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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 30, 2022

OR

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 31, 2022

Common stock, $.01 par value per share

 

25,852,570

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 30, 

    

2022

    

2021

Net sales

    

$

219,066

    

181,394

Costs and expenses:

 

 

Cost of sales

 

134,454

 

113,610

Selling, general and administrative expenses

 

47,479

 

42,882

Amortization of intangible assets

 

6,406

 

4,864

Interest expense, net

 

1,331

 

480

Other (income) expenses, net

 

(106)

 

615

Total costs and expenses

 

189,564

 

162,451

Earnings before income taxes

 

29,502

 

18,943

Income tax expense

 

6,329

 

4,034

Net earnings

$

23,173

 

14,909

 

 

Earnings per share:

 

 

Basic -

Net earnings

0.90

0.57

Diluted -

 

Net earnings

$

0.89

 

0.57

See accompanying notes to condensed consolidated financial statements.

2

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)

Nine Months Ended

June 30,

    

2022

    

2021

Net sales

$

601,004

 

509,962

Costs and expenses:

 

 

 

Cost of sales

 

371,134

 

 

316,785

Selling, general and administrative expenses

 

142,073

 

 

122,628

Amortization of intangible assets

 

19,383

 

 

14,729

Interest expense, net

 

3,084

 

 

1,453

Other income, net

 

(677)

 

 

(1,265)

Total costs and expenses

 

534,997

 

 

454,330

 

 

 

Earnings before income taxes

 

66,007

 

 

55,632

Income tax expense

 

14,727

 

 

12,501

Net earnings

$

51,280

 

43,131

 

 

Earnings per share:

 

 

Basic — Net earnings

$

1.98

1.66

Diluted — Net earnings

$

1.97

1.65

See accompanying notes to condensed consolidated financial statements.

3

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

Three Months Ended

 

Nine Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Net earnings

$

23,173

 

14,909

51,280

43,131

Other comprehensive income (loss), net of tax:

 

 

Foreign currency translation adjustments

 

(11,905)

 

535

(17,216)

6,000

Total other comprehensive income (loss), net of tax

 

(11,905)

 

535

(17,216)

6,000

Comprehensive income

$

11,268

 

15,444

34,064

49,131

See accompanying notes to condensed consolidated financial statements.

4

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

June 30, 

September 30, 

    

2022

    

2021

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

61,019

 

56,232

Accounts receivable, net of allowance for doubtful accounts of $3,328 and $3,445, respectively

 

168,720

 

146,341

Contract assets

 

115,840

 

93,771

Inventories, net

 

178,168

 

147,148

Other current assets

 

29,718

 

22,662

Total current assets

 

553,465

 

466,154

Property, plant and equipment, net of accumulated depreciation of $161,177 and $147,551, respectively

 

155,961

 

154,265

Intangible assets, net of accumulated amortization of $169,274 and $149,892, respectively

 

401,337

 

409,250

Goodwill

 

503,439

 

504,853

Operating lease assets

28,922

31,846

Other assets

 

9,562

 

10,977

Total assets

$

1,652,686

1,577,345

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

Current maturities of long-term debt and short-term borrowings

$

20,000

20,000

Accounts payable

 

70,748

56,669

Contract liabilities

 

117,863

106,045

Accrued salaries

 

35,256

39,768

Accrued other expenses

 

48,228

52,513

Total current liabilities

 

292,095

274,995

Deferred tax liabilities

 

82,580

73,560

Non-current operating lease liabilities

25,209

28,032

Other liabilities

 

41,920

47,062

Long-term debt

 

181,000

134,000

Total liabilities

 

622,804

557,649

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 30,707,567 and 30,666,173 shares, respectively

 

307

307

Additional paid-in capital

 

299,863

297,644

Retained earnings

 

876,050

830,989

Accumulated other comprehensive loss, net of tax

 

(19,377)

(2,161)

 

1,156,843

1,126,779

Less treasury stock, at cost: 4,854,997 and 4,604,741 common shares, respectively

 

(126,961)

(107,083)

Total shareholders’ equity

 

1,029,882

1,019,696

Total liabilities and shareholders’ equity

$

1,652,686

1,577,345

See accompanying notes to condensed consolidated financial statements.

5

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

Nine Months Ended

June 30, 

    

2022

    

2021

    

Cash flows from operating activities:

 

  

 

  

 

Net earnings

$

51,280

 

43,131

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

Depreciation and amortization

 

36,247

 

30,259

Stock compensation expense

 

5,318

 

5,386

Changes in assets and liabilities

 

(60,172)

 

2,520

Gain on sale of building and land

(1,950)

Effect of deferred taxes

9,020

(3,946)

Net cash provided by operating activities

 

41,693

 

75,400

Cash flows from investing activities:

 

 

Acquisition of business, net of cash acquired

 

(15,592)

 

(6,684)

Proceeds from sale of building and land

1,950

Additions to capitalized software

 

(9,359)

 

(6,500)

Capital expenditures

(25,893)

(17,887)

Net cash used by investing activities

 

(50,844)

 

(29,121)

Cash flows from financing activities:

 

 

Proceeds from long-term debt and short-term borrowings

 

111,000

 

80,000

Principal payments on long-term debt and short-term borrowings

 

(64,000)

 

(94,368)

Purchases of common stock into treasury

 

(19,878)

 

Dividends paid

 

(6,219)

 

(6,251)

Other

 

(2,787)

 

(1,672)

Net cash provided (used) by financing activities

18,116

(22,291)

Effect of exchange rate changes on cash and cash equivalents

(4,178)

1,811

Net increase in cash and cash equivalents

4,787

25,799

Cash and cash equivalents, beginning of period

56,232

52,560

Cash and cash equivalents, end of period

$

61,019

78,359

 

 

Supplemental cash flow information:

 

 

Interest paid

$

1,685

 

316

Income taxes paid (including state and foreign)

 

5,574

 

21,982

See accompanying notes to condensed consolidated financial statements.

6

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    BASIS OF PRESENTATION

The accompanying 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 consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures required for consolidated annual financial statements by accounting principles generally accepted in the United States of America (GAAP).

The Company’s results for the three-month and nine-month periods ended June 30, 2022 are not necessarily indicative of the results for the entire 2022 fiscal year. References to the third quarters of 2022 and 2021 represent the fiscal quarters ended June 30, 2022 and 2021, respectively. The preparation of consolidated 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 deferred revenue amounts have been reclassified to noncurrent to conform with the current year 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 performance-accelerated restricted shares (restricted shares) 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 30, 

Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Weighted Average Shares Outstanding Basic

 

25,856

 

26,045

25,959

26,040

Dilutive Restricted Shares

94

169

91

159

Weighted Average Shares Outstanding Diluted

 

25,950

 

26,214

26,050

26,199

3.    ACQUISITION

On November 4, 2021, the Company acquired Networks Electronic Company, LLC (NEco) for a purchase price of approximately $15.4 million, net of cash acquired. NEco, based in Chatsworth, California, provides miniature electro-explosive devices utilized in mission-critical defense and aerospace applications. Since the date of acquisition, the operating results for the NEco business have been included as part of PTI in the A&D segment. The acquisition date fair value of the assets acquired and liabilities assumed primarily were as follows: approximately $0.6 million of accounts receivable, $1.5 million of inventory, $0.2 million of property, plant and equipment, $0.7 million of accounts payable and accrued expenses, $8.1 million of identifiable intangible assets, mainly consisting of customer relationships totaling $6.3 million. The acquired goodwill of $5.7 million related to excess value associated with opportunities to expand the services and products that the Company can offer to its customers. The Company anticipates that the goodwill will be deductible for tax purposes.

4.    SHARE-BASED COMPENSATION

The Company provides compensation benefits to certain key employees under several share-based plans providing for performance-accelerated and/or time-vested restricted stock unit awards, and to non-employee directors under a non-employee directors compensation plan.

7

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

Compensation expense related to the PARS/RSU awards was $1.6 million and $4.4 million for the three and nine-month periods ended June 30, 2022, respectively, and $2.5 million and $4.5 million for the corresponding periods in 2021. As of June 30, 2022, there were 265,643 unvested stock units outstanding.

Non-Employee Directors Plan

Compensation expense related to the non-employee director grants was $0.3 million and $0.9 million for the three and nine-month periods ended June 30, 2022, respectively, and $0.3 million and $1.0 million for the corresponding periods in 2021.

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 $1.9 million and $5.3 million for the three and nine-month periods ended June 30, 2022, respectively, and $2.8 million and $5.5 million for the corresponding periods in 2021. The total income tax benefit recognized in results of operations for share-based compensation arrangements was $0.4 million and $1.0 million for the three and nine-month periods ended June 30, 2022, respectively, and $0.4 million and $1.1 million for the corresponding periods in 2021. As of June 30, 2022, there was $12.9 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 1.9 years.

5.    INVENTORIES

Inventories, net, consist of the following:

June 30, 

September 30, 

(In thousands)

    

2022

    

2021

Finished goods

$

39,904

 

32,998

Work in process

 

43,408

 

34,201

Raw materials

 

94,856

 

79,949

Total inventories, net

$

178,168

 

147,148

8

6.

GOODWILL AND OTHER INTANGIBLE ASSETS

Included on the Company’s Consolidated Balance Sheets at June 30, 2022 and September 30, 2021 are the following intangible assets gross carrying amounts and accumulated amortization:

    

June 30, 

    

September 30, 

(Dollars in thousands)

    

2022

    

2021

Goodwill

$

503,439

    

504,853

 

Intangible assets with determinable lives:

 

Patents

 

Gross carrying amount

$

2,246

2,131

Less: accumulated amortization

 

1,059

972

Net

$

1,187

1,159

 

Capitalized software

 

Gross carrying amount

$

103,030

93,671

Less: accumulated amortization

 

68,643

63,740

Net

$

34,387

29,931

 

Customer relationships

 

Gross carrying amount

$

290,133

288,530

Less: accumulated amortization

 

92,943

80,882

Net

$

197,190

207,648

 

Other

 

Gross carrying amount

$

13,885

13,080

Less: accumulated amortization

 

6,629

4,301

Net

$

7,256

8,779

Intangible assets with indefinite lives:

 

Trade names

$

161,317

161,733

The changes in the carrying amount of goodwill attributable to each business segment for the nine months ended June 30, 2022 is as follows:

Aerospace

(Dollars in millions)

    

USG

    

Test

    

& Defense

    

Total

Balance as of September 30, 2021

366.5

 

34.1

 

104.3

 

504.9

Acquisition activity and adjustments

5.7

5.7

Foreign currency translation

(7.2)

(7.2)

Balance as of June 30, 2022

$

359.3

34.1

110.0

503.4

7.    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, Utility Solutions Group (USG), and RF Shielding and Test (Test).

The Aerospace & Defense segment’s operations consist of PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair), Westland Technologies Inc. (Westland), Mayday Manufacturing Co. (Mayday) and Globe Composite Solutions, LLC (Globe). 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; and metal processing services.

9

The 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 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.

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 which provide its customers with the ability to identify, measure and contain magnetic, electromagnetic and acoustic energy. ETS-Lindgren also manufactures radio frequency shielding products and components used by manufacturers of medical equipment, communications systems, electronic products, and shielded rooms for high-security data processing and secure communication.

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 30, 

Ended June 30, 

(In thousands)

    

2022

    

2021

    

2022

    

2021

NET SALES

  

  

  

  

Aerospace & Defense

$

92,606

85,576

247,671

234,720

USG

67,201

47,704

194,877

141,799

Test

59,259

48,114

158,456

133,443

Consolidated totals

$

219,066

181,394

601,004

509,962

EBIT

Aerospace & Defense

$

20,738

16,714

45,042

41,980

USG

13,135

8,227

37,840

27,683

Test

8,354

6,751

20,813

17,781

Corporate (loss)

(11,394)

(12,269)

(34,604)

(30,359)

Consolidated EBIT

30,833

19,423

69,091

57,085

Less: Interest expense

(1,331)

(480)

(3,084)

(1,453)

Earnings before income taxes

$

29,502

18,943

66,007

55,632

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.

10

8.    DEBT

The Company’s debt is summarized as follows:

    

June 30, 

September 30, 

(In thousands)

    

2022

    

2021

Total borrowings

$

201,000

 

154,000

Current portion of long-term debt

 

(20,000)

 

(20,000)

Total long-term debt, less current portion

$

181,000

 

134,000

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 eight banks led by JP Morgan Chase Bank, N.A., as Administrative Agent. The Credit Facility matures September 27, 2024.

At June 30, 2022, the Company had approximately $291.0 million available to borrow under the Credit Facility, plus the $250 million increase option, subject to lender approval, in addition to $61.0 million cash on hand. The Company classified $20 million as the current portion of long-term debt as of June 30, 2022, as the Company intends to repay this amount within the next twelve months; however, the Company has no contractual obligation to repay such amount during the next twelve months. The letters of credit issued and outstanding under the Credit Facility totaled $7.8 million at June 30, 2022.

Interest on borrowings under the Credit Facility is calculated at a spread over either the New York Federal Reserve Bank Rate, the prime rate or the London Interbank Offered Rate (LIBOR), depending on various factors. The Credit Facility also requires a facility fee ranging from 10 to 25 basis points per annum on the unused portion. The Credit Facility is secured by the unlimited guaranty of the Company’s direct and indirect material U.S. subsidiaries and the pledge of 100% of the equity interests of its direct and indirect material foreign subsidiaries. The financial covenants of the Credit Facility include a leverage ratio and an interest coverage ratio. The weighted average interest rates were 2.20% and 1.57% for the three and nine-month periods ending June 30, 2022, respectively, and 1.16% and 1.33% for the three and nine-month periods ending June 30, 2021. As of June 30, 2022, the Company was in compliance with all covenants.

9.    INCOME TAX EXPENSE

The third quarter 2022 effective income tax rate was 21.5% compared to 21.3% in the third quarter of 2021. The effective income tax rate in the first nine months of 2022 was 22.3% compared to 22.5% for the first nine months of 2021. The income tax expense in the third quarter and first nine months of 2022 was favorably impacted by tax return to provision true-ups on U.S. tax on the distribution of foreign earnings and the re-rating of deferred taxes as a result of a Vermont law change, decreasing the third quarter and year-to-date effective tax rate by 1.6% and 0.7%, respectively. The income tax expense in the third quarter and first nine months of 2021 was favorably impacted by a tax return to provision true-up for foreign derived intangible income and other 2020 true-ups decreasing the third quarter and year-to-date effective tax rate by 3.9% and 1.2% respectively.

11

10.  SHAREHOLDERS’ EQUITY

The change in shareholders’ equity for the third quarter and first nine months of 2022 and 2021 is shown below (in thousands):

Three Months Ended June 30, 

Nine Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Common stock

Beginning balance

307

306

307

306

Stock plans

1

1

Ending balance

307

307

307

307

Additional paid-in-capital

Beginning balance

298,353

295,796

297,644

293,682

Stock plans

1,510

782

2,219

2,896

Ending balance

299,863

296,578

299,863

296,578

Retained earnings

Beginning balance

854,946

799,884

830,989

775,829

Net earnings common stockholders

23,173

14,909

51,280

43,131

Dividends paid

(2,069)

(2,084)

(6,219)

(6,251)

Ending balance

876,050

812,709

876,050

812,709

Accumulated other comprehensive income (loss)

Beginning balance

(7,472)

1,808

(2,161)

(3,657)

Foreign currency translation

(11,905)

535

(17,216)

6,000

Ending balance

(19,377)

2,343

(19,377)

2,343

Treasury stock

Beginning balance

(124,961)

(107,134)

(107,083)

(107,134)

Issued under stock plans /(repurchased)

(2,000)

51

(19,878)

51

Ending balance

(126,961)

(107,083)

(126,961)

(107,083)

Total equity

1,029,882

1,004,854

1,029,882

1,004,854

12

11.  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 30, 2022 and September 30, 2021 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.

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 ended June 30, 2022 and 2021.

13

12.  REVENUES

Disaggregation of Revenues

Revenues by customer type, geographic location, and revenue recognition method for the three and nine-month periods ended June 30, 2022 are presented in the tables 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 below also include a reconciliation of the disaggregated revenue within each reportable segment.

Three Months Ended June 30, 2022

Aerospace

(In thousands)

    

& Defense

    

USG

    

Test

    

Total

Customer type:

 

  

 

  

 

  

 

  

Commercial

$

38,918

$

65,610

$

54,449

$

158,977

U.S. Government

 

53,688

 

1,591

 

4,810

 

60,089

Total revenues

$

92,606

$

67,201

$

59,259

$

219,066

65

Geographic location:

 

 

 

 

United States

$

79,536

$

41,822

$

34,662

$

156,020

International

 

13,070

 

25,379

 

24,597

 

63,046

Total revenues

$

92,606

$

67,201

$

59,259

$

219,066

Revenue recognition method:

 

 

 

 

Point in time

$

35,238

$

53,656

$

15,827

$

104,721

Over time

 

57,368

 

13,545

 

43,432

 

114,345

Total revenues

$

92,606

$

67,201

$

59,259

$

219,066

Nine months ended June 30, 2022

Aerospace

(In thousands)

    

& Defense

    

USG

    

Test

    

Total

Customer type:

 

  

 

  

 

  

 

  

Commercial

$

100,407

$

191,832

$

147,390

$

439,629

U.S. Government

 

147,264

 

3,045

 

11,066

 

161,375

Total revenues

$

247,671

$

194,877

$

158,456

$

601,004

Geographic location:

 

 

 

 

United States

$

212,849

$

122,021

$

88,708

$

423,578

International

 

34,822

 

72,856

 

69,748

 

177,426

Total revenues

$

247,671

$

194,877

$

158,456

$

601,004

Revenue recognition method:

 

 

 

 

Point in time

$

99,464

$

155,693

$

43,488

$

298,645

Over time

 

148,207

 

39,184

 

114,968

 

302,359

Total revenues

$

247,671

$

194,877

$

158,456

$

601,004

14

Revenues by customer type, geographic location, and revenue recognition method for the three and nine-month periods ended June 30, 2021 are presented in the tables below.

Three months ended June 30, 2021

Aerospace

 

(In thousands)

    

& Defense

    

USG

    

Test

    

Total

Customer type:

 

  

 

  

 

  

 

  

Commercial

 

$

34,708

 

$

46,735

 

$

42,063

 

$

123,506

U.S. Government

50,868

969

6,051

57,888

Total revenues

 

$

85,576

 

$

47,704

 

$

48,114

 

$

181,394

Geographic location:

United States

 

$

75,701

 

$

32,111

 

$

27,719

 

$

135,531

International

9,875

15,593

20,395

45,863

Total revenues

 

$

85,576

 

$

47,704

 

$

48,114

 

$

181,394

Revenue recognition method:

Point in time

 

$

37,513

 

$

35,242

 

$

9,673

 

$

82,428

Over time

48,063

12,462

38,441

98,966

Total revenues

 

$

85,576

 

$

47,704

 

$

48,114

 

$

181,394

Nine months ended June 30, 2021

Aerospace

 

(In thousands)

    

& Defense

    

USG

    

Test

    

Total

Customer type:

Commercial

 

$

95,712

 

$

139,149

 

$

118,089

 

$

352,950

U.S. Government

139,008

2,650

15,354

157,012

Total revenues

 

$

234,720

 

$

141,799

 

$

133,443

 

$

509,962

Geographic location:

United States

 

$

205,527

 

$

96,601

 

$

73,950

 

$

376,078

International

29,193

45,198

59,493

133,884

Total revenues

 

$

234,720

 

$

141,799

 

$