Good day, and welcome to the Q4 2013 ESCO Technologies Inc. Earnings Conference Call. Today's call is being recorded. With us today are Vic Richey, Chairman and CEO; Gary Muenster, Vice President and CFO. And now to present the forward-looking statement, I would like to turn the call over to Kate Lowrey, Director of Investor Relations. Please go ahead.

Thank you. Statements made during this call regarding the success, timing, results and use of proceeds of the Aclara divestiture process, the write-down of Aclara's goodwill, 2014 EPS from Continuing Operations as adjusted, sales and EBIT growth, margin, EBIT, liquidity growth, profits, future acquisition efforts, the schedule and cost of the Crissair move, the benefits from previous consolidations and restructuring initiatives and other statements which are not strictly historical are forward-looking statements within the meaning of the Safe Harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions, and actual results may differ materially from those projected in the forward-looking statements, due to risks and uncertainties that exist in the company's operations and business environment, including, but not limited to, the risk factors referenced in the company's press release issued today, which we file in exhibit to the company's Form 8-K to be filed. We undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, during this call, the company may discuss some non-GAAP financial measures in describing the company's operating results. A reconciliation of these measures to their most comparable GAAP measures can be found in the press release issued today and found on the company's website at www.escotechnologies.com under the link Investor Relations. Now I'll turn the call over to Vic.

Thanks, Kate, and good afternoon. 2013 turned out to be quite an interesting year for ESCO. We've made several significant decisions during the past year, which will result in a different ESCO going forward. These actions were taken to position us for continued growth in the future, as well as providing more predictability and higher profitability. These are difficult decisions because they have a direct impact to our employees, but they are necessary to ensure overall success. I'll take a few minutes to status you on these major initiatives. We closed the Doble-Lemke operations in Germany due to their significant underperformance, and we relocated their products and IP to existing lower-cost locations. This activity was completed as of September 30 and was done on budget and on schedule. The restructuring process was a significant distraction for the Doble team, and I certainly look forward to focusing their efforts on growing the rest of their businesses. Our second major initiative was the consolidation of our domestic Test business, specifically the shutdown and relocation of a manufacturing facility in Glendale Heights, Illinois. We simply had too big of a footprint, which is negatively impacting our operating margins. This activity was largely completed midyear, on schedule and again on budget. The great news is we're seeing improved margins that we've expected. As you will see on our '14 projections, we're anticipating significantly improved margins year-over-year in Test. Lastly, I'll discuss our decision to divest the Aclara business. We talked at length on our last call about the rationale for this decision, and we remain convinced that this is the right decision for the company. Since the process is active, it would not be prudent to discuss any specifics at this time. We hope to have this process completed by now. But as stated in the press release, it is taking longer than anticipated. Our goal is to have the best outcome, which doesn't necessarily translate to the quickest outcome. As I mentioned earlier, all of these actions were taken with 2014 and beyond in mind. As we enter '14, our Continuing Operations are well positioned for success. All of our businesses have truly differentiated technology and market-leading positions. And as a result, the restructuring actions in '13 are much leaner. While we are currently in a very comfortable position from a leverage perspective, assuming the Aclara transaction is completed, we will be in an even stronger liquidity position. This provides us with the ability to augment our organic growth with acquisitions around our core businesses. As noted in our release, in '14, we anticipate sales growth in the high single-digits and double-digit EBIT growth. Given the current economic environment, we think this is solid performance. I'll now turn it over to Gary for a few specific comments about the financials, and we'll then be happy to answer any questions.

Thanks, Vic. As discussed during our Q3 earnings call, the decision to divest Aclara changed our financial statement presentation to reflect Aclara as Discontinued Operations in the P&L and assets held for sale on the balance sheet. Aclara remains in Discontinued Operations and held for sale in Q4. Due to a few open items surrounding the various bids and the projected valuation of Aclara's net assets, primarily goodwill, we'll report their results in Discontinued Operations with the filing of our 10-K later this month, as we develop more certainties surrounding this calculation. As noted in the Discontinued Operations section of this release, we do expect to write down the carrying value of the goodwill. The guidance we provided in August for the remainder of '13 was based on EPS from Continuing Operations, as adjusted. The Q4 earnings release is prepared in a similar format and my commentary will follow these results. As a reminder, EPS from Continuing Operations as adjusted excludes Aclara and certain costs associated with the Test segment facility consolidation completed earlier this year, as well as the Doble-Lemke facility closure, which was completed as of September 30. As Vic noted, both actions were completed on time and on budget, and we expect to see the benefit of these actions going into '14. Our previous expectations of EPS from Continuing Operations as adjusted are in the range of $1.35 to $1.45 per share, and we exceeded our expectations as we closed the year at $1.47 per share on a comparable basis. We beat the top end of our range as a result of solid performance across all 3 operating segments. I'll call out a few highlights from the release to allow you to better understand the underlying results of the business going forward on a Continuing Operations basis.…

Okay. We're ready to take any questions you have.

[Operator Instructions] And our first question comes from Kevin Maczka from BB&T Capital Markets. Kevin R. Maczka - BB&T Capital Markets, Research Division: First question, Vic, if we can just touch on visibility. Of course, you're guiding '14 for the first time now. And in the past, with Aclara in the mix, it was always a bigger backlog business but yet visibility there was never as good. And so that should be improved now. But I'm just wondering with the revenue guidance that you're giving here with a backlog that's only about half of the revenue you expect for the year, can you just talk about the visibility you have there in general and your confidence level in that guidance?

Yes, we feel good about it. Obviously, we're off to a new start here. We really wanted to make sure that we're able to hit the numbers we put out there. We've had some struggles, obviously, with Aclara in doing that over the last year or so. So as we look at going into this year, we feel very good about the backlog levels that we have. They do give us a lot of visibility. The businesses that we have now do turn -- a lot quicker turn in the backlog -- return to orders, I should say, in the sales, much quicker than Aclara did in some cases. So I would say the level of backlog shouldn't give anybody any concern. In fact, if you look at the backlog going into this year versus last year, I would say that we grew the backlog about 11%. So we should be in good position there. Kevin R. Maczka - BB&T Capital Markets, Research Division: And, Vic, I know these -- especially Doble and Filtration, these aren't typically very macro-sensitive businesses. But can you just talk about that? What kind of expectations do you have there? Or are there some specific projects that you've got or you're planning on that are driving this growth?

It's very project-specific, I would say, particularly -- I would say there's 2 things. If you look at the Filtration business, it's really the ability to get -- or to be on the platforms they're on. We kind of understand the bill schedules for those, whether it be on the aerospace side or the space side. So those are very project-specific for specific airframes or spacecrafts. So we know where those are coming. If you look at the Doble growth that we're seeing, it is a manifestation of the investment that we've made in new products over the last couple of years and just having that uptake in these products in our current markets, and we're seeing that happen. Additionally, we're starting to get some traction with some of the new international locations that we have put in place over the last year as well. So I would say that it's not -- we're not dependent on some significant growth in one market or the other as much as very specific things that we've identified that we have good insight into happening. Kevin R. Maczka - BB&T Capital Markets, Research Division: Okay. Vic, if I could ask one question on margins. The Doble and the Filtration margins are high already. But I'm just wondering with high single-digit revenue growth, is there something going on there in the mix or elsewhere that we wouldn't see more leverage on the operating margin line, as we have that kind of growth on the top?

Yes. Really, the thing I always end up looking at there is that there's some change in mix that would keep that from going up dramatically, and there is some of that. But again, we've got pretty good margin levels there already. The thing that we're also seeing is that as we get some of this consolidation completed, we're seeing those margins come through. The $2 million that Gary alluded to that we're spending to move the Crissair projects down to Canyon is going to also yield something, and that will really hit in '15, because it will take us the majority of this year to complete that move. And the only reason it takes that long is not because it's hard to physically move the product, but it's just the licensing, permitting that has to be done, and L.A. County is a little complicated and bureaucratic, to say the least. That's really the driving factor on this move. We'd love to get it done in the next 3 months. And if it were totally up to us, we'd get that done, start achieving those savings. But that's a little bit out of our control.

Kevin, let me -- this is Gary. Let me add one other thing on the mix. We've been talking about a couple of platforms that we won a couple of years ago, primarily the Airbus A350. We start shipping product there, as well as the ramp-up of Boeing's Dreamliner. And what happens in what's called low rate initial production, you're not maximizing the factory throughput. So when the A350 and Dreamliner start stepping up and enters a new business jet that we won, some of the Filtration elements and so on, when you're in that low rate run rate, your margins are compressed because obviously you're eating a little bit of overhead there against those low volumes, which then obviously in '15 and '16, when they ramp up, they reverse themselves. So you are getting a little bit of platform impact on some initial launches, which we're excited about. But in that first year, you get a little ding on the overhead absorption. Kevin R. Maczka - BB&T Capital Markets, Research Division: That's helpful, Gary. And when do those shipments start for the A350 and the Dreamliner?

Second half of '14, fiscal '14.

Our next question comes from Jon Tanwanteng from CJS Securities.

Just wanted a little more clarity regarding the potential write-down at Aclara, if you're able to discuss it. Do you have a more specific reason for that? And also how many bidders are still in the running?

Well, as far as the bidders, we can't really talk specifically about that just because it is a competitive environment. What I would say around the potential write-down is this: as you know, there's a number of factors from accounting perspective that has to go into the valuation of the asset value to it include the potential value from the acquirer as well as potential performance of the business if it's retained. And then this estimate is further complicated by the fact that Aclara's asset value increased pretty significantly in the fourth quarter. So we want to make sure that we have that covered. And so we made the decision to put a range out there. There's some activity we anticipate over the next couple of weeks, which will give us further clarity into the potential value there. And by the time we file the 10-Q we, of course, had to put a point estimate in there. But we didn't feel comfortable doing that today because of some additional information, intelligence we'll have over the next couple of weeks.

And then just concerning your outlook. Your growth and EBIT projections by segment all seem pretty healthy. I see expected tax rate is 35%, but the EPS outlook is a little bit light of what we expected, even factoring in the relocation expenses in there, that kind of leaves interest behind. So I'm just wondering what level of expense do you expect to have there and if that assumes the impact of Aclara on your debt levels at all.

Yes, what you have to do, Jon, obviously, when you're building a model there is we have debt today, obviously we anticipate covering that as a transaction, when occurs, we'll pay that off. But for modeling purposes, we just -- we're just running out the interest expense consistent with last year, obviously. If you look at -- when you see the results there, that's the assumption we made for '14. So you can kind of go in and stratify it if we complete a transaction by 12/31. You can take 1/4 of that number as the expense and 3/4 out of it. So it's a variable based on the time we anticipate. So just for modeling purposes, there's an interest expense charge in there that will evaporate upon the transaction completing. So that's where you would see a little bit of cushion, if that's the right terminology, to hold your model together.

Okay, got it. And then just one more. On Crissair, when do you expect the bulk of that relocation expense to occur?

As Vic said, the issue really isn't the physical side. It's the permitting side because it is California. And our esteemed friends out there, you know how that all works. And so we will have a little bit of costs in the first quarter. And when I say a little, that will be less than $200,000. And then we expect the permitting to be fully rationalized from the state, probably January or February. So we will physically start moving in our second fiscal quarter and the bulk of it will be in the third, and we should be fully up and running in the fourth. So that's why I said by the end of the fiscal year, but I think it'll be a little bit earlier than that. And we're using some outside help to help rationalize that and relay out the facility to maximize what it looks like on the other side, and we're real pleased with the way that's all coming together right now.

[Operator Instructions] Our next question comes from John Quealy from Canaccord Genuity.

Vic, so you talked a little bit about M&A, and obviously it sounds like you're very active taking a look at what's available. Can you characterize what you're seeing out there by segment? You've talked before that you like the utility space, but just, obviously, a different mix of business. Can you comment what multiples you're -- are looking for you guys and what else is piquing your fancy here?

Well, yes, as far as the utility space, I would say there's 2 areas we're looking at, and those would be things we can add directly to Doble. And there are some opportunities there, I'd say primarily on the international side, where we could accelerate the growth that we're looking for in the international markets. The other thing would be some adjacencies. We've done some works there to understand Doble-like businesses in the utility space that we could acquire. And there are a couple of specific things that we've looked at that they're very interested -- interesting to us. I would tell you, we really want to make sure that we get this transaction done first before we spend -- before we aggressively go after acquisitions. But we are in the process now of understanding what's available and looking at some things. On the Test side, as we've talked before, there aren't as quite many opportunities there because they have such a large market share. And then on the Filtration side, we'd love to do some more acquisitions like we've done recently. I think we're best served if were able to identify privately-owned companies that don't go to bid process because those assets get pretty expensive. So we've had some success in doing that. And Sam Chapetta, the guy that runs that business for us, has been very active in cultivating some of those relationships so that we're in a position to move forward on those aggressively, we'll have those relationships cemented or worked, so that we can have some success there.

Okay. And then in terms of Filtration or other parts of the business from a restructuring or realignment standpoint, excluding any future M&A activity, are we pretty much done with realignment activities? Or do you think it's going to be an ongoing effort for you folks to potentially consolidate facilities '14, '15, et cetera? How should we think about the bulk of the work being done there?

No, I think that's really done. I mean, if you go to those facilities, I think you'd see some very full facilities, particularly at VACCO. And once we have this consolidation with Crissair in Canyon, that's going to be a very full facility. PTI is a very optimized facility as well. We made a very small acquisition there a couple -- probably 6 months ago, we've moved all that machinery there. So the facilities we have today are very unique and very supportive of the types of products that they make and fortunately, now they're, well, almost fully utilized.

Okay. And then lastly, so for the E&P opportunity just from a secular driver, can you just flesh that out a little bit for us, what particular aspects of that technology are you looking at? Or what are the drivers [indiscernible] there?

There's a couple of things that really drive that. The success that we've had so far in the U.S. are data centers. If you think about the fact that people are very worried about the integrity of the data, the opportunity to lose that data, it's become very important. And we've now completed -- or we've been awarded 3 pretty significant jobs in the U.S., and those have all been driven by data centers. We've also had some success in Asia, where there's a very large concern about some of the, I guess, the rogue nations over there. And we've got a couple -- or 1, I should say, so far, 1 large order, again for data center. It looks like there's a lot of additional opportunities there as well just because the threats are real there. So it really is primarily about protecting data. We've done a lot of this historically in the embassies, but now it's become more of a concern for civilian organizations.

[Operator Instructions]

Okay. I think that's all the questions. I appreciate everyone's interest, and we'll be back with you as soon as we have more to report. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you all for participating. You may now disconnect.