Kate Lowrey - Director, Investor Relations Vic Richey - Chairman and Chief Executive Officer Gary Muenster - Vice President and Chief Financial Officer

Good day and welcome to the ESCO Second Quarter 2017 Conference Call. Today’s call is being recorded. With us today is 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 2017 and beyond EPS, EBITDA, EBIT, EBIT margin, growth, profitability, sales, cash flow, orders, success of new products, success in completing additional acquisitions, the results of recent acquisitions and other statements which are not strictly historical are forward-looking statements within the meaning of the safe harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions, and actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company’s operations and business environment, including but not limited to the risk factors referenced in the company’s press release issued today, which will be included as an exhibit to the company’s Form 8-K to be filed. We undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, during this call, the company may discuss some non-GAAP financial measures in describing the company’s operating results. A reconciliation of these measures to the most comparable GAAP measures can be found in the press release issued today and found on the company’s website at www.escotechnologies.com under the link Investor Relations. Now I’ll turn the call over to Vic.

Thanks, Kate and good afternoon. Before I give my perspective on the quarter, I will turn it over to Gary for a few financial highlights.

Thanks, Vic. When we laid out our detailed guidance for the beginning of the year, we noted that our quarterly earnings profile was once again back-end loaded from an EPS perspective. In that initial guidance, we also projected a more heavily weighted Q4 than previous years given the timing of several large projects across the company. As we sit here at the halfway point, the year is playing out a bit ahead of plan and the quarterly profile we projected at the start of the year is being delivered as expected. Moving on to the Q2 results. In February, Q2 EPS was projected to be in the range of $0.37 to $0.42 a share on a GAAP basis. And additionally, we indicated our GAAP earnings were impacted by some non-cash purchase accounting charges related to our recent acquisitions – when we described and quantified these incremental charges related to the inventory step up at Mayday as well as additional or incremental non-cash depreciation and amortization charges that were expected to be incurred as a result of our recent M&A activities. As noted in the release, we delivered Q2 GAAP EPS of $0.43 a share, which beat the top end of our expected range. The better-than-expected earnings were primarily driven by the continued strength of our commercial aerospace platform as well as significantly higher Navy and space products delivered in the quarter, coupled with lower corporate spending. Westland and Mayday delivered a combined $15 million in sales in Q2 along with solid EBITDA contributions. I’ll remind you in Q2 that we recognized the final piece of Mayday’s non-cash inventory step up charge, which was approximately $1 million. And as you can see from the financial tables within the release, depreciation and amortization increased $1.7 million in Q2 compared to the prior…

Thanks, Gary. I also am pleased with our second quarter performance and with the way we were at with the first half of the year. Our second quarter sales came in on plan, and we exceeded our internal targets on EBIT, EPS, cash flow and orders. As Gary mentioned, our current backlog level is the highest it’s been in a number of years, especially in Test, which bodes well for meeting our commitments over the balance of the year. We continue to deliver on our results across the 4 operating segments, and I believe our 6 months results validate our strategy and demonstrate -- the major benefits of maintaining our multi-segment business platform. Given the diversity and strength of our end markets, it allows us to manage around the normal operational and project timing issues and provides us with several alternative paths to achieve success. Our results communicated today demonstrate what, I believe, we do best: collectively, our management teams continue to execute to plan and remain focused on delivering sustainable operational results. This gives us the chance to exceed expectations despite the normal business challenges the industrial companies face regularly. Since Gary covered the detailed financials in his commentary, I’ll focus my comments on the balance of ‘17. Given our guidance for the third quarter and by reaffirming our full year EPS expectations, it’s obvious we are counting on a very strong performance in the fourth quarter. I’m confident in our ability to deliver these commitments over the balance of the year, supported by the strength of our current backlog and the detailed insight by program supporting this ramp-up in sales and earnings. So here are brief comments on the individual businesses. In Filtration, we continue to expect to deliver solid results in sales growth, EBIT and EBITDA contributions…

Okay. Well, thank you for calling in today and we look forward to talking to you next quarter.

Ladies and gentlemen, thank you for participating in today’s call. This concludes today’s program. You may all disconnect. Everyone have a great day.