2008-07-24 17:48:00
Curtiss-Wright Reports 2008 Second Quarter and Six Month Financial Results
Sales up 24%; Operating Income up 29%; Net Earnings up 27%; Backlog at
Record Level
ROSELAND, N.J., July 24 /EMWNews/ -- Curtiss-Wright
Corporation (NYSE: CW) today reports financial results for the second
quarter and six months ended June 30, 2008. The highlights are as follows:
Second Quarter 2008 Operating Highlights
-- Net sales for the second quarter of 2008 increased 24% to $453.5
million from $365.6 million in the second quarter of 2007.
-- Operating income in the second quarter of 2008 increased 29% to
$49.7 million from $38.4 million in the second quarter of 2007.
-- Net earnings for the second quarter of 2008 increased 27% to $27.1
million, or $0.60 per diluted share, from $21.4 million, or $0.48 per
diluted share, in the second quarter of 2007.
-- New orders received in the second quarter of 2008 were $876.5
million, up 141% compared to the second quarter of 2007.
Six Months 2008 Operating Highlights
-- Net sales for the first six months of 2008 increased 27% to $886.8
million from $698.2 million in the first six months of 2007.
-- Operating income for the first six months of 2008 increased 23% to
$90.4 million from $73.6 million in the first six months of 2007.
-- Net earnings for the first six months of 2008 increased 19% to $48.9
million, or $1.08 per diluted share, from $40.9 million, or $0.91 per
diluted share, for the first six months of 2007.
-- New orders received in the first six months of 2008 were $1,327.2
million, up 75% compared to the first six months of 2007. At June 30, 2008,
our record backlog was $1,745.4 million, up 34% from $1,303.8 million at
December 31, 2007.
"We are pleased to report strong sales and operating income growth for
the second quarter of 2008," commented Martin R. Benante, Chairman and CEO
of Curtiss-Wright Corporation. "Overall our performance was driven by
strong organic growth in sales, operating income and operating margin. Our
operating margin was partially offset by lower margins from our 2007
acquisitions, as previously indicated. Our strong operating income
performance in the second quarter was led by our Flow Control segment,
which experienced a 112% increase in operating income, the majority of
which was organic, as compared to the prior year. From a market
perspective, sales in our commercial markets grew 36%, led by strong sales
growth of 48% in our commercial power market and 38% in the oil and gas
market. Our record backlog is a clear indication of the continuing success
of our products and programs and provides great momentum for the rest of
this year and heading into 2009. We have made significant progress with our
facility expansion and contract to build reactor coolant pumps for the
AP1000 reactor design. This effort solidifies our leadership in this
advanced nuclear plant design, and we remain optimistic about new nuclear
power plant construction domestically and internationally. Finally, we
continue to invest in a number of military and commercial development
programs anticipating these investments will provide future growth
opportunities and improved profitability."
Sales
Sales growth in the second quarter of 2008 was generated by double
digit organic growth in all of our segments and contributions from our 2007
acquisitions, which provided $52.7 million in incremental sales in the
second quarter of 2008. The base businesses generated an organic sales
growth of 11%, with our Flow Control, Metal Treatment, and Motion Control
segments generating an increase of 11%, 11%, and 10%, respectively, as
compared to the prior year period.
In our base businesses, higher sales from our Flow Control segment to
the commercial power and oil and gas markets, higher sales from our Metal
Treatment segment to the commercial aerospace, general industrial and
commercial power markets, and higher sales from our Motion Control segment
to the aerospace and ground defense markets, all contributed to the second
quarter organic sales growth. In addition, foreign currency translation
positively impacted sales in the second quarter of 2008 by $4.4 million as
compared to the prior year period.
Operating Income
Operating income in the second quarter of 2008 increased 29% over the
comparable prior year period. Organic operating income growth was 25% for
the second quarter of 2008 as compared to the prior year period. Our 2007
acquisitions contributed $2.2 million (approximately 4% operating margin)
of incremental operating income in the second quarter of 2008. The organic
operating income growth in the second quarter was led by our Flow Control
segment, which experienced strong organic growth of 95% over the prior year
period. The prior year quarter included non-recurring cost overruns on a
development contract for the U.S. Navy and business consolidation costs.
Organic operating income for our Metal Treatment and Motion Control
segments increased 14% and 2%, respectively, mainly due to higher volume.
Our consolidated operating margin is 50 basis points higher in the
second quarter of 2008 as compared to the prior year period. The higher
operating margin was mainly driven by improvement at our Flow Control
segment. Intangible asset amortization increased $3.1 million in the second
quarter 2008 as compared to the prior year as a result of our 2007
acquisitions, which were primarily in the Flow Control segment. In the
second quarter of 2008, our base businesses generated operating margin of
approximately 12% while our 2007 acquisitions were approximately 4%.
Non-segment operating expense increased over the prior year period due to
higher pension and legal costs. Foreign currency translation unfavorably
impacted operating income by $0.8 million in the second quarter of 2008 and
operating margin by 30 basis points as compared to the prior year period,
primarily in our Motion Control segment.
Net Earnings
Net earnings for the second quarter of 2008 increased 27% from the
comparable prior year period. The improvement was achieved by strong
segment operating income, partially offset by higher interest and pension
expense. The higher interest expense for the second quarter of 2008 was
mainly due to higher average debt levels resulting from our 2007
acquisitions, partially offset by lower interest rates, as compared to the
prior year period. Our effective tax rate for the second quarter of 2008
was 36.6% versus 35.5% for the second quarter of 2007.
Cash Flow
Our free cash flow, defined as cash flow from operations less capital
expenditures, was $54.7 million for the second quarter of 2008 as compared
to $48.9 million in the prior year period. Net cash provided by operating
activities in the second quarter was $77.7 million, an increase of $16.9
million as compared to the prior year period, due to higher net earnings
and overall improvements in working capital, specifically accounts
receivable and inventory. Capital expenditures were $23.1 million in the
second quarter of 2008 versus $11.9 million in the comparable prior year
period. The majority of this increase is due to the facility expansion at
our Cheswick, PA. location for our AP1000 nuclear power program.
Segment Performance
Flow Control -- Sales for the second quarter of 2008 were $226.7
million, up 39% over the comparable prior year period due to solid organic
growth and the contribution from our 2007 acquisitions. Organic sales
growth was 11% in the second quarter of 2008 over the comparable prior year
period. This organic sales growth was led by higher sales to the commercial
power market, driven by revenues for our reactor coolant pumps for the new
AP1000 reactors being constructed in China, and higher sales to the oil and
gas market due to increased demand for valves, coker deheading systems and
services within this market. Strong commercial sales were partially offset
by lower sales to the defense market due to the timing of U.S. Navy
procurement cycles, primarily from lower submarine and aircraft carrier
work. In the second quarter of 2008, our 2007 acquisitions contributed
$45.6 million in incremental sales. Sales of this segment were positively
affected by foreign currency translation of $0.3 million in the second
quarter of 2008 compared to the prior year period.
Operating income for this segment increased 112% in the second quarter
of 2008 over the comparable prior year period. This segment's base
businesses achieved strong organic operating income growth of 95% and a 460
basis point improvement in organic operating margin in the second quarter
of 2008 over the prior year period. The increase in both operating income
and margin was largely due to higher demand for our valve products and an
improved mix. The operating income in the prior year quarter was adversely
impacted by cost overruns on a development contract for the U.S. Navy,
business consolidation costs, as well as investments in product development
for our oil and gas product portfolio. In the second quarter of 2008, our
2007 acquisitions added $1.7 million of incremental operating income
representing a 4% operating margin. Operating income of this segment was
unfavorably affected by foreign currency translation of $0.3 million in the
second quarter of 2008 compared to the prior year period.
Motion Control -- Sales for the second quarter of 2008 were $156.7
million, an increase of 13% over the comparable period last year. This
improvement was due primarily to solid organic sales growth of 10% and the
incremental contribution from our 2007 acquisition of $7.1 million. The
organic sales growth was driven by higher sales to the aerospace defense
market across several platforms including the F-16, F-22, V-22, Global
Hawk, and various military helicopter programs. Our integrated sensing
products had solid organic sales growth in this market. In addition, we had
higher sales of embedded computing products to the ground defense market,
due mainly to increased demand for our products used on the Bradley
Fighting Vehicle. Sales of this segment were favorably affected by foreign
currency translation of $2.5 million in the second quarter of 2008 compared
to the prior year period.
Operating income for this segment increased 3% for the second quarter
of 2008 over the comparable prior year period. Our organic operating income
growth was 2% as a result of the higher sales volume noted above, partially
offset by unfavorable foreign currency translation which negatively
impacted operating income by $0.8 million and operating margin by 70 basis
points in the quarter. In addition, research and development expenses were
higher in the current quarter as compared to the prior year due to the
support of strategic initiatives, primarily in embedded computing. Although
foreign currency translation had a favorable impact on sales, the net
impact to operating income was unfavorable mainly due to the Canadian
operations having a significant amount of sales denominated in U.S. dollars
and operating costs denominated in Canadian dollars. Thus, changes in the
Canadian exchange rate directly impact operating costs with no offsetting
impact on sales.
Metal Treatment -- Sales for the second quarter of 2008 amounting to
$70.1 million were 11% higher than the comparable period last year, all of
which was organic growth. This segment experienced growth in most of its
markets and in all its primary service offerings. The main drivers were
higher global shot peening revenues, primarily in the commercial aerospace,
general industrial and commercial power markets, along with higher revenues
in our laser peening business from the commercial aerospace and defense
markets. These increases were partially offset by a decline in the
automotive market. Sales of this segment were favorably affected by foreign
currency translation of $1.5 million in the second quarter of 2008 compared
to the prior year period.
Operating income increased 15% for the second quarter of 2008 as
compared to the prior year period, primarily as a result of the higher
sales volume and improved mix. Operating margin for the second quarter of
2008 was higher by 80 basis points mainly due to improved mix, as the sales
increases were generated in our higher margin shot peening and laser
peening businesses. Operating income of this segment was favorably affected
by foreign currency translation of $0.3 million in the second quarter of
2008 compared to the prior year period.
Fiscal Year 2008 Outlook
The Company is making the following adjustment to its full year 2008
financial guidance:
-- Free Cash Flow $90 - $100 million
(previously in the range of $70 - $80 million)
Free Cash Flow is defined as cash flow from operations less capital
expenditures and includes approximately $40 million for our EMD facility
expansion in Cheswick, PA. (Same as previous guidance).
The Company is reconfirming its previous full year 2008 financial
guidance:
-- Total Revenues $1.83 - $1.85 billion
-- Operating Income $215 - $222 million
-- Diluted Earnings Per Share $2.55 - $2.65
(Assumes 46 million shares outstanding)
-- Effective Tax Rate 36%
Mr. Benante concluded, "In 2008, we should once again demonstrate our
ability to generate long-term shareholder value by growing our sales and
earnings. Our historic performance demonstrates our ability to execute our
strategy and achieve our financial targets. Our solid performance in the
first half of the year and record backlog supports this trend. We expect
the second half of the year to be even stronger as many of our defense
programs ramp up and commercial markets remain robust, specifically the oil
and gas market which continues to expand globally and the commercial
nuclear power market which is in the midst of a renaissance and growing at
a rapid rate. We continue to experience increased demand for our new
technologies, many of which are in the early stages of their life cycles,
which should provide continued growth and strong returns to our
shareholders in the future. Our diversification, the continued successful
integration of acquisitions, and ongoing emphasis on advanced technologies
should continue to generate growth opportunities in each of our three
business segments in 2008 and beyond."
The Company will host a conference call to discuss the second quarter
2008 results at 10:00 A.M. EDT Friday, July 25, 2008. A live webcast of the
call can be heard on the Internet by visiting the company's website at
http://www.curtisswright.com and clicking on the investor information page or by
visiting other websites that provide links to corporate webcasts.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share data)
Three Months Ended
June 30, Change
2008 2007 $ %
Net sales $453,464 $365,576 $87,888 24.0%
Cost of sales 296,230 247,553 48,677 19.7%
Gross profit 157,234 118,023 39,211 33.2%
Research & development expenses 13,017 11,487 1,530 13.3%
Selling expenses 28,842 22,331 6,511 29.2%
General and administrative expenses 65,703 45,796 19,907 43.5%
Operating income 49,672 38,409 11,263 29.3%
Other income, net 224 466 (242) (51.9%)
Interest expense (7,176) (5,704) (1,472) 25.8%
Earnings before income taxes 42,720 33,171 9,549 28.8%
Provision for income taxes 15,643 11,781 3,862 32.8%
Net earnings $27,077 $21,390 $5,687 26.6%
Basic earnings per share $0.61 $0.48
Diluted earnings per share $0.60 $0.48
Dividends per share $0.08 $0.06
Weighted average shares outstanding:
Basic 44,631 44,256
Diluted 45,355 44,915
Six Months Ended
June 30, Change
2008 2007 $ %
Net sales $886,843 $698,185 $188,658 27.0%
Cost of sales 591,140 468,775 122,365 26.1%
Gross profit 295,703 229,410 66,293 28.9%
Research & development expenses 25,853 22,826 3,027 13.3%
Selling expenses 54,182 42,603 11,579 27.2%
General and administrative expenses 125,269 90,430 34,839 38.5%
Operating income 90,399 73,551 16,848 22.9%
Other income, net 698 1,350 (652) (48.3%)
Interest expense (14,759) (11,204) (3,555) 31.7%
Earnings before income taxes 76,338 63,697 12,641 19.8%
Provision for income taxes 27,482 22,804 4,678 20.5%
Net earnings $48,856 $40,893 $7,963 19.5%
Basic earnings per share $1.10 $0.93
Diluted earnings per share $1.08 $0.91
Dividends per share $0.16 $0.12
Weighted average shares outstanding:
Basic 44,607 44,200
Diluted 45,290 44,815
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
June 30, December 31, Change
2008 2007 $ %
Assets
Current Assets:
Cash and cash equivalents $85,164 $66,520 $18,644 28.0%
Receivables, net 377,069 392,918 (15,849) (4.0%)
Inventories, net 275,688 241,728 33,960 14.0%
Deferred income taxes 28,497 30,208 (1,711) (5.7%)
Other current assets 29,071 26,807 2,264 8.4%
Total current assets 795,489 758,181 37,308 4.9%
Property, plant, & equipment,
net 351,064 329,657 21,407 6.5%
Prepaid pension costs 65,694 73,947 (8,253) (11.2%)
Goodwill, net 571,964 570,419 1,545 0.3%
Other intangible assets, net 229,311 240,842 (11,531) (4.8%)
Other assets 12,109 12,514 (405) (3.2%)
Total Assets $2,025,631 $1,985,560 $40,071 2.0%
Liabilities
Current Liabilities:
Short-term debt $981 $923 $58 6.3%
Accounts payable 121,360 137,401 (16,041) (11.7%)
Accrued expenses 93,073 103,207 (10,134) (9.8%)
Income taxes payable 3,127 13,260 (10,133) (76.4%)
Deferred revenue 131,375 105,421 25,954 24.6%
Other current liabilities 42,716 38,403 4,313 11.2%
Total current liabilities 392,632 398,615 (5,983) (1.5%)
Long-term debt 508,972 510,981 (2,009) (0.4%)
Deferred income taxes 60,881 62,416 (1,535) (2.5%)
Accrued pension & other
postretirement benefit costs 40,966 39,501 1,465 3.7%
Long-term portion of
environmental reserves 20,376 20,856 (480) (2.3%)
Other liabilities 35,875 38,406 (2,531) (6.6%)
Total Liabilities 1,059,702 1,070,775 (11,073) (1.0%)
Stockholders' Equity
Common stock, $1 par value 47,798 47,715 83 0.2%
Additional paid in capital 86,446 79,550 6,896 8.7%
Retained earnings 846,600 807,413 39,187 4.9%
Accumulated other comprehensive
income 95,225 93,327 1,898 2.0%
1,076,069 1,028,005 48,064 4.7%
Less: cost of treasury stock 110,140 113,220 (3,080) (2.7%)
Total Stockholders' Equity 965,929 914,785 51,144 5.6%
Total Liabilities and
Stockholders' Equity $2,025,631 $1,985,560 $40,071 2.0%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION (UNAUDITED)
(In thousands)
Three Months Ended
June 30,
Change
2008 2007 %
Sales:
Flow Control $226,662 $163,198 38.9%
Motion Control 156,661 138,949 12.7%
Metal Treatment 70,141 63,429 10.6%
Total Sales $453,464 $365,576 24.0%
Operating Income:
Flow Control $21,252 $10,030 111.9%
Motion Control 16,027 15,585 2.8%
Metal Treatment 14,929 12,987 15.0%
Total Segments 52,208 38,602 35.2%
Corporate & Other (2,536) (193) 1214.0%
Total Operating Income $49,672 $38,409 29.3%
Operating Margins:
Flow Control 9.4% 6.1%
Motion Control 10.2% 11.2%
Metal Treatment 21.3% 20.5%
Total Curtiss-Wright 11.0% 10.5%
Six Months Ended
June 30,
%
2008 2007 Change
Sales:
Flow Control $437,624 $300,891 45.4%
Motion Control 311,493 270,206 15.3%
Metal Treatment 137,726 127,088 8.4%
Total Sales $886,843 $698,185 27.0%
Operating Income:
Flow Control $35,258 $20,025 76.1%
Motion Control 29,950 28,870 3.7%
Metal Treatment 28,029 25,957 8.0%
Total Segments $93,237 $74,852 24.6%
Corporate & Other (2,838) (1,301) 118.1%
Total Operating Income $90,399 $73,551 22.9%
Operating Margins:
Flow Control 8.1% 6.7%
Motion Control 9.6% 10.7%
Metal Treatment 20.4% 20.4%
Total Curtiss-Wright 10.2% 10.5%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Net Cash Provided by $77,741 $60,802 $59,189 $53,104
Operating Activities
Capital Expenditures (23,052) (11,909) (46,596) (23,978)
Free Cash Flow (1) $54,689 $48,893 $12,593 $29,126
Cash Conversion (1) 202% 229% 26% 71%
(1) The Corporation discloses free cash flow and cash conversion because
the Corporation believes that they are measurements of cash flow
that are available for investing and financing activities. Free cash flow
is defined as net cash flow provided by operating activities less capital
expenditures. Free cash flow represents cash generated after paying for
interest on borrowings, income taxes, capital expenditures, and working
capital requirements, but before repaying outstanding debt and investing
cash or utilizing debt credit lines to acquire businesses and make other
strategic investments. Cash conversion is defined as free cash flow
divided by net earnings. Free cash flow, as we define it, may differ from
similarly named measures used by entities and, consequently, could be
misleading unless all entities calculate and define free cash flow in the
same manner.
About Curtiss-Wright
Curtiss-Wright Corporation is a diversified company headquartered in
Roseland, New Jersey. The Company designs, manufactures and overhauls
products for motion control and flow control applications and provides a
variety of metal treatment services. The firm employs approximately 7,600
people. More information on Curtiss-Wright can be found at
http://www.curtisswright.com.
Certain statements made in this release, including statements about
future revenue, organic revenue growth, quarterly and annual revenue, net
income, organic operating income growth, future business opportunities,
cost saving initiatives, and future cash flow from operations, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements present management's
expectations, beliefs, plans and objectives regarding future financial
performance, and assumptions or judgments concerning such performance. Any
discussions contained in this press release, except to the extent that they
contain historical facts, are forward- looking and accordingly involve
estimates, assumptions, judgments and uncertainties. Such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those expressed or implied.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Such risks and
uncertainties include, but are not limited to: a reduction in anticipated
orders; an economic downturn; changes in competitive marketplace and/or
customer requirements; a change in government spending; an inability to
perform customer contracts at anticipated cost levels; and other factors
that generally affect the business of aerospace, defense contracting,
electronics, marine, and industrial companies. Such factors are detailed in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2007 and subsequent reports filed with the Securities and Exchange
Commission.
This press release and additional information is available at
http://www.curtisswright.com.
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