INDEX TO ANNUAL REPORT ON FORM 10-K

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FORWARD-LOOKING INFORMATION

Statements contained in this Form 10-K regarding future events and the Company’s future results that are based on current expectations, estimates, forecasts and projections about the Company’s performance and the industries in which the Company operates are considered “forward-looking statements” within the meaning of the safe harbor provisions of the Federal securities laws. These include, without limitation, statements about: the effects of the continuing COVID-19 pandemic and its known or unknown variants on the Company’s business and results of operations; the adequacy of the Company’s buildings, machinery and equipment; the adequacy of the Company’s credit facilities and future cash flows; the outcome of litigation, claims and charges; future costs relating to environmental matters; repayment of debt within the next twelve months; the outlook for all or any part of the Company’s business, including amounts, timing and sources of future sales, revenues, sales growth, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS and comparisons with the current year; interest on Company debt obligations; the ability of expected hedging gains or losses to be offset by losses or gains on related underlying exposures; the Company’s ability to increase shareholder value; acquisitions; income tax expense and the Company’s expected effective tax rate; the recognition of unrecognized compensation costs related to share-based compensation arrangements; the Company’s exposure to market risk related to interest rates and to foreign currency exchange risk; the likelihood of future variations in the Company’s assumptions or estimates used in recording contracts and expected costs at completion under the percentage of completion method; the Company’s estimates and assumptions used in the preparation of its financial statements; costs and estimated earnings from long-term contracts; valuation of inventories; estimates of uncollectible accounts receivable; the risk of goodwill impairment; the Company’s estimates utilized in software revenue recognition, non-cash depreciation and the amortization of intangible assets; the valuation of deferred tax assets; estimates of future cash flows and fair values in connection with the risk of goodwill impairment; amounts of NOL not realizable and the timing and amount of the reduction of unrecognized tax benefits; the effects of implementing recently issued accounting pronouncements; and any other statements contained herein which are not strictly historical. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, estimates, variations of such words, and similar expressions are intended to identify such forward-looking statements.

Investors are cautioned that such statements are only predictions and speak only as of the date of this Form 10-K, and the Company undertakes no duty to update the information in this Form 10-K except as may be required by applicable laws or regulations. 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 those described herein under “Item 1A, Risk Factors,” and the following: the duration, scope and effects of the COVID-19 pandemic and its variants, including the impact of vaccine mandates or other restrictive protocols on our business and workforce;workforce and the availability and acceptance of effective vaccines by enough of the U.S. and the world’s population to curtail or alleviate the seriousness of the pandemic; the impacts of climate change and related regulation of greenhouse gases, the impacts of labor disputes, civil disorder, wars, elections, political changes, tariffs and trade disputes, terrorist activities, cyberattacks or natural disasters on the Company’s operations and those of the Company’s customers and suppliers; disruptions in manufacturing or delivery arrangements due to shortages or unavailability of materials or components or supply chain disruptions; inability to access work sites; the timing and content of future customer orders; the appropriation and allocation of Government funds; the termination for convenience of Government and other customer contracts or orders; the timing and magnitude of future contract awards; weakening of economic conditions in served markets; the success of the Company’s competitors; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties or data breaches; the availability of selected acquisitions; defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs and availability of certain raw materials; material changes in the cost of credit; changes in laws and regulations including but not limited to changes in accounting standards and taxation requirements; costs relating to environmental matters; litigation uncertainty; the Company’s inability to successfully execute internal restructuring and other plans; and the integration and performance of recently acquired businesses.

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PART I

Item 1. Business

The Company

The Registrant is ESCO Technologies Inc., sometimes referred to in this report as ESCO. Except where the context indicates otherwise, the terms “Company”, “we”, “our” and “us” are used in this report to refer to ESCO together with its subsidiaries through which its businesses are conducted. We are:

Our business is focused on generating predictable and profitable long-term growth through continued innovation and expansion of our product offerings across each of our business segments. We conduct our business through a number of wholly-owned direct and indirect subsidiaries. Our corporate strategy is centered on a multi-segment approach designed to enhance the strength and sustainability of sales and earnings growth by providing lower risk through diversification. Our stock is listed on the New York Stock Exchange, where its ticker symbol is “ESE”.

Our fiscal year ends September 30. Throughout this Annual Report, unless the context indicates otherwise, references to a year (for example 2021)2022) refer to our fiscal year ending on September 30 of that year, and references to the “Consolidated Financial Statements” refer to our Consolidated Financial statements included in the Financial Information section of this Annual Report beginning on page F-1, an Index to which is provided on page F-1.

We classify our business operations into three segments for financial reporting purposes, although for reporting certain financial information we treat Corporate activities as a separate segment. Our three operating segments during 2021,2022, together with the significant domestic and foreign operating subsidiaries within each segment, are as follows:

Aerospace & Defense (A&D):

VACCO Industries (VACCO)

PTI Technologies Inc. (PTI)

Crissair, Inc. (Crissair)

Globe Composite Solutions, LLC (Globe)

Mayday Manufacturing Co. (Mayday) (includes former subsidiary Hi-Tech Metals, Inc., which was merged into Mayday effective December 31, 2021)

Networks Electronic Co. (NEco)

Westland Technologies, Inc. (Westland)

Hi-Tech Metals, Inc. (Hi-Tech)

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Utility Solutions Group (USG):

Doble Engineering Company

I.S.A. – Altanova Group S.r.l. and affiliates (Altanova)

Morgan Schaffer Ltd. (Morgan Schaffer)

NRG Systems, Inc. (NRG)

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Except as the context otherwise indicates, the term “Doble” as used herein includes Doble Engineering Company and ESCO’s other USG subsidiaries except NRG.

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RF Shielding and Test (Test):

ETS-Lindgren Inc.

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Except as the context otherwise indicates, the term “ETS-Lindgren” as used herein includes ETS-Lindgren Inc. and ESCO’s other Test segment subsidiaries.

Our operating subsidiaries are engaged primarily in the research, development, manufacture, sale and support of the products and systems described below. Their respective businesses are subject to a number of risks and uncertainties, including without limitation those discussed in Item 1A, “Risk Factors.” See also Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Forward-Looking Information.”

We are continually seeking ways to reduce our overall operating costs, streamline business processes and enhance the branding of our products and services. During 2019, Doble sold its headquarters facility in Watertown, Massachusetts, andFor example, during 2020 itDoble consolidated its headquarters operations into a single, more cost-efficient facility in Marlborough, Massachusetts. InMassachusetts, and in 2021 Dobleit closed its facility in Toronto, Ontario and consolidated its Manta product line into its existing production capacity for Doble instruments.

We are also continually seeking opportunities to supplement our growth by making strategic acquisitions. In 2019 we acquired Globe Composite Solutions, LLC; in October 2020 we acquired Advanced Technology Machining, Inc. (ATM) and its sister company TECC Grinding, Inc.; in July 2021 we acquired I.S.A Altanova Group S.r.l. and its affiliated companies (Altanova); and in August 2021 we acquired the assets of Phenix Technologies Inc. (Phenix).; and in November 2021 we acquired Networks Electronic Company, LLC (NEco), a provider of miniature electro-explosive components and subsystems supporting mission, flight, and life-critical applications to the aerospace and defense end-markets. Information about these acquired businesses is provided in the following section, “Products,” and in Note 2 to the Consolidated Financial Statements.

In December 2019, we sold the businesses comprising our former Technical Packaging segment and used the proceeds from the sale to pay down debt and for other corporate purposes, including the termination of our defined benefit pension plan.purposes. The Technical Packaging segment was reported as Discontinued Operations in 2020 and is presented accordingly for all periods in this report.2020. See Note 3 to the Consolidated Financial Statements.

Products

Our principal products are described below. See Note 12 to the Consolidated Financial Statements for financial information regarding business segments and 10% customers.

A&D

Beginning in the first quarter of 2020, we renamed our Filtration/Fluid Flow segment as Aerospace & Defense to better reflect the composition of the segment’s products, end markets and customer characteristics. The A&D segment’s individual legal and operating entities and historical financial results are unchanged from what was formerly presented as Filtration/Fluid Flow.

The A&D segment accounted for approximately 44%41%, 48%44% and 45%48% of our total revenue in 2022, 2021 and 2020, respectively. This segment has seven facilities in the United States and 2019, respectively.one in Mexico.

Our companies within this segment primarily design and manufacture specialty filtration, fluid control and naval products, including hydraulic filter elements, and fluid control devices, and precision-tolerance machined components 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 componentsand miniature electro-explosive devices for the aerospacemilitary aircraft ejection seats and defense industry; and metal processing services.The segment has six facilities in the United States and one in Mexico.missile arming devices.

USG

Our USG segment accounted for approximately 28%32%, 26%28% and 29%26% of our total revenue in 2022, 2021 and 2020, respectively. This segment has seven facilities in the United States, one in Canada, and 2019, respectively.eight outside North America.

Doble is an industry leader in the development, manufacture and delivery of diagnostic testing and data management 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 instruments and condition monitoring systems, expert consulting, and testing services. The acquisition of Phenix’s assets has enhanced Doble’s high-voltage,high voltage, high current, high power test systems, components and solutions. NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar. Doble and NRG together have eight facilities in the United States and one in Canada.

Altanova, headquartered in Taino, Italy, provides products and services in more than 100 countries. Its strong market share in Europe and Asia creates a significant international platform for our USG segment and fills important product gaps and geographies not previously served by our existing products and solutions. Doble’s offices outside North America have been consolidated with Altanova’s, and going forward we expect that Altanova will represent their combined businesses in markets outside the U.S. and Canada.

limited term, and there can be no assurance that third parties will not infringe or design around our intellectual property. Policing the unauthorized use of intellectual property is difficult, and infringement and misappropriation are persistent problems for many companies, particularly in some international markets, and in some cases, we may elect not to pursue an unauthorized user due to the

electronic components can be subject to supply chain constraints. USG purchases only a limited amount of raw materials.materials, although some USG products require helium, which may at times be in short supply.

operate in a supportive culture that incorporates strong ethical behavior and reinforces our human rights commitment through annual ethics training which incorporates instruction on ethics, human rights, anti-human trafficking and anti-harassment, as well as other areas of importance such as supervisory training on diversity and inclusion.anti-harassment.

COVID-19 Related Risks

The continuation of the COVID-19 pandemic and its widespread effects on the United States and global economiesimpacts of known or unknown COVID-19 variants may have a material adverse effect on our business which could continue for an unknown period of time.

The effects of the COVID-19 global pandemic has significantly increased ourcontinue to create or increase the economic, demand and operational uncertainty. The rapid worldwide spreaduncertainties of the COVID-19 virus, as well as the measures governments and private organizations have implemented in order to stem the spread of this pandemic, is resulting in significant worldwide disruptions and contractions in economic activity, including those resulting from “shelter in place” and similar orders, restrictions on non-essential business operations and travel, and increased unemployment.our business. We have global operations, customers and suppliers, including in countries most impacted by COVID-19, and both the disease itself and the actions taken around the world to slow the spread of COVID-19 and its variants have impacted our customers and suppliers; and future developments could cause further disruptions to the Company due to the interconnected nature of our business relationships.

We have been and may continue to be subject to postponement or cancellation of certain contracts to which we are a party. We have also suffered a significant reduction in our commercial aircraft business due to slowdowns in OEM production and reduced flights, and this business is unlikely to return to pre-COVID levels for an unknown but possibly significant period of time. Current restrictions and conditions have and may continue to prevent or delay us in accessing customer facilities to deliver products and provide services, and disrupt or delay our supply chain. Even though our businesses have been classified as essential businesses and allowed to remain in operation in jurisdictions in which facility closures have been mandated, we can give no assurance that this will not change in the future or that our businesses will be classified as essential in each of the jurisdictions in which we operate. Further, although we have implemented prevention measures at our own facilities, including enhanced cleaning procedures, social distancing efforts and working from home where feasible, and substantially all of our facilities have so far remained in business, we have occasionally incurred short-term disruptions in some facility operations, and due to the nature of the COVID-19 pandemic there can be no assurance that we will not suffer facility closures or other adverse effects on our business operations in the future.

The facilities of our suppliers and customers have experienced, and may continue to experience, disruptions in manufacturing and supply arrangements due to the loss or disruption of critical manufacturing and supply elements, such as raw materials or other finished product components, transportation, workforce or other manufacturing and distribution capability. We may also experience failure of third parties on which we rely, including our suppliers, distributors and contractors, to meet their obligations to us, or significant restrictions in their ability to do so. In addition, our compliance with applicable safety requirements may cause us to lose critical employees who are unwilling or unable to comply with the requirements.

These facts and circumstances may have a material adverse effect on our business, results of operations, financial condition and cash flows. The extent to which the COVID-19 pandemic will impact our business, results of operations, financial condition and cash flows in the future, and the length of time these impacts may continue, will depend on future developments that are highly uncertain and cannot be predicted at this time, including new information that may emerge concerning the severity of COVID-19 and its variants, the longevity of COVID-19 and its variants, and the actions taken to contain its impact.their impacts.

decrease in our sales. For example, a substantial portion of PTI’s revenue is generated from commercial aviation aftermarket sales. As certain aircraft are retired and replaced by newer aircraft, there could be a corresponding decrease in sales associated with our current products. Such a decrease could adversely affect our operating results.

Risks Related to our International Business

Negative worldwide economic conditions and related credit shortagesinflation, rising interest rates and a potential economic slowdown could result in a decrease in our sales and an increase in our operating costs, which could adversely affect our business and operating results.

If there is a worsening of global and U.S. economic and financial market conditions and additional tightening of global credit markets, many of our customers may further delay or reduce their purchases of our products. Uncertainties in the global economy may cause the utility industry and commercial market customers to experience shortagesincreases in available credit,cost of capital, which could limit capital spending. To the extent this problem affects our customers, our sales and profits could be adversely affected. Likewise, if our suppliers face challenges in obtaining credit, they may have to increase their prices or become unable to continue to offer the products and services we use to manufacture our products, which could have an adverse effect on our business, results of operations and financial condition.

Increases in tariffs or other changes in trade policies could adversely affect our ability to compete.

In addition to the effects of increases in market prices, increases in domestic import tariffs could increase the prices to us of our foreign-sourced raw materials and product components and thereby require us to either increase our selling prices or accept reduced margins. In the case of ETS-Lindgren, for example, tariffs on imports of Chinese goods have raised the costs of components purchased by it either from its China facility or from other Chinese suppliers, and its margins in China have been impacted by the increased costs of its products made in the U.S. and sold through its Chinese business.

In addition, increases in foreign-country tariffs applicable to our exported products could increase the effective prices of our products to our customers in those countries unless we are able to offset the tariffs by reducing our selling prices. Any or all of these factors could decrease the demand for our products, reduce our profitability, and/or make our products less competitive than those of other manufacturers that are not subject to the same tariffs. For example, since 2019 increased tariffs imposed by China on U.S. origin goods have adversely affected sales of NRG’s products in China by increasing their prices to Chinese customers.

Our international sales are also subject to other risks inherent in foreign commerce, including currency fluctuations and devaluations, differences in foreign laws, uncertainties as to enforcement of contract or intellectual property rights, and difficulties in negotiating and resolving disputes with our foreign customers.

Our governmental sales and our international and export operations are subject to special U.S. and foreign government laws and regulations which may impose significant compliance costs, create reputational and legal risk, and impair our ability to compete in international markets.

The international scope of our operations subjects us to a complex system of commercial and trade regulations around the world, and our foreign operations are governed by laws and business practices that often differ from those of the U.S. In addition, laws such as the U.S. Foreign Corrupt Practices Act and similar laws in other countries increase the need for us to manage the risks of improper conduct not only by our own employees but by distributors and contractors who may not be within our direct control. Many of our exports are of products which are subject to U.S. Government regulations and controls such as the U.S. International Traffic in Arms Regulations (ITAR), which impose certain restrictions on the U.S. export of defense articles and services, and these restrictions are subject to change from time to time, including changes in the countries into which our products may lawfully be sold.

If we were to fail to comply with these laws and regulations, we could be subject to significant fines, penalties and other sanctions including the inability to continue to export our products or to sell our products to the U.S. Government or to certain other customers. In addition, some of these regulations may be viewed as too restrictive by our international customers, who may elect to develop their own domestic products or procure products from other international suppliers which are not subject to comparable export restrictions; and the laws, regulations or policies of certain other countries may also favor their own domestic suppliers over foreign suppliers such as the Company.

Risks Related to our Manufacturing and Sales Operations and Technology

Disruptions of Our Information Technology Systems, or Information Security and/or Data Privacy Breaches, Could Adversely Affect Our Business.

We have many information technology systems that are important to the operation of our businesses, some of which are managed by third parties. These systems are used to obtain, process, transmit and store electronic information and to manage or support a variety of

As another example, PTI has a single supplier of critical electronic components for a significant aircraft production program, and if this supplier were to discontinue producing these components the need to secure another source could pose a risk to the production program. A significant disruption in the supply of those products or others provided by a small number of suppliers could negatively affect the timely delivery of products to customers as well as future sales, which could increase costs and reduce margins.

Certain of our other businesses are dependent upon sole source or a limited number of third-party manufacturers of parts and components. Many of these suppliers are small businesses. Since alternative supply sources are limited, there is an increased risk of adverse impacts on our production schedules and profits if our suppliers were to default in fulfilling their price, quality or delivery obligations. In addition, some of our customers or potential customers may prefer to purchase from a supplier which does not have such a limited number of sources of supply.

Increases in prices of raw material and components, and decreased availability of such items, could adversely affect our business.

The cost of raw materials and product components is a major element of the total cost of many of our products. For example, our Test segment’s critical components rely on purchases of raw materials from third parties. Increases in the prices of raw materials (such as steel, copper, nickel, zinc, wood and petrochemical products) could have an adverse impact on our business by, among other things, increasing costs and reducing margins. Aerospace-grade titanium and gaseous helium, important raw materials for our A&D segment, may at times be in short supply; in addition, although we try to tie our supplier pricing to long-term contracts this is not always possible, and we are experiencing price inflation on a number of products. Further, some of Doble’s items of equipment which are provided to its customers for their use are in the maturity of their life cycles, which creates the risk that replacement components may be unavailable or available only at increased costs. Doble hasWe have experienced COVID-related short term disruptions in the supply chain which have periodically resulted in extended lead times and cost increases, and the long term impacts of these disruptions are uncertain. See also “COVID-19 Related Risks” above.

In addition, our reliance on sole or limited sources of supply of raw materials and components in each of our segments could adversely affect our business, as described in the preceding Risk Factor. The potential physical impacts of climate change, such as increased frequency and severity of storms, floods and other climatic events, could disrupt our supply chain, and cause our suppliers to incur significant costs in preparing for or responding to these effects. These and other weather-created disruptions in supply, in addition to affecting costs, could impact our ability to procure an adequate supply of these raw materials and components, and delay or prevent deliveries of products to our customers. The entire electronics industry is currently disrupted due to limited sources of supply, and we

Product defects or customer claims could result in costly fixes, litigation and damages.

Our business exposes us to potential product liability risks that are inherent in the design, manufacture and sale of our products and the products of third-party vendors which we use or resell, many of which are mission-critical to our customers. If there are claims related to defective products (under warranty or otherwise), particularly in a product recall situation, we could be faced with significant expenses in replacing or repairing the product. For example, the A&D segment obtains raw materials, machined parts and other product components from suppliers who provide certifications of quality which we rely on. Should these product components be defective and pass undetected into finished products, or should a finished product contain a defect, we could incur significant costs for repairs, re-work and/or removal and replacement of the defective product. In addition, if a dispute over product claims cannot be settled, arbitration or litigation may result, requiring us to incur attorneys’ fees and exposing us to the potential of damage awards against us.

A major portion of our Test segment’s business involves working in conjunction with general contractors to produce complex building components constructed on-site, such as electronic test chambers, secure communication rooms and MRI facilities. If there are performance problems caused by either us or a contractor, they could result in cost overruns and may lead to a dispute as to which party is responsible. The resolution of such disputes can involve arbitration or litigation, and can cause us to incur significant expense including attorneys’ fees. In addition, these disputes could result in a reduction in revenue, a loss on a particular project, or even a significant damages award against us.

Despite our efforts, we may be unable to adequately protect our intellectual property.

Much of our business success depends on our ability to protect and freely utilize our various intellectual properties, including both patents and trade secrets. Despite our efforts to protect our intellectual property, unauthorized parties or competitors may copy or otherwise obtain and use our products and technology, particularly in foreign countries such as China where the laws may not protect our proprietary rights as fully as in the United States. Our current and future actions to enforce our proprietary rights may ultimately not be successful; or in some cases we may not elect to pursue an unauthorized user due to the high costs and uncertainties associated with litigation. We may also face exposure to claims by others challenging our intellectual property rights. Any or all of these actions may divert our resources and cause us to incur substantial costs.

Environmental laws and regulations or environmental contamination could increase our expenses and adversely affect our profitability.

Our operations and properties are subject to U.S. and foreign environmental laws and regulations governing, among other things, the generation, storage, emission, discharge, transportation, treatment and disposal of hazardous materials and the clean-up of contaminated properties. In addition, governments around the world are increasingly focused on enacting laws and regulations regarding climate change and regulation of greenhouse gases. These regulations, and changes to them, could increase our cost of compliance, and our failure to comply could result in the imposition of significant fines, suspension of production, alteration of

communication technologies were developed that required less testing or different types of testing, our sales of certain testing products could be significantly reduced.

We may not be able to identify suitable acquisition candidates or complete acquisitions successfully, which may inhibit our rate of growth.

As part of our growth strategy, we plan to continue to pursue acquisitions of other companies, assets and product lines that either complement or expand our existing business. However, we may be unable to implement this strategy if we are unable to identify suitable acquisition candidates or consummate future acquisitions at acceptable prices and terms. We expect to face competition for acquisition candidates which may limit the number of acquisition opportunities available to us and may result in higher acquisition prices. As a result, we may be limited in the number of acquisitions which we are able to complete and we may face difficulties in achieving the profitability or cash flows needed to justify our investment in them.

Our acquisitions of other companies carry risk.

Acquisitions of other companies involve numerous risks, including difficulties in the integration of the operations, technologies and products of the acquired companies, the potential exposure to unanticipated and undisclosed liabilities, the potential that expected benefits or synergies are not realized and that operating costs increase, the potential loss of key personnel, suppliers or customers of acquired businesses and the diversion of Management’s time and attention from other business concerns. Although we attempt to identify and evaluate the risks inherent in any acquisition, we may not properly ascertain or mitigate all such risks, and our failure to do so could have a material adverse effect on our business.

We may incur significant costs, experience short-term inefficiencies, or be unable to realize expected long-term savings from facility consolidations and other business reorganizations.

We periodically assess the cost and operational structure of our facilities in order to manufacture and sell our products in the most efficient manner, and based on these assessments, we may from time to time reorganize, relocate or consolidate certain of our facilities. These actions may require us to incur significant costs and may result in short term business inefficiencies as we consolidate and close facilities and transition our employees; and in addition, we may not achieve the expected long-term benefits. Any or all of these factors could result in an adverse impact on our operating results, cash flows and financial condition.

Our inability to hire or retain qualified key employees could affect our performance and revenues.

There is a risk of our losing key employees having engineering and technical expertise. For example, our USG segment relies heavily on engineers with significant experience and reputation in the utility industry to furnish expert consulting services and support to customers, and our other segments similarly rely on qualified and experienced employees to carry on their businesses. Despite our active recruitment efforts, there remains a shortage of these qualified engineers and other employees because of hiring competition

Provisions in our articles of incorporation, bylaws and Missouri law could make it more difficult for a third party to acquire us and could discourage acquisition bids or a change of control, and could adversely affect the market price of our common stock.

Our articles of incorporation and bylaws contain certain provisions which could discourage potential hostile takeover attempts, including: a limitation on the shareholders’ ability to call special meetings of shareholders; advance notice requirements to nominate candidates for election as directors or to propose matters for action at a meeting of shareholders; a classified board of directors, which means that approximately one-third of our directors are elected each year; and the authority of our board of directors to issue, without shareholder approval, preferred stock with such terms as the board may determine. In addition, the laws of Missouri, in which we are incorporated, require a two-thirds vote of outstanding shares to approve mergers or certain other major corporate transactions, rather than a simple majority as in some other states such as Delaware. These provisions could impede a merger or other change of control not approved by our board of directors, which could discourage takeover attempts and in some circumstances reduce the market price of our common stock.

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Item 1B. Unresolved Staff Comments

None

Item 2. Properties

We believe our buildings, machinery and equipment have been generally well maintained, are in good operating condition and are adequate for our current production requirements and other needs.

At September 30, 2021,2022, our physical properties, including those described in the table below, comprised approximately 1,558,0001,618,000 square feet of floor space, of which approximately 680,000757,500 square feet were owned and approximately 878,000860,500 square feet were leased. The table below includes our principal physical properties. We do not believe any of the omitted properties, consisting

Item 3. Legal Proceedings

As a normal incident of the businesses in which we are engaged, various claims, charges and litigation are asserted or commenced from time to time against us. With respect to claims and litigation currently asserted or commenced against us, it is the opinion of our Management that final judgments, if any, which might be rendered against us are adequately reserved for, are covered by insurance, or are not likely to have a material adverse effect on our financial condition or results of operations. Nevertheless, given the uncertainties of litigation, it is possible that certain types of claims, charges and litigation could have a material adverse impact on us; see Item 1A, “Risk Factors.”

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Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Holders of Record. As of November 20, 2021,7, 2022, there were approximately 1,8361,808 holders of record of our common stock.

Price Range of Common Stock and Dividends. Our common stock is listed on the New York Stock Exchange; its trading symbol is “ESE”.

Company Purchases of Equity Securities. For information about our common stock repurchase programs, please refer to Note 9 to the Consolidated Financial Statements. We did not repurchase any shares of our common stock during the fourth quarter of fiscal 2021.2022.

Securities Authorized for Issuance Under Equity Compensation Plans. For information about securities authorized for issuance under our equity compensation plans, please refer to Item 12 of this Form 10-K and to Note 10 to the Consolidated Financial Statements.

Performance Graph. The graph and table on the following page present a comparison of the cumulative total shareholder return on our common stock as measured against the cumulative total returns of the Russell 2000 index, which is a broad equity market index, and the S&P SmallCap 600 Industrials index, which is a published industry index designed to measure the performance of small-cap companies that are classified as members of the GICS Industrials sector. The Company is a component of both the Russell 2000 index and the S&P SmallCap 600 Industrials index.

We determined to use the S&P SmallCap 600 Industrials index for comparison beginning in 2021 rather than using a peer group of individual companies as we had done in prior years, because of the difficulty of finding comparable companies to select for the peer group and the frequent changes in the selected peer group from year to year necessitated by acquisitions, mergers or other transactions.

Because of this change, we also show the returns for the six remaining public companies in the customized peer group we used in 2020: CIRCOR International, Inc., Donaldson Company, Inc., Moog Inc., Ameresco, Inc., Thermon Group Holdings, Inc. and FARO Technologies, Inc. In calculating the composite return of the modified 2020 peer group, we weighted the return of each of the companies by (a) its market capitalization in relation to the other companies in its corresponding Company industry segment, and (b) the percentage of the Company’s total revenue from continuing operations represented by its corresponding Company industry segment.

The measurement period begins on September 30, 20162017 and measures at each September 30 thereafter. These figures assume that all dividends, if any, paid over the measurement period were reinvested, and that the starting values of each index and the investments in our common stock and the modified 2020 peer group were $100 at the close of trading on September 30, 2016.2017.

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Introduction

We classify our business operations into three segments for financial reporting purposes, although for reporting certain financial information we treat Corporate activities as a separate segment. Our three operating segments during 20212022 were Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Shielding and Test (Test). Our operating segments are comprised of the following primary operating subsidiaries:

A&D. PTI, VACCO and Crissair primarily design and manufacture specialty filtration products, including hydraulic filter elements and fluid control devices used in commercial aerospace applications, unique filter mechanisms used in micro-propulsion devices for satellites and custom designed filters for manned aircraft and submarines. Westland and Globe design, develop and manufacture elastomeric-based signature reduction solutions for U.S. naval vessels. Mayday designs and manufactures mission-critical bushings, pins, sleeves and precision-tolerance machined components for landing gear, rotor heads, engine mounts, flight controls, and actuation systems for the aerospace and defense industries.

USG. Doble develops, manufactures and delivers diagnostic testing solutions that enable electric power grid operators to assess the integrity of high-voltage power delivery equipment. NRG designs and manufactures decision support tools for the renewable energy industry, primarily wind and solar.

Test. ETS-Lindgren is an industry leader in providing its customers with the ability to identify, measure and contain magnetic, electromagnetic and acoustic energy.

We continue to operate with meaningful growth prospects in our primary served markets and with considerable financial flexibility. We continue to focus on new products that incorporate proprietary design and process technologies. Our Management is committed to delivering shareholder value through organic growth, ongoing performance improvement initiatives, and acquisitions.

In December 2019, we sold the businesses comprising our former Technical Packaging segment. We received net proceeds from the sale of approximately $184 million and recorded $76.5 million of after-tax net earnings on the sale in 2020. The Technical Packaging segment is reflected as discontinued operations in the Consolidated Financial Statements and related notes for all periods presented, in accordance with accounting principles generally accepted in the United States of America (GAAP). See Note 3 to the Consolidated Financial Statements for further discussion.

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Results of Continuing Operations

Net Sales

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Net sales decreased $15.1increased $142.1 million, or 2.1%19.9%, to $857.5 million in 2022 from $715.4 million in 2021 from $730.5 million in 2020.2021. The decreaseincrease in net sales in 20212022 as compared to 20202021 was mainly due to a $37.1 million decrease in the A&D segment, partially offset by an $11.2$75.5 million increase in the USG segment, including $4.4a $36.6 million of sales fromincrease in the acquisitions of Altanova and the assets of Phenix,A&D segment, and a $10.8$30.0 million increase in the Test segment. Organic sales increased $90 million and recent acquisitions added approximately $52 million of revenue growth in 2022 as compared to 2021.

A&D.

The $37.1$36.6 million, or 10.5%11.6%, decreaseincrease in net sales in 20212022 as compared to 20202021 was mainly due to a $16.7$16.4 million decreaseincrease in net sales at PTI (including $5.2 million from NEco), a $14.1 million increase in net sales at Mayday, both primarily due to an $11.0 million decreaseincrease in netcommercial aerospace sales at Crissair, a $9.8 million decrease in net sales at PTI all primarily driven by the impact ofrebound from the COVID-19 pandemic, andpandemic; a $3.7$3.0 million decreaseincrease in net sales at Westland driven by new product development challenges, partially offset bytiming of navy defense projects, a $3.7 million increase in net sales at Globe and a $0.4$1.5 million increase in net sales at VACCO, driven by ana $0.9 million increase in navy defense shipments.net sales at Crissair and a $0.7 million increase in net sales at Globe.

USG.

The $11.2$75.5 million, or 5.8%37.2%, increase in net sales in 20212022 as compared to 20202021 was mainly due to a $7.7$46.9 million increase in net sales from the 2021 acquisitions of Altanova and Phenix, a $20 million increase in core Doble products and services; and a $8.2 million increase in net sales at NRG driven by renewable energy products and $4.4 million of sales from the acquisitions of Altanova and the assets of Phenix that closed during the fourth quarter of 2021.products.

Test.

The $10.8$30.0 million, or 5.8%15.2%, increase in net sales in 20212022 as compared to 20202021 was mainly due to a $4.1$22.3 million increase in net sales from the Company’s U.S. operations, $11.5 million increase in net sales from the Company’s Asian operations $3.7both driven by increased medical and industrial shielding and power filter demand, partially offset by a $3.8 million increase in net sales from the Company’s U.S. operations and a $3.0 million increasedecrease in net sales from the Company’s European operations, primarily driven by the timing of test and measurement chamber projects.

Orders and Backlog

New orders received were $960.5 million in 2022 and $796.3 million in both 2021 and 2020.2021. Order backlog was $695.0 million at September 30, 2022, compared to order backlog of $592.0 million at September 30, 2021, compared to order backlog of $511.2 million at September 30, 2020.2021. Orders are entered into backlog as firm purchase order commitments are received.

By operating segment, 2022 orders were $392.5 million related to A&D products, $314.9 million related to USG products, and $253.1 million related to Test products; and 2021 orders were $337.4 million related to A&D products, $243.9 million related to USG products (including $29 million of acquired backlog), and $215.0 million related to Test products; and 2020 orders were $420.4 million related to A&D products, $200.7 million related to USG products, and $175.3 million related to Test products.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses were $195.1 million, or 22.7% of net sales, in 2022, and $167.5 million, or 23.4% of net sales, in 2021, and $159.5 million, or 21.8% of net sales, in 2020.

2021. The increase in SG&A expenses in 20212022 as compared to 20202021 was mainly due to an increasehigher expenses at Doble due toas a result of the SG&A expenses from the Altanova and Phenix acquisitions and the return of discretionary spending to more normal levels the inclusion of SG&A from the Phenix and Altanova acquisitions, compensation expenses due to the transition of key executives, and an increase in acquisition(travel, events, etc.) as COVID-19 pandemic related costs at Corporate.restrictions eased.

Amortization of Intangible Assets

Amortization of intangible assets was $25.9 million in 2022 and $20.8 million in 2021, and $21.8 million in 2020, including $14.3$19.3 million and $13.0$14.3 million of amortization of acquired intangible assets in 20212022 and 2020,2021, respectively, related to our acquisitions. The amortization of acquired intangible assets related to acquisitions is included in the Corporate segment’s results. The remaining amortization expenses relate to other identifiable intangible assets (primarily software, patents and licenses), which are included in the respective segment’s operating results. The decreaseincrease in amortization expense in 20212022 as compared to 20202021 was mainly due to a decrease in amortizationthe Company’s recent acquisitions of capitalized software.Phenix, Altanova and NEco.

Other ExpensesIncome or Income,Expenses, Net

Other income, net, was $0.3 million in 2022, compared to other income, net, of $0.9 million in 2021, compared to2021. There were no individually significant items in other expenses,income, net of $7.1 million in 2020.2022. The principal components of other income, net, in 2021 included a gain of approximately $2 million for the final settlement on the sale of the Doble Watertown, MA property, partially offset by facility consolidation charges within the USG segment (Doble Manta, Morgan Schaffer and Altanova facilities). The principal components of other expenses, net, in 2020 included approximately $8 million of pretax charges consisting primarily of facility consolidation charges for the Doble Manta facility, including employee severance and compensation benefits, and asset impairment charges. There were no other individually significant items included in other expenses, net, in 2021 or 2020.

Non-GAAP Financial Measures

The information reported herein includes the financial measures Diluted EPS – Continuing Operations As Adjusted, which we define as Diluted EPS – Continuing Operations excluding the per-share impact of discrete compensation and acquisition related costs, severance charges primarily within the A&D segment, and purchase accounting charges related to the Company’s recent acquisitions (Altanova and NEco) in 2022; the per-share net impact of one-timediscrete compensation and acquisition related costs, facility consolidation charges within the USG segment, and purchase accounting charges related to the Company’s recent acquisitions

expressed as a percentage of net sales. Diluted EPS – Continuing Operations As Adjusted, EBIT on a consolidated basis, and EBIT margin on a consolidated basis are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, we believe that EBIT and EBIT margin provide investors and Management with valuable information for assessing our operating results. Management evaluates the performance of our operating segments based on EBIT and believes that EBIT is useful to investors to demonstrate the operational profitability of our business segments by excluding interest and taxes, which are generally accounted for across the entire company on a consolidated basis. EBIT is also one of the measures Management uses to determine resource allocations and incentive compensation. We believe that the presentation of EBIT, EBIT margin and Diluted EPS – Continuing Operations As Adjusted provides important supplemental information to investors by facilitating comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. The use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.

EBIT

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The reconciliation of EBIT to a GAAP financial measure is as follows:

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EBIT by business segment is as follows:

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A&D

The $13.4$11.9 million, decreaseor 21.1%, increase in EBIT in 20212022 as compared to 20202021 was primarily due to charges at Westland driven by new product development challenges, increased production costs, and product quality issues; lowerhigher sales volumes, favorable product mix and price increases at Mayday, CrissairWestland, PTI and PTI;Globe partially offset by an increasea decrease in EBIT at VACCOCrissair and GlobeVACCO due to the higher sales volumes mentioned above. In addition,product mix and inflationary pressures. EBIT in 20212022 was negatively impacted by a $0.3 million inventory step-up charge related to the NEco acquisition and $0.4 million of ATM.severance charges primarily at VACCO.

USG

The $16.5$16.7 million, or 40.8%, increase in EBIT in 20212022 as compared to 20202021 was mainly due to higher sales volumes at Doble and NRG with a favorable product mix approximately $2 million final settlement received on the sale of the Doble Watertown property,and price increases, partially offset by $2.4inflationary pressures and increased travel and event costs. EBIT in 2022 was negatively impacted by approximately $0.5 million of facility consolidationinventory step-up charges at its Doble Manta, Morgan Schaffer and Altanova facilities, and purchase accounting charges of approximately $1.0 million related to the Phenix and Altanova acquisitions mainly consisting of inventory step-up charges. In addition, NRG’sacquisition.

Test

The $5.0 million, or 18.1%, increase in EBIT increased $3.1 million in 2022 as compared to 2021 was primarily due to leverage on higher sales volumes as compared toand price increases mainly from the prior year.segment’s Asian and U.S. operations partially offset by material cost and wage inflation.

Test

The $0.4 million increase in EBIT in 2021 as compared to 2020 was primarily due to product mix and increase in sales volumes as mentioned above partially offset by higher material prices.

Corporate

Corporate operating charges included in 20212022 consolidated EBIT decreasedincreased to $42.1$47.3 million as compared to $78.4$42.1 million in 20202021 mainly due to a $40.6 million pension plan termination charge in 2020 as a result of the decision to terminate and annuitize the Company’s defined benefit pension plan. Corporate’s operating charges were negatively impacted in 2021 due to higher compensation expenses due to the transition of key executives and an increase in acquisitionamortization expense of acquired intangible assets related costs.to the Company’s recent acquisitions of Phenix, Altanova and NEco.

The “Reconciliation to Consolidated Totals (Corporate)” in Note 12 to the Consolidated Financial Statements represents Corporate office operating charges.

Interest Expense, Net

Interest expense, net was $2.2$4.9 million and $6.7$2.3 million in 20212022 and 2020,2021, respectively. The decreaseincrease in interest expense in 20212022 was mainly due to lowerhigher average outstanding borrowings and lowerhigher average interest rates. Average outstanding borrowings were $190 million in 2022 compared to $71 million in 2021 compared to $176 million in 2020.2021. The weighted average interest rates were 2.11% in 2022 compared to 1.20% in 2021 compared to 3.20% in 2020.2021.

Income Tax Expense

The effective tax rates from continuing operations for 2022, 2021 and 2020 were 22.7%, 21.3% and 2019 were 21.3%, 37.1% and 20.8%, respectively. The 2020increase in the 2022 effective tax rate as compared to 2021 was unfavorably impacted by a pension plan termination charge of $40.6 million which is not deductible for tax purposes, increasing the effective tax rate by 23.4%. The 2020 effective tax rate was favorably impacted by the following: (1)due an increase in the available 2019 foreignstate income tax expense and a reduction in research credit which was attributable to new information and tax planning strategies reducingbenefits, increasing the 2020 effective tax rate by 1.9%; (2) the release of a valuation allowance of $2.8 million1.0% and 0.6%, respectively.

No provision has been made in 2022 for foreign net operating losses decreasing the effective tax rate by 7.8%; and (3) favorable 2019 state tax return to provision true-ups decreasing the effective tax rate by 1.7%.

The 2017 Tax Cut and Jobs Act (TCJA) made comprehensive changes to U.S. federal income tax laws by moving from a global to a modified territorial tax regime. As a result, cash repatriated to the U.S. is generally no longer subject to U.S. federal income tax. No provision is made for foreign withholding of any applicable U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries where these earnings are considered indefinitely invested or otherwise retained for continuing international operations. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable.

Acquisitions and Divestiture

Information regarding our acquisitions and divestiture during 2022, 2021 2020 and 20192020 is set forth in Notes 2 and 3 to the Consolidated Financial Statements, which Notes are incorporated by reference herein.

All of our acquisitions have been accounted for using the purchase method of accounting, and accordingly, the respective purchase prices were allocated to the assets (including intangible assets) acquired and liabilities assumed based on estimated fair values at the date of acquisition. The financial results from these acquisitions have been included in our financial statements from the date of acquisition.

Capital Resources and Liquidity

Our overall financial position and liquidity are strong. Working capital from continuing operations (current assets less current liabilities) increased to $188.4$254.5 million at September 30, 20212022 from $187.8$191.2 million at September 30, 2020. Inventories2021. Accounts receivable increased by $11.9$18.3 million during 20212022 mainly due to a $14.7$10.4 million increase within the USG segment, a $4.7 million increase within the Test segment and a $3.2 million increase within the A&D segment, driven by timing and higher sales volumes in the acquisitionscurrent year. Inventories increased by $15.3 million during 2022 mainly due to a $7.9 million increase within the Test segment and an $8.7 million increase within the USG segment resulting primarily from the timing of Altanovareceipt of raw materials to meet anticipated demand and the assetsan increase in work in process inventories due to timing of Phenix.manufacturing existing orders. Accounts payable increased by $6.1$22.1 million during 2022 mainly due to a $9.6 million increase within the Test segment, a $7.1 million increase within the A&D segment and a $4.2 million increase within the USG segment, due to the timing of payments.

Net cash provided by operating activities was $135.3 million in 2022 and $123.1 million in 2021.

Net cash used in investing activities was $55.9 million in 2022 and $202.4 million in 2021. The decrease in net cash used in investing activities in 2022 as compared to 2021 was mainly due to a decrease in amounts spent on acquisitions in 2022. Capital expenditures were $32.1 million in 2022 and $26.7 million in 2021. The increase in 2022 as compared to 2021 was mainly due to the USG segment driven by the Altanova and Phenix acquisitions.purchase of

Net cash provided by operating activities from continuing operations was $123.1the NRG building of approximately $10 million in 2021 and $108.5 million in 2020.

Net cash used in investing activities from continuing operations was $202.4 million in 2021 and $41.1 million in 2020. The increase in net cash used in investing activities in 2021 as compared to 2020 was mainly due to the Altanova and Phenix acquisitions totaling approximately $162 million. Capital expenditures from continuing operations were $26.7 million in 2021 and $32.1 million in 2020. The decrease in 2021as compared to 2020 was mainly due to the building improvement additions in 2020 at the new Doble headquarters facility.first quarter of 2022. In addition, the Company incurred expenditures for capitalized software of $12.9 million in 2022 and $8.8 million in 2021 and $9.0 million in 2020.2021.

There were no commitments outstanding that were considered material for capital expenditures at September 30, 2021, except for a commitment to purchase the NRG building for approximately $10 million which closed in the first quarter of fiscal 2022.

Net cash used by financing activities was $32 million in 2022 compared to net cash provided by financing activities from continuing operations wasof $81.5 million in 2021, compared to net cash used by financing activities from continuing operations of $(234.1) million in 2020, primarily due to the increase inlower borrowings in 2021 as a resultthe current year and repurchases of the Company’s recent acquisitions.common stock into treasury.

Bank Credit Facility

A description of our credit facility (the “Credit Facility”) is set forth in Note 8 to the Consolidated Financial Statements, which Note is incorporated by reference herein.

Cash flow from operations and borrowings under the Credit Facility is expected to provide adequate resources to meet our capital requirements and operational needs both for the next 12 months and for the foreseeable future.

Dividends

Since 2010,During both 2022 and 2021 we have paid a regular quarterly cash dividend at an annual rate of $0.32 per share. We paid dividendsshare, totaling $8.3 million in both 20212022 and 2020.2021.

Off-Balance-Sheet Arrangements

We had no off-balance-sheet arrangements outstanding at September 30, 2021.2022.

Share Repurchases

Information about our common stock repurchases is provided in Note 9 to the Consolidated Financial Statements.

Subsequent Event

On November 4, 2021,During 2022, the Company acquired Networks Electronic Company, LLC. (NEco) which provides miniature electro-explosive devices utilized in mission-critical defense and aerospace applications. NEco is based in Chatsworth, CA and will become part of the A&D segment. Their annual sales are expected to berepurchased approximately $7 million in 2022.257,500 shares for approximately $20.0 million.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires Management to make estimates and assumptions in certain circumstances that affect amounts reported in the Consolidated Financial Statements. In preparing these financial statements, Management has made its best estimates and judgments of certain amounts included in the Consolidated Financial Statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Our senior Management discusses the critical accounting policies described below with the Audit and Finance Committee of our Board of Directors on a periodic basis.

extent it is probable that a significant reversal of cumulative revenue recognized will not occur. The estimated amounts are based on an assessment of our anticipated performance and all other information that is reasonably available to us.

Approximately 57%60% of the A&D segment’s revenue (25% of consolidated revenue) is recognized over time as the products do not have an alternative use and either we have an enforceable right to payment for costs incurred plus a reasonable margin or the inventory is owned by the customer. Selecting the method to measure progress towards completion for our contracts requires judgment and is based on the nature of the products or services to be provided.

The A&D segment generally uses the cost-to-cost method to measure progress on our contracts, as the rate at which costs are incurred to fulfill a contract best depicts the transfer of control to the customer. Under this method, we measure the extent of progress towards completion based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and we record revenue proportionally as costs are incurred based on an estimated profit margin.

The Test segment generally uses the milestone output method to measure progress on our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this method, we estimate profit as the difference between total revenue and total estimated costs at completion of a contract and recognize these revenues and costs based on milestones achieved.

Total contract cost estimates are based on current contract specifications and expected engineering requirements and require us to make estimates on expected profit. The estimates on profit are based on judgments we make to project the outcome of future events, and can often span more than one year and include labor productivity and availability, the complexity of the work to be performed, change orders issued by our customers, and other specialized engineering and production related activities. Our cost estimation process is based on historical results of contracts and historical actuals to original estimates, and the application of professional knowledge and experience of engineers and program managers along with finance professionals to these historical results. We review and update our estimates of costs quarterly or more frequently when circumstances significantly change, which can affect the profitability of our contracts.

For contracts where revenue is recognized over time, we recognize changes in estimated contract revenues, costs and profits using the cumulative catch-up method of accounting. This method recognizes the cumulative effect of changes on current and prior periods with the impact of the change from inception-to-date recorded in the current period. We have net revenue recognized in the current year from performance obligations satisfied in the prior year due to changes in our estimated costs to complete the related performance obligations. We recognize anticipated losses on contracts in full in the period in which the losses become known.

The impact of adjustments in contract estimates on our operating earnings can be reflected in either revenue or operating costs and expenses. The aggregate impact of adjustments in contract estimates increaseddecreased our earnings before income tax and diluted earnings per share by $1.7$0.9 million and $0.05$0.03 per share, respectively, in 2021.2022.

Income Taxes

We operate in numerous taxing jurisdictions and are subject to examination by various U.S. Federal, state and foreign jurisdictions for various tax periods. Our income tax positions are based on research and interpretations of the income tax laws and rulings in each of

Goodwill and Other Long-Lived Assets

Our Management annually reviews goodwill and other long-lived assets for impairment or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. If we determine that the carrying value of the goodwill and other long-lived assets may not be recoverable, we record a permanent impairment charge for the amount by which the carrying value of the goodwill and other long-lived assets exceeds its fair value. We measure fair value based on a discounted cash flow method using a discount rate determined by Management to be commensurate with the risk inherent in each of our reporting units’ or asset groups’ current business models. Our estimates of cash flows and discount rate are subject to change due to the economic environment, including such factors as interest rates, expected market returns and volatility of markets served. We believe that Management’s estimates of future cash flows and fair value are reasonable; however, changes in estimates could result in impairment charges. At September 30, 20212022 we have determined that no goodwill or other long-lived assets were impaired.

We amortize intangible assets with estimable useful lives over their respective estimated useful lives to their estimated residual values, and review them for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.

Other Matters

Quantitative and Qualitative Disclosures about Market Risk

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates. We are exposed to market risk related to changes in interest rates, and we selectively use derivative financial instruments, including forward contracts and swaps, to manage these risks. Our Canadian subsidiary Morgan Schaffer has entered into foreign exchange contracts to manage foreign currency risk, because a portion of their revenue is denominated in U.S. dollars. We report all derivative instruments on our balance sheet at fair value. For derivative instruments designated as cash flow hedges, we defer the gain or loss on the derivative in accumulated other comprehensive income until recognized in earnings with the underlying hedged item. See further discussion regarding our market risks in “Market Risk Analysis,” above.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

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Item 8. Financial Statements and Supplementary Data

The information required by this Item is incorporated by reference to the Consolidated Financial Statements of the Company, the Notes thereto, and the related “ReportReports of Independent Registered Public Accounting Firm”Firm of Grant Thornton LLP and KPMG LLP, as set forth in the Financial Information section of this Annual Report, an Index to which is provided on page F-1.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

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Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer (“Certifying Officers”) carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of September 30, 2021. Our Certifying Officers concluded that, as a result2022. The evaluation was conducted under the supervision and with the participation of the material weaknesses in internal control over financial reporting as described below, our disclosure controlsCompany’s Management, including the Company’s Chief Executive Officer and procedures were not effective asChief Financial Officer, using the Internal Control - Integrated Framework (2013) issued by the Committee of September 30, 2021.Sponsoring Organizations of the Treadway Commission (COSO). Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

In light of the material weaknesses at a reporting unit within Based upon that evaluation, the Company’s Aerospace & Defense (A&D) segment, described below, management performed additional analysesChief Executive Officer and other procedures to ensure that our ConsolidatedChief Financial Statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). Accordingly, management believesOfficer concluded that the Consolidated Financial Statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations,Company’s disclosure controls and cash flowsprocedures were effective as of and for the periods presented in accordance with GAAP.September 30, 2022.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s management,Management, with participation of the Certifying Officers, under the oversight of our Board of Directors, evaluated the effectiveness of the Company’s internal control over financial reporting as of September 30, 20212022 using the framework in Internal Control – Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon that evaluation, management concluded that the Company’sBecause of its inherent limitations, any system of internal control over financial reporting, wasno matter how well designed, may not effective as of September 30, 2021,prevent or detect misstatement due to the material weaknesses in internal control over financial reporting, described below.

Based on this assessment, the Company’s management concluded that an effective risk assessment process responsive to changes in the operating environment and business at a reporting unit in the Company’s Aerospace & Defense (A&D) segment did not occur, resulting in the ineffective design and implementation of certain controls to reduce the risks of material misstatements at that reporting unit. Specifically, the design of certain controls over revenue recognition, and the accumulation of inventory costs and the determination of inventory carrying values were ineffective. The control deficiencies resulted in immaterial misstatements of net sales and cost of sales. The control deficiencies described above created a reasonable possibility that a material misstatementcontrol can be circumvented or overridden or that misstatements due to the consolidated financial statements woulderror or fraud may occur that are not be prevented or detected on a timely basis. Therefore, we concluded that the deficiencies represent material weaknessesdetected. Also, because of changes in the Company’sconditions, internal control effectiveness may vary over financial reporting and that our internal control over financial reporting was not effective as of September 30, 2021.time.

The Company acquired Altanova and the assets of Phenix (together, the “Acquired Businesses”) during the year ended September 30, 2021, and management excluded from its assessment ofManagement assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021,2022, using criteria established in Internal Control – Integrated Framework (2013) issued by COSO and concluded that the Acquired Businesses’Company maintained effective internal control over financial reporting associated with total assets representing 12.2 percent of consolidated assets, and total sales representing 0.6 percent of consolidated net sales, included in the consolidated financial statements of the Company as of and for the year ended September 30, 2021.2022, based on these criteria.

The Company’sOur internal control over financial reporting as of September 30, 2022, has been audited by Grant Thornton, an independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statementsas stated in its report which is included in this Annual Report on Form 10-K issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. KPMG LLP’s report appears on page F-33 of this Annual Report on Form 10-K.

Remediation

The Company is in the process of remediating the material weaknesses and is taking the following actions:

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information regarding our directors, nominees and nominating procedures, Code of Ethics, Audit and Finance Committee, and non-compliance (if any) with Section 16(a) of the Securities Exchange Act of 1934 is hereby incorporated by reference to the sections captioned “Proposal 1: Election of Directors,” “BoardDirectors” and “Securities Ownership of Directors – Governance Policies and Management Oversight,” “Committees” and “Securities Ownership”Executive Officers” in the 20212022 Proxy Statement.

Information regarding our executive officers is set forth in Item 1, “Business – Information about our Executive Officers,” above.

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Item 11. Executive Compensation

Information regarding our compensation committee and director and executive officer compensation is hereby incorporated by reference to the sections captioned “Committees – Compensation Committee Interlocks and Insider Participation,” “Director Compensation” and “Executive Compensation Information”“Proposal 3: Advisory Vote to Approve Executive Compensation” in the 20212022 Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

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