million increase in the Test segment, and a $0.3 ~~million increase in the USG segment~~.7 ~~The increase in net sales in the first nine months of 2024 as compared to the first nine months of 2023 was due to a $38.5~~ million increase in the ~~A&D segment, and a $20.4 million increase in the~~ USG segment~~, partially offset by a $14~~.~~0 million decrease in the Test segment.~~

-~~Aerospace & Defense (~~A&D)

InNet ~~the third quarter of 2024, net~~ sales of $114.53 million ~~were $11.0 million, or 10.6%, higher than the $103.5 million~~ in the ~~third~~first quarter of ~~2023.~~2025 ~~In the first nine months of 2024, net sales of $323.9 million~~ were $3819.56 million, or 1320.57%, higher than the $~~285~~94.47 million in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. The sales increase in the ~~third~~first quarter of ~~2024~~2025 compared to the ~~third~~first quarter of ~~2023~~2024 was ~~mainly~~primarily due to aan ~~$2.3~~approximately ~~million increase in commercial aerospace shipments, a~~ $29.1 million increase in ~~defense~~ aerospace shipments ~~and~~at anCrissair ~~$8.1~~and ~~million increase in navy revenues~~PTI, ~~partially~~and ~~offset by~~ a $112.56 million ~~decrease~~increase in ~~industrial~~navy ~~revenues. The~~ sales ~~increase~~at inVACCO the first nine months of 2024 compared to the first nine months of 2023 was mainly due to a $10.0 million increase in commercial aerospace shipments, an $8.0 million increase in defense aerospace shipments, an $18.1 million increase in navy revenues and ~~a $1~~Globe.~~8 million increase in space revenues.~~

-USG

InNet ~~the third quarter of 2024, net~~ sales of $9086.37 million ~~were $0.3 million, or 0.3%, higher than the $90.0 million~~ in the ~~third~~first quarter of ~~2023.~~2025 ~~In the first nine months of 2024, net sales of $260.6 million~~ were $203.47 million, or 84.5%, higher than the $~~240~~83.20 million in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. The ~~sales~~ increase in the ~~third~~first quarter of ~~2024~~2025 as compared to the ~~third~~first quarter of ~~2023~~2024 was ~~driven~~mainly bydue ~~higher~~to ~~service~~a ~~revenue at Doble partially offset by lower protection testing revenue~~$7.9 ~~The~~million ~~sales~~ increase in ~~the~~net ~~first~~sales ~~nine~~at ~~months~~Doble ofdriven ~~2024~~by ~~compared~~higher tosales ~~the corresponding period~~ of ~~2023~~offline ~~was~~and ~~mainly~~protection ~~due~~testing toproducts anand ~~increase in Doble’s service revenue~~services, ~~cybersecurity/compliance~~partially ~~(DUCe)~~offset ~~revenue~~by ~~and~~a ~~offline~~$4.2 ~~test~~million ~~revenue~~decrease ~~and an increase~~ in net sales at NRG ~~driven~~as bywe ~~continued~~experienced ~~strength~~moderation in the renewables end-market~~, partially offset by a decrease in protection testing revenue at Doble~~.

-Test

InNet ~~the third quarter of 2024, net~~ sales of $5646.1 million ~~were $0.8 million, or 1.3%, higher than the $55.3 million~~ in the ~~third~~first quarter of ~~2023.~~2025 ~~In the first nine months of 2024, net sales of $143.8 million~~ were $145.05 million, or 813.95%, ~~lower~~higher than the $~~157~~40.86 million in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. The increase in the ~~third~~first quarter of ~~2024~~2025 as compared to the ~~third~~first quarter of ~~2023~~2024 was primarily due to a $42.48 million ~~increase~~of inhigher sales from the segment’s European ~~operations driven by the MPE acquisition partially offset by a $3.6 million decrease in sales from the Company’s U.S.~~ and Asian operations ~~due to lower wireless, filters~~ and ~~acoustic volumes. The decrease in the first nine months of 2024 compared to the first nine months of 2023 was due to a~~ $132.7 million ~~decrease~~of inhigher sales from the ~~Company~~segment’s U.S. operations~~, and a $1~~.9 million decrease in sales from the Company’s Asian operations due to lower wireless, filters and acoustic volumes and timing of test and measurement chamber projects partially offset by a $1.6 million increase in sales from the segment’s European operations.

ORDERS AND BACKLOG

Backlog was $~~888~~906.79 million at ~~June~~December 3031, 2024 compared with $~~772~~879.40 million at September 30, ~~2023~~2024. The Company received new orders totaling $~~311~~275.70 million in the ~~third~~first quarter of ~~2024~~2025 compared to $~~213~~293.37 million in the ~~third~~first quarter of ~~2023~~2024. Of the new orders received in the ~~third~~first quarter of ~~2024~~2025, $~~146~~120.96 million related to ~~Aerospace~~ A&D ~~Defense~~ products, $~~100~~89.06 million related to USG products, and $64.8 million related to Test products. Of the new orders received in the ~~third~~first quarter of ~~2023~~2024, $81171.95 million related to ~~Aerospace~~ A&D ~~Defense~~ products, $8577.50 million related to USG products, and $45.92 million related to Test products.

The Company received new orders totaling $844.5 million in the first nine months of 2024 compared to $693.8 million in the first nine months of 2023. Of the new orders received in the first nine months of 2024, $434.5 million related to Aerospace & Defense products, $256.0 million related to USG products, and $154.0 million related to Test products. Of the new orders received in the first nine months of 2023, $290.9 million related to Aerospace & Defense products, $250.3 million related to USG products, and $152.6 million related to Test products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative (SG&A) expenses ~~for the third quarter of 2024~~ were $5558.08 million (2123.18% of net sales), ~~compared with $55.4 million (22.3% of net sales)~~ for the ~~third~~first quarter of ~~2023. For the first nine months of 2024~~2025, ~~SG&A~~compared ~~expenses~~with ~~were~~ $~~164~~54.0 million (2224.57% of net sales) ~~compared to $160.6 million (23.5% of net sales)~~ for the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. The increase in SG&A in the first ~~nine~~quarter ~~months~~ of ~~2024~~2025 compared to the ~~corresponding~~first ~~period~~quarter of ~~2023~~2024 was ~~mainly~~ due to an increase within ~~the~~all ~~USG~~three ~~and~~business ~~A&D~~ segments mainly due to higher sales, inflationary impacts, ~~and~~R&D ~~MPE~~expenses ~~acquisition~~and ~~impacts~~commission expenses.

AMORTIZATION OF INTANGIBLE ASSETS

Amortization of intangible assets was $8.10 million and $247.69 million for the ~~third~~first quarter ~~and~~of ~~first~~2025 ~~nine~~and ~~months of~~ 2024, respectively~~, compared to $7~~.1 ~~million and $21.0 million for the corresponding periods of 2023.~~ Amortization expenses consist of amortization of acquired intangible assets from acquisitions and other identifiable intangible assets (primarily software). The increase in amortization expense in the ~~third~~first quarter ~~and first nine months~~ of ~~2024~~2025 compared to the ~~corresponding~~first ~~periods~~quarter of ~~2023~~2024 was mainly due to an increase in amortization of capitalized software and amortization of intangible assets related to the MPE ~~and CMT acquisitions~~acquisition.

~~OTHER EXPENSES (INCOME), NET~~15

~~Other~~OTHER ~~expenses~~ (~~income~~INCOME), ~~net~~EXPENSES, was ($0.3) million in the third quarter of 2024 compared to $1.0 million of expenses in the third quarter of 2023. Other expenses, net, was $0.6 million in the first nine months of 2024 compared to $1.7 million of expenses in the first nine months of 2023. The principal component of other expenses, net, in the first nine months of 2024 was approximately $0.9 million of restructuring charges (primarily severance) within all three segments. The principal items included in other expenses, net, in the third quarter and first nine months of 2023 included a bad debt write-off of $0.5 million due to a customer bankruptcy within the A&D segment and approximately $0.5 million of restructuring costs (mainly severance) in the first nine months of 2023.NET

Other (income), net, was ($0.6) million in the first quarter of 2025 compared to other expenses, net, of $0.2 million in the first quarter of 2024. There were no individually significant items in other (income) expenses, net, in the first quarter of 2025 or 2024.

EBIT

The Company evaluates the performance of its operating segments based on EBIT, and provides EBIT on a consolidated basis., ~~EBIT~~which is a non-GAAP financial measure. Please refer to the discussion of non-GAAP financial measures in Note 7 to the Consolidated Financial Statements, above. EBIT was $4032.52 million (1513.50% of net sales) for the ~~third~~first quarter of ~~2024~~2025 compared to $3822.~~0 million (15.3% of net sales) for the third quarter of 2023. For the first nine months of 2024, EBIT was $95.~~1 million (1310.1% of net sales) ~~compared to $84.2 million (12.3% of net sales)~~ for the first ~~nine~~quarter ~~months~~ of ~~2023~~2024.

The following table presents a reconciliation of EBIT to ~~net~~a ~~earnings.~~GAAP financial measure:


	Three Months Ended				~~Nine Months Ended~~
	~~June~~December 3031,				~~June 30,~~
(In thousands)	2024		2023		~~2024~~	~~2023~~
Net earnings	$	2923,~~230~~473		2715,~~943~~169	~~67,618~~	~~60,548~~
Plus: Interest expense, net		32,~~335~~257		2,~~495~~667	~~9,228~~	~~6,422~~
Plus: Income tax expense		76,~~942~~468		74,~~563~~285	~~18,229~~	~~17,207~~
Consolidated EBIT	$	4032,~~507~~198		3822,~~001~~121	~~95,075~~	~~84,177~~

20-A&D

~~–Aerospace~~EBIT &was ~~Defense~~$21.6 million (18.9% of net sales) in the first quarter of 2025 compared to $16.7 million (17.6% of net sales) in the first quarter of 2024. The increase in EBIT in the first quarter of 2025 compared to the first quarter of 2024 was mainly due to higher sales volumes at Crissair, PTI, VACCO and Globe as mentioned above and price increases, partially offset by inflationary pressures and mix.

EBIT in the third quarter of 2024 was $21.4 million (18.7% of net sales) compared to $21.7 million (20.9% of net sales) in the third quarter of 2023. EBIT in the first nine months of 2024 was $61.4 million (19.0% of net sales) compared to $53.0 million (18.6% of net sales) in the first nine months of 2023. EBIT in the third quarter of 2024 was negatively impacted by margin erosion on space development programs at VACCO, revenue mix, and inflationary pressures, partially offset by leverage on higher sales volumes and price increases. The increase in EBIT in the first nine months of 2024 compared to the corresponding period of 2023 was mainly driven by leverage on higher sales volumes and price increases, partially offset by inflationary pressures and mix. EBIT was negatively impacted by $0.4 million of restructuring charges (primarily severance) in the third quarter and first nine months of 2024. EBIT in the first nine months of 2023 was negatively impacted by a $0.6 million inventory step-up charge related to the CMT acquisition.

-USG

EBIT ~~in the third quarter of 2024~~ was $2220.~~2 million (24.~~5% ~~of net sales) compared to $20.4~~ million (2223.6% of net sales) in the ~~third~~first quarter of ~~2023.~~2025 ~~EBIT in the first nine months of 2024 was $57.4 million (22.0% of net sales)~~ compared to $5017.56 million (21.02% of net sales) in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. The increase in EBIT in the ~~third~~first quarter ~~and first nine months~~ of ~~2024~~2025 compared to the ~~corresponding~~first ~~periods~~quarter of ~~2023~~2024 was mainly due to ~~leverage~~the on higher sales volumes at Doble ~~and~~in ~~NRG~~the first quarter of 2025, price increases, and mix, partially offset by inflationary pressures. ~~EBIT was negatively impacted by $0.2 million of restructuring charges (primarily severance) in the first nine months of 2024.~~

-Test

EBIT ~~in the third quarter of 2024~~ was $94.34 million (169.6% of net sales) ~~compared to $8.6 million (15.6% of net sales)~~ in the ~~third~~first quarter of ~~2023.~~2025 ~~EBIT in the first nine months of 2024 was $16.6 million (11.6% of net sales)~~ compared to $211.38 million (134.54% of net sales) in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. The increase in EBIT in the ~~third~~first quarter of ~~2024~~2025 as compared to the ~~corresponding~~first ~~period~~quarter of ~~2023~~2024 was ~~mainly~~primarily ~~due to higher sales volumes from the segment’s European operations~~ driven by the ~~MPE~~higher ~~acquisition. The decrease in EBIT in the first nine months of 2024 compared to the corresponding period of 2023 was primarily due to lower~~ sales volumes ~~mainly~~ from the segment’s ~~U.S~~European and Asian operations, price increases, and ~~inflationary~~cost ~~pressures~~reduction efforts, partially offset by ~~price~~inflationary ~~increases~~pressures and ~~cost reduction actions~~mix. In addition, EBIT in the first ~~nine~~quarter ~~months~~ of ~~2024,~~2025 ~~EBIT~~ was negatively impacted by $0.34 million of ~~inventory~~restructuring ~~step-up~~ charges ~~related~~(primarily ~~to the MPE acquisition and $0~~severance).~~2 million of restructuring charges.~~

–Corporate

Corporate costs included in EBIT were $1214.3 million and $4013.39 million in the ~~third~~first quarter ~~and~~of ~~first~~2025 ~~nine~~and ~~months of~~ 2024, respectively~~, compared to $12~~.7 ~~million and $40.6 million in the corresponding periods of 2023.~~ The ~~decrease~~increase in Corporate costs in the ~~third~~first quarter ~~and first nine months~~ of ~~2024~~2025 as compared to the ~~corresponding~~first ~~prior~~quarter ~~year~~of ~~periods~~2024 was mainly due to ~~executive~~an ~~management~~increase ~~transition~~in ~~costs~~share ~~that~~based ~~were~~compensation ~~incurred~~costs inand ~~the~~acquisition ~~prior year period~~costs.

INTEREST EXPENSE, NET

Interest expense was $32.3 million and $9.2.7 million in the ~~third~~first quarter ~~and~~of ~~first~~2025 ~~nine~~and ~~months of~~ 2024, respectively~~, and $2~~.5 ~~million and $6.4 million in the corresponding periods of 2023.~~ The ~~increase~~decrease in interest expense in the ~~third~~first quarter ~~and first nine months~~ of ~~2024~~2025 as compared to the ~~corresponding~~first ~~periods~~quarter of ~~2023~~2024 was mainly due to ~~higher~~lower average ~~interest rates and higher average~~ outstanding borrowings. ~~The~~and ~~weighted~~lower average interest rates ~~were~~ (6.711% ~~and~~in ~~6.75% for~~ the ~~three~~first ~~and~~quarter ~~nine-month~~of ~~periods~~2025 ~~ending~~compared ~~June~~to ~~30, 2024, respectively, and~~ 6.058% ~~and~~in ~~5.57% for~~ the ~~three~~first ~~and~~quarter ~~nine-month~~of ~~periods ending June 30, 2023~~2024).

INCOME TAX EXPENSE

The ~~third quarter 2024~~ effective income tax rate was 21.46% ~~compared to 21.3%~~ in the ~~third~~first quarter of ~~2023.~~2025 ~~The effective income tax rate in the first nine months of 2024 was 21.2%~~ compared to 22.10% ~~for~~in the first ~~nine~~quarter ~~months~~ of ~~2023~~2024. Income tax expense in the first ~~nine~~quarter ~~months~~ of ~~2024~~2025 was favorably impacted by ~~discrete~~additional ~~events that occurred during the second quarter of 2024 including the release of a foreign valuation allowance and excess~~ tax ~~benefit~~benefits related to the vesting of share-based ~~director~~ compensation awards.

CAPITAL RESOURCES AND LIQUIDITY

The Company’s overall financial position and liquidity ~~remains~~remain strong. Working capital (current assets less current liabilities) increased to $~~341~~329.74 million at ~~June~~December 3031, 2024 from $~~266~~318.48 million at September 30, ~~2023~~2024. ~~Inventories~~Accounts ~~increased~~receivable bydecreased $3538.20 million during this period mainly due to a $1619.09 million ~~increase~~decrease within the A&D segment, aan $1411.68 million ~~increase~~decrease within the ~~USG~~Test segment and a $4.6.3 million ~~increase~~decrease within the ~~Test~~USG segment ~~resulting primarily from the timing of receipt of raw materials to meet anticipated demand and an increase in work in process and finished goods inventories~~ due to ~~timing~~strong ofcash ~~manufacturing~~collections ~~existing~~during ~~orders~~the quarter. ~~Accounts~~Inventories ~~receivable~~ increased by $1510.02 million during this period mainly due to ana ~~approximately~~ $97.09 million increase within the ~~Test~~USG segment and ana ~~approximately~~ $62.05 million increase within the A&D segment ~~driven~~primarily from an increase in finished goods and raw materials inventories due to timing of manufacturing existing orders. Accrued salaries decreased by $7.7 million during this period due to timing of ~~sales~~salaries and ~~collections~~bonus payments.

Net cash provided by operating activities was $5534.52 million and $298.27 million in the first ~~nine~~quarters ~~months~~ of ~~2024~~2025 and ~~2023~~2024, respectively. The increase in net cash provided by operating activities in the first ~~nine~~quarter ~~months~~ of ~~2024~~2025 as compared to the first ~~nine~~quarter ~~months~~ of ~~2023~~2024 was mainly driven by an increase in net earnings and lower accounts receivable ~~collections~~balances ~~and~~due ~~higher~~to ~~earnings~~timing of collections.

Capital expenditures were $245.92 million and $177.08 million in the first ~~nine~~quarters ~~months~~ of ~~2024~~2025 and ~~2023~~2024, respectively. The ~~increase~~decrease in the first ~~nine~~quarter ~~months~~ of ~~2024~~2025 ~~compared to the prior year period~~ was mainly due to ana ~~increase~~decrease in building improvements and machinery & equipment within the A&D segment. In addition, the Company incurred expenditures for capitalized software of approximately $82.6 million and $92.39 million in the first ~~nine~~quarters ~~months~~ of ~~2024~~2025 and ~~2023~~2024, respectively.

Subsequent Event

Pursuant to a Commitment Letter entered into on July 8, 2024 between the Company and JPMorgan Chase Bank, N.A., on August 5, 2024 the Registrant and certain of its subsidiaries entered into Amendment No. 1 (the “Amendment”) to its Amended and Restated Credit Agreement dated August 30, 2023 (the “2023 Credit Agreement”) among the Company and certain of its subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent thereunder, the initial lenders party thereto and Citibank, N.A. The Amendment, among other things, (i) implements a senior incremental delayed draw term loan credit facility in an aggregate principal amount of up to $375 million (the “Incremental Facility”), and (ii) permits the direct or indirect acquisition by the Registrant or certain of its subsidiaries of all of the issued and outstanding shares of Ultra PMES Limited, Measurement Systems, Inc., EMS Development Corporation, and DNE Technologies, Inc. (the “Transaction”), pursuant to and in accordance with the terms and conditions of that certain Sale and Purchase Agreement, dated July 8, 2024, among Ultra Electronics Holdings Limited, as parent seller, the Registrant, as guarantor, and certain of the Registrant’s subsidiaries as buyers. The proceeds of the loans drawn under the Incremental Facility will be applied to pay a portion of the cash consideration for the Transaction and other customary fees, premiums, expenses and costs incurred in connection with the Transaction. See further discussion of the transaction and financing arrangements in the Company’s Form 8-K’s filed on July 8, 2024 and August 7, 2024.

Acquisition

On November 9, 2023, the Company acquired MPE Limited (MPE), based in the United Kingdom, for a purchase price of approximately $56.2 million, net of cash acquired. MPE is a leading global manufacturer of high-performance EMC/EMP filters and capacitor products for military, utility, telecommunication, and other critical infrastructure applications. Since the date of acquisition, the operating results for the MPE business have been included as part of ETS-Lindgren in the Test segment. The Company paid a $0.2 million working capital settlement in the third quarter of fiscal 2024.

Credit Facility

At ~~June~~December 3031, 2024, the Company had approximately $~~321~~383 million available to borrow under its bank credit facility, excluding the Incremental Facility, plus a $250 million increase option, and $6371.03 million cash on hand. At ~~June~~December 3031, 2024, the Company had $~~173~~112 million of outstanding borrowings under the credit facility in addition to outstanding letters of credit of $54.58 million. Cash flow from operations and borrowings under the Company’s credit facility are expected to meet the Company’s capital requirements and operational needs for the foreseeable future. The Company’s ability to access the additional $250 million increase option of the credit facility is subject to acceptance by participating or other outside banks.

~~Share~~SM&P ~~Repurchases~~Acquisition

~~During~~On July 8, 2024, the ~~first~~Company ~~nine~~and ~~months~~certain of ~~2024~~its wholly owned subsidiaries entered into a Sale and Purchase Agreement with Ultra Electronics Holdings Limited, a private limited liability company incorporated in England & Wales (“Ultra”), pursuant to which one or more wholly owned subsidiaries of the Company ~~repurchased~~will ~~approximately~~acquire 80from Ultra or its subsidiaries Ultra’s Signature Management & Power (“SM&P”) business,~~000~~ ~~shares~~including all of the issued and outstanding equity interests of (i) Ultra PMES Limited, a private limited liability company incorporated in England & Wales (“the UK Target Company”), (ii) Measurement Systems, Inc., a Delaware corporation, (iii) EMS Development Corporation, a New York corporation, and (iv) DNE Technologies, a Delaware corporation, for a purchase price of approximately $~~8.0~~550 million., ~~For~~plus ~~further~~or ~~information~~minus oncertain ~~the~~customary ~~share~~adjustments ~~repurchases~~at ~~during~~closing and post-closing for cash, debt, working capital and transaction expenses as specified in the ~~third~~Purchase ~~quarter~~Agreement (the “SM&P Acquisition”). The closing of ~~2024,~~the ~~see~~SM&P ~~Part~~acquisition IIis subject to certain conditions, ~~Item~~including 2receipt of clearance under the UK National Security and Investment Act of 2021. We currently expect to close on this ~~Report~~transaction either in our second quarter or early in our third fiscal quarter.

Dividends

A dividend of $0.08 per share, totaling $2.1 million, was paid on October 1716, ~~2023~~2024 to stockholders of record as of October ~~3, 2023. A dividend of $0.08 per share, totaling $~~2~~.1 million~~, ~~was paid on January 19,~~ 2024 ~~to stockholders of record as of January 4, 2024~~. ~~A dividend of $0.08 per share, totaling $2.1 million, was paid on April 16, 2024 to stockholders of record as of April 1, 2024.~~ Subsequent to ~~June~~December 3031, 2024, a quarterly dividend of $0.08 per share, totaling $2.1 million, was paid on ~~July~~January 1917, ~~2024~~2025 to stockholders of record as of ~~July~~January 32, ~~2024~~2025.

CRITICAL ACCOUNTING POLICIES

Management has evaluated the accounting policies used in the preparation of the Company’s financial statements and related notes and believes those policies to be reasonable and appropriate. Certain of these accounting policies require the application of significant judgment by Management in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, trends in the industry, information provided by customers and information available from other outside sources, as appropriate. The most significant areas involving Management judgments and estimates may be found in the Critical Accounting Policies section of Management’s Discussion and Analysis and in Note 1 to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

are subject to an inherent degree of uncertainty. These judgments are based on historical experience, trends in the industry, information provided by customers and information available from other outside sources, as appropriate. The most significant areas involving Management judgments and estimates may be found in the Critical Accounting Policies section of Management’s Discussion and Analysis and in Note 1 to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

OTHER MATTERS

Contingencies

As a normal incident of the business in which the Company is engaged, various claims, charges and litigation are asserted or commenced against the Company. Additionally, the Company is currently involved in various stages of investigation and remediation relating to environmental matters. In the opinion of Management, the aggregate costs involved in the resolution of these matters, and final judgments, if any, which might be rendered against the Company, are adequately reserved, are covered by insurance, or would not have a material adverse effect on the Company’s results from operations, capital expenditures, or competitive position.

FORWARD LOOKING STATEMENTS

Statements contained in this Form 10-Q regarding future events and the Company’s future results that reflect or are based on current expectations, estimates, forecasts, projections or assumptions about the Company’s performance and the industries in which the Company operates are considered “forward-looking statements” within the meaning of the safe harbor provisions of the Federal securities laws. These may include, but are not necessarily limited to, statements about: the strength of certain end markets served by the Company, and the timing of the recovery of certain end markets which the Company serves; the adequacy of the Company’s credit facility and the Company’s ability to increase it; the outcome of current litigation, claims and charges; timing of the ~~determination~~repayment of the current portion of the Company’s long-term debt ~~and the timing of its repayment~~; future revenues from remaining performance obligations; fair values of reporting units; the deductibility of goodwill; estimates and assumptions that affect the reported ~~values~~amounts of assets and liabilities; the ~~future~~ recognition of compensation cost related to share-based compensation arrangements; the Company’s ability to hedge against or otherwise manage market risks through the use of derivative financial instruments; the extent to which hedging gains or losses will be offset by losses or gains on related underlying exposures; and any other statements contained herein which are not strictly historical. 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.

23Investors are cautioned that such statements are only predictions and speak only as of the date of this Form 10-Q, and the Company undertakes no duty to update them except as may be required by applicable laws or regulations. 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 Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024, and the following: the impacts of climate change and related regulation of greenhouse gases; the impacts of labor disputes, civil disorder, wars, elections, political changes, tariffs and trade disputes, terrorist activities, cyberattacks or natural disasters on the Company’s operations and those of the Company’s customers and suppliers; disruptions in manufacturing or delivery arrangements due to shortages or unavailability of materials or components; or supply chain disruptions; inability to access work sites; the timing and content of future contract awards or customer orders; the timely appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts or orders; 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 or data breaches; the availability of selected acquisitions; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs and availability of certain raw materials; material changes in the cost of credit; changes in laws and regulations including but not limited to changes in accounting standards and taxation; changes in interest rates; costs relating to environmental matters arising from current or former facilities; uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration; and the integration and performance of recently acquired businesses.

Investors are cautioned that such statements are only predictions and speak only as of the date of this Form 10-Q, and the Company undertakes no duty to update them except as may be required by applicable laws or regulations. 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 Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, and the following: the impacts of climate change and related regulation of greenhouse gases; the impacts of labor disputes, civil disorder, wars, elections, political changes, tariffs and trade disputes, terrorist activities, cyberattacks or natural disasters on the Company’s operations and those of the Company’s customers and suppliers; disruptions in manufacturing or delivery arrangements due to shortages or unavailability of materials or components; or supply chain disruptions; inability to access work sites; the timing and content of future contract awards or customer orders; the timely appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts or orders; 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 or data breaches; the availability of selected acquisitions; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs and availability of certain raw materials; material changes in the cost of credit; changes in laws and regulations including but not limited to changes in accounting standards and taxation; changes in interest, inflation and employment rates; costs relating to environmental matters arising from current or former facilities; uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration; and the integration and performance of recently acquired businesses.18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company’s operations result primarily from changes in interest rates and changes in foreign currency exchange rates. The Company is exposed to market risk related to changes in interest rates and selectively uses derivative financial instruments, including forward contracts and swaps, to manage these risks. The Company’s Canadian subsidiary Morgan Schaffer enters into foreign exchange contracts to manage foreign currency risk as a portion of their revenue is denominated in U.S. dollars. All derivative instruments are reported on the balance sheet at fair value. For derivative instruments designated as cash flow hedges, the gain or loss on the respective derivative is deferred in accumulated other comprehensive income until recognized in earnings with the underlying hedged item. There has been no material change to the Company’s market risks since September 30, ~~2023~~2024.

ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of 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 of the end of the period covered by this report. 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 that date. 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 Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

~~Item~~ITEM 2. ~~Unregistered~~UNREGISTERED ~~Sales~~SALES ofOF ~~Equity~~EQUITY ~~Securities~~SECURITIES ~~and~~AND ~~Use~~USE ofOF ~~Proceeds~~PROCEEDS

~~ISSUER~~The ~~PURCHASES~~Company OFdid ~~EQUITY~~not SECURITIES*repurchase any shares during the first quarter of 2025.


				Total Number of	Approximate Dollar
				Shares Purchased as	Value of Shares that
	Total Number	Average		Part of Publicly	May Yet Be
	of Shares	Price Paid		Announced Plans	Purchased Under the
Period	Purchased	per Share		or Programs	Plans or Programs
April 1-30, 2024	8,126	$	99.65	8,126	$	159.6 million
May 1-31, 2024	0	$	N/A	0	$	159.6 million
June 1-30, 2024	0	$	N/A	0	$	159.6 million
Total	8,126	$	99.65	8,126	$	159.6 million

* On August 5, 2021, the Company’s Board of Directors approved a common stock repurchase program, which was announced on August 9, 2021, authorizing us to repurchase shares of our stock from time to time at our discretion, in the open market or otherwise, up to a maximum total repurchase amount equal to $200 million (or such lesser amount as may be permitted under the Company’s bank credit agreements). This program is scheduled to expire September 30, 2024. The Company has not determined whether or when it may cease making repurchases under the program prior to its expiration.

In August 2024, the Company’s Board of Directors renewed the common stock repurchase program for an additional three years expiring September 30, 2027 on terms similar to those of the 2021-2024 program, but with a new maximum total repurchase amount of $200 million or the maximum amount permitted under the Company’s bank credit agreements, if less.

ITEM 5. OTHER INFORMATION

During the first quarter of fiscal 2025, no director or officer (as defined in Securities and Exchange Commission Rule 16a-1(f)) of the Company adopted or terminated:

(i)

Any contract, instruction or written plan for the purchase or sale of Company securities intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c) (a “Rule 10b5-1 trading arrangement”); or

(ii)

Any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of SEC Regulation S-K.

ITEM 6. EXHIBITS

Exhibit Number	Description	Document Location

3.1(a)	Restated Articles of Incorporation	Exhibit 3(a) to the Company’s Form 10-K for the fiscal year ended September 30, 1999
3.1(b)	Amended Certificate of Designation, Preferences and Rights of Series A Participating Cumulative Preferred Stock of the Registrant	Exhibit 4(e) to the Company’s Form 10-Q for the fiscal quarter ended March 31, 2000
3.1(c)	Articles of Merger effective July 10, 2000	Exhibit 3(c) to the Company’s Form 10-Q for the fiscal quarter ended June 30, 2000
3.1(d)	Amendment of Articles of Incorporation effective February 5, 2018	Exhibit 3.1 to the Company’s Form 8-K filed February 7, 2018

3.2	Bylaws	Exhibit 3.1 to the Company’s Form 8-K filed November 22, 2022

4.2	Amended and Restated Credit Agreement dated August 30, 2023	Exhibit 10.1 to the Company’s Form 8-K filed September 6, 2023
4.1(a)	Amended and Restated Credit Agreement dated August 30, 2023	Exhibit 10.1 to the Company’s Form 8-K filed September 6, 2023

10.1	Tenth Amendment and Restatement of Employee Stock Purchase Plan effective May 5, 2024	Filed herewith
4.1(b)	Amendment No. 1 to the Amended and Restated Credit Agreement dated August 30, 2023	Exhibit 10 (c) to the Company’s Form 10-K for the fiscal year ended September 30, 2024

31.1	Certification of Chief Executive Officer	Filed herewith
31.2	Certification of Chief Financial Officer	Filed herewith
32	Certification of Chief Executive Officer and Chief Financial Officer	Filed herewith
101.INS	XBRL Instance Document*	Submitted herewith

101.SCH	XBRL Schema Document*	Submitted herewith

101.CAL	XBRL Calculation Linkbase Document*	Submitted herewith

101.DEF	XBRL Definition Linkbase Document*	Submitted herewith

101.LAB	XBRL Label Linkbase Document*	Submitted herewith

101.PRE	XBRL Presentation Linkbase Document*	Submitted herewith
104	Cover Page Interactive Data File (contained in Exhibit 101)	Submitted herewith

*	Exhibit 101 to this report consists of documents formatted in XBRL (Extensible Business Reporting Language). The financial information contained in the XBRL – related documents is “unaudited” or “unreviewed”.

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SIGNATURE

Pursuant to the requirements 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.
	/s/ Christopher L. Tucker
	Christopher L. Tucker
	Senior Vice President and Chief Financial Officer
	(As duly authorized officer and principal accounting and financial officer of the registrant)

Dated: August 9, 2024
Dated: February 10, 2025

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