ESCO TECHNOLOGIES INC. Item 2.01 Completion of Acquisition or Disposition of Assets
OnDecember 31, 2019 , the Registrant completed the disposition of itsTechnical Packaging business segment, consisting of Registrant's wholly-owned subsidiariesThermoform Engineered Quality LLC ,Plastique Ltd. and Plastique sp. z o.o. (the "Technical Packaging Business"), toSonoco Plastics, Inc. andSonoco Holdings, Inc. ("Buyers"), two wholly-owned subsidiaries of Sonoco Products Company, pursuant to the Equity Purchase Agreement entered into onNovember 15, 2019 and announced onNovember 18, 2019 (the "Agreement"). The Agreement provided for a purchase price of$187 million in cash, plus or minus certain customary adjustments based on working capital and other typical post-closing adjustments specified in the Agreement. Additional information about the Agreement and the transaction was provided in the Registrant's Form 8-K filed onNovember 15, 2019 . At the Closing, the Registrant received approximately$187 million in cash, subject to final determination of the adjustments provided for in the Agreement. A copy of the Agreement is attached to this Report as Exhibit 10.1. The Agreement is provided pursuant toSecurities and Exchange Commission requirements and to provide investors with information regarding the terms of the Agreement. The terms of the Agreement have been negotiated between the parties solely for the purposes of this particular transaction, and are not intended to provide any other factual information about the Registrant or its subsidiaries or affiliates. The representations, warranties and covenants contained in the Agreement were made only for purposes of that Agreement and as of specific dates; were solely for the benefit of the parties to the Agreement; and are subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them, which may differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Registrant or any of its subsidiaries, affiliates or businesses. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Registrant. Accordingly, investors should read the representations and warranties in the Agreement not in isolation but only in conjunction with the other information about the Registrant and its subsidiaries included in the reports, statements, and other filings the Registrant makes or has made with theSecurities and Exchange Commission . Item 9.01 Financial Statements and Exhibits (b) Pro forma financial information
On
The following unaudited pro forma consolidated statements of operations for the year endedSeptember 30, 2019 present the Registrant's results of operations as adjusted to give effect to the divestiture of the Technical Packaging Business as if it had occurred at the beginning of the period. The accompanying unaudited pro forma consolidated balance sheet as ofSeptember 30, 2019 presents the Registrant's financial position as if the divestiture had occurred onSeptember 30, 2019 . The unaudited pro forma consolidated balance sheet as ofSeptember 30, 2019 reflects the elimination of the net assets of theTechnical Packaging Business, the elimination of all intercompany accounts, the inclusion of the net proceeds from the sale reducing the outstanding debt, and the estimated gain on the sale in retained earnings. The estimated gain on the sale of the Technical Packaging Business may change upon final determination and settlement of post-closing adjustments. The unaudited pro forma financial statements should be read in conjunction with the Registrant's consolidated financial statements and notes thereto previously filed as part of the Registrant's most recent annual report on Form 10-K for the period endedSeptember 30, 2019 . The unaudited pro forma information below is provided for information purposes only and is not necessarily indicative of what the actual financial position or results of operations of the Registrant would have been had the transaction actually occurred on the dates indicated, nor does it purport to indicate the future financial position or results of operations of the Registrant. The pro forma adjustments are based upon available information and assumptions believed to be reasonable in the circumstances. There can be no assurance that such information and assumptions will not change from those reflected in the pro forma financial statements and notes thereto. ESCO TECHNOLOGIES INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollars in thousands, except per share amounts) Pro Forma Year Ended Less Technical Year Ended September 30, Packaging Pro Forma September 30, 2019 Business (1) Adjustments 2019 Net sales$ 812,970 (86,926 ) - 726,044 Costs and expenses: Cost of sales 508,521 (70,523 ) - 437,998 Selling, general and administrative expenses 172,109 (9,375 ) - 162,734 Amortization of intangible assets 19,488 (996 ) - 18,492 Interest expense (income) 8,396 (304 ) (4,815 )(2) 3,277 Other income (expenses), net 2,240 (1,389 ) (100,000 )(3) (99,149 ) Total costs and expenses 710,754 (82,587 ) (104,815 ) 523,352 Earnings before income taxes 102,216 (4,339 ) 104,815 202,692 Income taxes 21,177 (789 ) 30,875 (4) 51,263 Net earnings 81,039 (3,550 ) 73,940 151,429 Earnings per share: Basic: Net earnings $ 3.12 5.84 Diluted: Net earnings $ 3.10 5.80 Average common shares outstanding: Basic 25,946 25,946 Diluted 26,097 26,097 Notes:
(1) The elimination of operating results, assets sold to Buyers and liabilities
assumed by Buyers reflects the terms of the Agreement.
(2) Represents an adjustment of interest expense assuming the net cash proceeds
were received at the beginning of the period.
(3) Represents the estimated pre-tax gain on the sale of the
Business.
(4) Represents the estimated tax expense impact on the pro forma adjustments.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
Less Technical Pro Forma
September 30, Packaging Pro Forma September 30,
2019 Business (1) Adjustments 2019
ASSETS
Current assets:
Cash and cash equivalents $ 61,808 - - 61,808
Accounts receivable, net 174,427 (15,712 ) - 158,715
Contract assets, net 115,310 (5,099 ) - 110,211
Inventories 128,825 (3,869 ) - 124,956
Other current assets 14,824 (634 ) - 14,190
Total current assets 495,194 (25,314 ) - 469,880
Property, plant and equipment, net 161,470 (33,627 ) - 127,843
Intangible assets, net 393,047 (11,442 ) - 381,605
Goodwill 409,215 (18,959 ) - 390,256
Other assets 7,794 (3,349 ) - 4,445
Total assets $ 1,466,720 (92,691 ) - 1,374,029
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 21,261 (1,261 ) - 20,000 Accounts payable 71,370 (7,570 ) - 63,800 Contract liabilities, net 81,177 - - 81,177 Accrued salaries 38,531 (1,337 ) - 37,194 Accrued other expenses 39,296 (1,349 ) - 37,947 Total current liabilities 251,635 (11,517 ) - 240,118 Pension obligations 22,682 - - 22,682 Deferred tax liabilities 64,855 - - 64,855 Other liabilities 36,326 - - 36,326 Long-term debt 265,000 - (150,000 )(2) 115,000 Total liabilities 640,498 (11,517 ) (150,000 ) 478,981 Shareholders' equity 826,222 (81,174 ) 150,000 (3) 895,048 Total liabilities and shareholders' equity$ 1,466,720 (92,691 ) - 1,374,029 Notes:
(1) The elimination of operating results, assets sold to Buyers and liabilities
assumed by Buyers reflect the terms of the Agreement. (2) Represents the estimated net proceeds of the transaction used to pay down
debt.
(3) Represents the estimated net gain of approximately
as a result of the divestiture and the elimination of approximately
million of equity related to the Technical Packaging Business. The estimated
gain may change upon the final determination and settlement of post-closing
adjustments and other divestiture-related costs.
(d) Exhibits
Exhibit No. Description of Exhibit
10.1 Equity Purchase Agreement dated
Sonoco Plastics, Inc. ,Sonoco Holdings, Inc. , Esco
Technologies
Holding LLC, Esco UK Holding Company I Ltd. , Thermoform Engineered
Quality LLC , and Plastique Holdings Ltd. *
* Schedules to the Equity Purchase Agreement have been omitted
pursuant to the provisions of Item 601(b)(2) of Regulation S-K. The
Registrant agrees to furnish a copy of any of the omitted Schedules
to the Securities and Exchange Commission upon request.
104 Cover Page Inline Interactive Data File© Edgar Online, source
