ST. LOUIS, Sept. 18 /PRNewswire-FirstCall/ -- ESCO Technologies Inc.
(NYSE: ESE) today announced the strategic integration of its three primary
Communications Segment operating entities to more effectively serve the
electric, gas and water markets. In addition, the Company provided a
current status update on its TWACS Next Generation (TWACS NG(TM)) software
development program and updated guidance.
Strategic Integration of the Communications Segment
The realignment of the Communications Segment was in response to the
utility markets' increasing requirements for fully integrated,
state-of-the- art advanced metering solutions which include comprehensive
data management systems. These actions position ESCO to further expand its
market presence within this fast-growing Segment.
The strategic alignment and integration of DCSI, Hexagram, and Nexus
Energy Software into a more concentrated customer-facing organization will
bring together a comprehensive suite of unique products and services
providing proven technologies and industry leadership while offering
seamless, integrated solutions that have not existed in the marketplace
As a result of these actions, ESCO is now capable of providing
customers with a comprehensive hybrid solution that offers the highest
caliber, proven-at-scale, two-way fixed network Advanced Metering
communication system. This new hybrid solution includes both power-line and
wireless / RF based technologies which are fully integrated with enterprise
software (including Meter Data Management) that stands alone in its ability
to optimize what Smart Metering data can accomplish for utilities and their
This combined technology offering provides customers with the option to
choose a fully customized AMR / AMI solution suite designed to meet their
individual needs regardless of size, geography, or advanced functional
requirements currently or in the future.
Vic Richey, Chairman and Chief Executive Officer, commented, "The AMR /
AMI market continues to expand and offers a tremendous growth opportunity
for our Company. In this regard, I am pleased to announce that Bruce
Phillips, currently President of DCSI, will assume the role of Group
President of the Communications Segment. Bruce is now responsible for the
overall growth strategy and operating performance of the Group, with the
senior management teams of DCSI, Hexagram, and Nexus reporting to him.
Bruce is a proven leader with an exceptional track record and brings a
wealth of experience to this position. I am confident in his capabilities
to effectively lead this organization.
"Our strategic actions announced today position us to provide utilities
with a proven suite of solutions that are unique and unsurpassed by any of
our competitors. One of our primary objectives has always been to help our
customers mitigate their operational challenges while providing superior
customer service to their consumers.
"We are now able to more effectively satisfy customer requirements by
offering a complete suite of interchangeable solutions allowing them to
select an optimal configuration of technologies to meet their current and
future needs. All of this is now available from one solution provider,
"Additionally, our recent initiatives on the international front
confirm that the opportunities to deploy our technology solutions outside
of North America are substantial, and that this integration should assist
us in capitalizing on these opportunities."
Mr. Richey concluded, "I am confident that this alignment and
integration put us in an excellent position to capture new business and
enhance our ability to satisfy our customers' needs. These actions
significantly optimize our market position and capitalize on the strengths
of the respective organizations and the tremendous employees who have made
DCSI, Hexagram and Nexus successful, and should allow us to garner more
than our fair share of the AMR / AMI opportunities in front of us."
TWACS NG ("TNG") Software Update
All of the code development for the new functionality has been
completed on the recently developed TNG software versions 2.0 and 3.0, with
both functional and performance testing continuing with favorable results.
To ensure that the Company delivers the most capable, robust and
upgradeable AMI software application available in the market today, DCSI
has established a very rigorous set of internal testing protocols and
procedures which are designed to detect and mitigate performance
deficiencies prior to the delivery of the software.
As a result of this comprehensive testing protocol, the Company has
identified a number of small issues which are being remediated through
minor modifications to the original code. This ongoing "debugging" process
has resulted in additional retesting of the patches which has added
development time and, therefore, moves the expected delivery date of
version 3.0 into the first quarter of fiscal 2008.
Given that the customer is not planning to use version 3.0 until
sometime later in calendar 2008, Management determined that it is more
efficient to utilize this additional time window to conduct even more
thorough testing of the software prior to delivery.
This revised expected delivery date has no impact on the customer's
current product delivery and installation schedule.
As a result of accounting rules previously described throughout fiscal
2007 earnings releases, the Company will be required to defer revenue
recognition on this contract until the first fiscal quarter of 2008 when
the software is now expected to be delivered.
Operationally during fiscal 2007, DCSI is expected to deliver 338,000
electric modules and 62 pieces of substation equipment with a total sales
value of $20.2 million and a related pretax profit of $8.4 million. These
sales and profit amounts are now expected to be recognized in the first
quarter of fiscal 2008 versus our previous expectations of revenue
recognition in the fiscal 2007 fourth quarter.
Additionally, this revenue and profit deferral does not have any cash
flow impact to DCSI as nearly $22 million of payments for the product
deliveries to date have been received consistent with normal payment terms.
Operationally, with the exception of this issue, the Company continues
to be on track with our previous expectations.
Vic Richey commented, "While I am disappointed that we will not be able
to recognize this revenue in final 2007 for the hardware delivered to date,
I am very pleased with the performance of the software. I remain confident
that TWACS NG will be the best-in-class AMI software offering available in
the market. While time consuming, I believe adherence to our rigid testing
discipline will result in having a final software product that both meets
and exceeds current and future customers' expectations."
Forward Looking Statement
Statements in this release regarding the amounts and timing of fiscal
2007 and 2008 future profits, earnings and sales, long term success of the
Company, successful development, delivery and customer acceptance of the
TNG Software, the timing of deferred revenue and products previously
delivered to PG&E, and any other written or oral statements which are not
strictly historical, are "forward-looking" statements within the meaning of
the safe harbor provisions of the federal securities laws. Investors are
cautioned that such statements are only predictions, and speak only as of
the date of this release, and the Company undertakes no duty to update. The
Company's actual results in the future may differ materially from those
projected in the forward-looking statements due to risks and uncertainties
that exist in the Company's operations and business environment including,
but not limited to the risk factors described in Item 1A of the Company's
annual report on Form 10-K for the fiscal year ended September 30, 2006 and
Item 1A of the Company's Form 10-Q for the three months ended June 30,
2007; actions by the California Public Utility Commission; PG&E's Board of
Directors or PG&E's management impacting PG&E's AMI projects; the timing
and success of DCSI's software development efforts; DCSI successful
performance of the PG&E contracts; technical difficulties; and termination
of customer contracts.
ESCO, headquartered in St. Louis, is a proven supplier of special
purpose communications systems for electric, gas and water utilities,
including hardware and software to support advanced metering applications.
In addition, the Company provides engineered filtration products to the
transportation, health care and process markets worldwide and is the
industry leader in RF shielding and EMC test products. Further information
regarding ESCO and its subsidiaries is available on the Company's website
SOURCE ESCO Technologies Inc.