News Details
CURTISS-WRIGHT REPORTS 2005 SECOND QUARTER AND SIX MONTH FINANCIAL RESULTS
July 28, 2005
Sales Increased 27%, Operating Income 31%, and Net Earnings 37% in the Second Quarter of 2005, Respectively
Full Year Guidance Increased
ROSELAND, N.J., July 28 /PRNewswire-FirstCall/ -- Curtiss-Wright Corporation (NYSE: CW) today reports financial results for the second quarter and six months ended June 30, 2005. The highlights are as follows:
SECOND QUARTER 2005 OPERATING HIGHLIGHTS
- Net sales for the second quarter of 2005 increased 27% to $283.2 million from $222.4 million in the second quarter of 2004. Acquisitions made since March 31, 2004 contributed $31.6 million in incremental sales in the second quarter of 2005.
- Operating income in the second quarter of 2005 increased 31% to $33.2 million from $25.4 million in the second quarter of 2004. Acquisitions made since March 31, 2004 contributed $1.1 million in incremental operating income in the second quarter of 2005.
- Net earnings for the second quarter of 2005 increased 25% to $17.9 million, or $0.82 per diluted share, from $14.3 million, or $0.67 per diluted share, in the second quarter of 2004. The increase in the 2005 second quarter net earnings was achieved despite a $1.1 million after-tax increase in interest expense (approximately $0.05 per diluted share).
- New orders received in the second quarter of 2005 were $284.9 million, up 37% compared to the second quarter of 2004.
SIX MONTHS 2005 OPERATING HIGHLIGHTS
- Net sales for the first six months of 2005 increased 24% to $541.7 million from $437.4 million in the first six months of 2004. Acquisitions made in 2005 and 2004 contributed $67.4 million in incremental sales in the first six months of 2005.
- Operating income in the first six months of 2005 increased 20% to $60.7 million from $50.6 million in the first six months of 2004. Acquisitions made in 2005 and 2004 contributed $1.2 million in incremental operating income in the first six months of 2005. Operating income in the first six months of 2005 included a gain of $2.8 million related to the sale of non-operating property.
- Net earnings for the first six months of 2005 increased 8% to $32.5 million, or $1.49 per diluted share, from $29.9 million, or $1.40 per diluted share, in the first six months of 2004. The increase in the 2005 net earnings was achieved despite a $2.4 million after-tax increase in interest expense (approximately $0.11 per diluted share).
- New orders received in the first six months of 2005 were $610.8 million, up 38% compared to the first six months of 2004. At June 30, 2005, backlog was $740.6 million, up 18% from $627.7 million at December 31, 2004.
"We are pleased to report increased sales, operating income, and net earnings for the second quarter and first half of 2005," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "Our new orders were strong for the first half of 2005 which provides us with good momentum for the second half of the year and into 2006. We experienced strong overall organic sales and operating income growth of 8% and 17%, respectively, in the first half of 2005. The strong organic sales growth was in the oil and gas, commercial aerospace, and power generation markets. Many of our military programs are progressing through the procurement cycle and we expect a ramp-up in the second half of the year. In addition, we continue to progress on several developmental contracts that generally produce lower margins than production contracts; however, these contracts should provide us future opportunities. We are continuing to integrate our acquisitions and experienced some integration costs; however, these integration efforts are beginning to produce reduced costs and improved profitability that is expected to continue throughout the remainder of the year."
SALES
Sales growth in 2005 for the three and six months ended June 30th compared to 2004 was mainly driven by the contributions from our 2004 and 2005 acquisitions and organic growth in some of our base businesses. Acquisitions made since March 31, 2004 contributed $31.6 million and $67.4 million in incremental sales for the quarter and six months ended June 30, 2005, respectively, over the comparable prior year periods. The base businesses generated overall organic growth of 12% and 8% for the three and six months ended June 30, 2005, respectively, over the prior year periods. This organic sales growth was led by our Metal Treatment segment, which experienced strong organic growth of 13%, followed by our Motion Control and Flow Control segments at 8% and 5%, respectively, for the first six months of 2005.
In our base businesses, higher sales from our Metal Treatment segment of global shot peening services, higher sales from our Motion Control segment to the global commercial aerospace, general industrial, and military aerospace markets, and higher sales from our Flow Control segment to the oil and gas and commercial power generation markets, all contributed to the organic growth in the first six months of 2005. In addition, foreign currency translation favorably impacted sales by $2.1 million and $4.3 million for the three and six months ended June 30, 2005, compared to the prior year periods.
OPERATING INCOME
Operating income for the three and six months ended June 30, 2005 increased 31% and 20%, respectively, over the 2004 prior year periods. The increases were due to higher sales volumes, favorable sales mix, and previously implemented cost control initiatives. Overall, operating income organic growth was 24% and 17% for the three and six months ended June 30, 2005, respectively, compared to the prior year periods. All three operating segments experienced strong organic operating income growth, led by our Metal Treatment segment, which grew 23% and 17% for the three and six months ended June 30, 2005, respectively, over the prior year periods. Operating income for the six months ended June 30, 2005 includes a gain of $2.8 million related to the sale of non-operating property. The higher segment operating income was partially offset by higher pension expense from the Curtiss-Wright Plans of $0.5 million and $0.9 million for the three and six months ended June 30, 2005, respectively, over the comparable prior year periods. In addition, foreign currency translation favorably impacted operating income by $0.3 million and $0.7 million for the three and six months ended June 30, 2005, respectively, compared to the prior year periods.
NET EARNINGS
Net earnings increased 25% and 8% for the three and six months ended June 30, 2005, respectively, over the comparable prior year periods. The improvement was due to strong operating income from our business segments, which increased $8.5 million and $7.7 million for the three and six months ended June 30, 2005, respectively, over the prior year periods. Curtiss-Wright achieved strong growth in the oil and gas, shot peening, military aerospace, and commercial power generation markets. Higher interest expense, due to both higher debt levels and higher interest rates, lowered net earnings in the second quarter and first six months of 2005 by $1.1 million and $2.4 million, respectively.
SEGMENT PERFORMANCE
Flow Control -- Sales for the second quarter of 2005 were $114.3 million, up 33% over the comparable period last year due to solid organic growth and the contributions from the 2004 acquisitions. Sales from the base businesses increased 12% in the second quarter of 2005 as compared to the prior year period. The organic sales growth was primarily from higher sales to the oil and gas market, led by higher demand for the Coker valve products, and higher sales of valves to the U.S. Navy. The improvement was partially offset by lower sales of electromechanical pump products to the U.S. Navy due to the timing of customer driven delivery schedules. Sales of this business segment also benefited from favorable foreign currency translation of $0.5 million in the second quarter of 2005 compared to the prior year period.
Operating income for this segment increased 47% in the second quarter of 2005 compared to the prior year period. The improvement was due to the higher sales volume and favorable sales mix for our oil and gas products, previously implemented cost control initiatives, higher sales volume for our valve products to the U.S. Navy, and the contributions from the 2004 acquisitions.
Motion Control -- Sales for the second quarter of 2005 of $117.9 million increased 29% over last year, principally due to solid organic growth and the contributions from the 2004 and 2005 acquisitions. Sales from the base businesses increased 14% in the second quarter of 2005 as compared to the prior year period. This organic sales growth was due primarily to higher sales of OEM and spares products and repair and overhaul services to the commercial aerospace market, higher sales of industrial sensor products, and higher sales of embedded computing products to the defense aerospace market, as compared to the prior year period. Partially offsetting these increases are lower sales of F-16 spares, and lower sales of tilting train systems in Europe due to expiration of this program in 2004. Sales of this business segment also benefited from favorable foreign currency translation of $1.0 million in the second quarter of 2005 as compared to the prior year period.
Operating income for this segment increased 27% for the second quarter of 2005 compared to the prior year period. The increase was driven primarily by higher sales volume mentioned above and previously implemented cost control initiatives. The improvement was partially offset by less favorable sales mix resulting from decreased higher margin sales, such as the F-16 spares and tilting train program, and higher development work which generate lower margins. In addition, this segment continued to experience some business consolidation costs in the embedded computing group; however, these integration efforts have begun to produce reduced costs and improved profitability which are expected to continue in the future.
Metal Treatment -- Sales for the second quarter of 2005 of $51.0 million were 14% higher than the comparable period last year. The improvement, all of which was organic, was driven by higher global shot peening revenues from the aerospace and automotive markets. Favorable foreign currency translation positively impacted sales by $0.6 million in the second quarter of 2005 as compared to the prior year period.
Operating income increased 23% for the second quarter of 2005 as compared to the prior year period, primarily as a result of the higher sales volume. Favorable foreign currency translation also contributed to the increase in operating income.
2005 MANAGEMENT GUIDANCE
We are increasing our 2005 full-year guidance to reflect improved market conditions and incorporate our 2005 acquisition. We expect revenues in the range of $1.10 billion to $1.15 billion, operating income in the range of $135 - $145 million, and earnings per share in the range of $3.30 to $3.50 per share. This guidance reflects our expectations of 15-20% growth in revenue and operating income, and 10-15% growth in EPS. EPS guidance is based on estimated fully diluted shares outstanding of 22 million shares for the full year 2005.
Mr. Benante concluded, "In 2005, we will once again demonstrate our ability to generate long-term shareholder value by growing our sales and earnings. Our historical performance demonstrates our ability to execute our strategy and achieve our financial targets. Our strong performance in the first half of 2005 continues this trend. We expect the second half of 2005 to be even stronger as many of our defense programs ramp up, our commercial markets continue to strengthen, and we realize the benefits of integration efforts. Our diversification strategy and emphasis on new technologies, many of which are only at the beginning of their life cycles, should continue to generate growth opportunities in each of our three business segments in 2005 and beyond."
The Company will host a conference call to discuss the second quarter 2005 results at 9:00 EDT Friday, July 29, 2005. A live webcast of the call can be heard on the Internet by visiting the company's website at http://curtisswright2014.q4web.com and clicking on the investor information page or by visiting other websites that provide links to corporate webcasts.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Net sales $283,193 $222,428 $541,680 $437,361
Cost of sales 182,894 146,406 355,612 289,744
Gross profit 100,299 76,022 186,068 147,617
Research &
development
expenses 11,580 7,754 21,808 15,966
Selling expenses 17,971 14,743 34,895 27,347
General and
administrative
expenses 36,501 27,789 69,969 53,038
Environmental
remediation and
administrative
expenses, net 573 51 656 291
Pension expense
(income), net 500 42 1,000 82
(Gain) Loss on sale
of real estate and
fixed assets (12) 230 (2,925) 317
Operating income 33,186 25,413 60,665 50,576
Other income
(expenses), net (576) 523 (700) 121
Interest expense (4,778) (3,018) (9,081) (5,283)
Earnings before
income taxes 27,832 22,918 50,884 45,414
Provision for
income taxes 9,898 8,594 18,427 15,481
Net earnings $17,934 $14,324 $32,457 $29,933
Basic earnings
per share $0.83 $0.68 $ 1.51 $ 1.42
Diluted earnings
per share $0.82 $0.67 $ 1.49 $ 1.40
Dividends per share $0.09 $0.09 $ 0.18 $ 0.18
Weighted average shares
outstanding:
Basic 21,608 21,136 21,557 21,013
Diluted 21,888 21,460 21,844 21,330
Three Months Six Months
Change Change
$ % $ %
Net sales $60,765 27.32% $104,319 23.85%
Cost of sales 36,488 24.92% 65,868 22.73%
Gross profit 24,277 31.93% 38,451 26.05%
Research &
development expenses 3,826 49.34% 5,842 36.59%
Selling expenses 3,228 21.90% 7,548 27.60%
General and
administrative
expenses 8,712 31.35% 16,931 31.92%
Environmental
remediation and
administrative
expenses, net 522 1023.53% 365 125.43%
Pension expense
(income), net 458 1090.48% 918 1119.51%
(Gain) Loss on sale
of real estate and
fixed assets (242) -105.22% (3,242) -1022.71%
Operating income 7,773 30.59% 10,089 19.95%
Other income
(expenses), net (1,099) -210.13% (821) -678.51%
Interest expense (1,760) 58.32% (3,798) 71.89%
Earnings before
income taxes 4,914 21.44% 5,470 12.04%
Provision for
income taxes 1,304 15.17% 2,946 19.03%
Net earnings $3,610 25.20% $2,524 8.43%
Basic earnings
per share
Diluted earnings
per share
Dividends per share
Weighted average shares
outstanding:
Basic
Diluted
Certain prior year information has been reclassified to conform to current
presentation.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31, Change
2005 2004 $ %
Assets
Current Assets:
Cash and cash equivalents $47,983 $41,038 $6,945 16.9%
Receivables, net 243,138 214,084 29,054 13.6%
Inventories, net 137,370 115,979 21,391 18.4%
Deferred income taxes 26,123 25,693 430 1.7%
Other current assets 10,416 12,460 (2,044) -16.4%
Total current assets 465,030 409,254 55,776 13.6%
Property, plant, and
equipment, net 267,619 265,243 2,376 0.9%
Prepaid pension costs 76,865 77,802 (937) -1.2%
Goodwill, net 388,132 364,313 23,819 6.5%
Other intangible assets, net 152,111 140,369 11,742 8.4%
Other assets 17,542 21,459 (3,917) -18.3%
Total Assets $1,367,299 $1,278,440 $88,859 7.0%
Liabilities
Current Liabilities:
Short-term debt $934 $1,630 $(696) -42.7%
Accounts payable 66,626 65,364 1,262 1.9%
Accrued expenses 62,054 63,413 (1,359) -2.1%
Income taxes payable 12,517 13,895 (1,378) -9.9%
Other current liabilities 49,818 52,793 (2,975) -5.6%
Total current liabilities 191,949 197,095 (5,146) -2.6%
Long-term debt 402,561 340,860 61,701 18.1%
Deferred income taxes 48,317 40,043 8,274 20.7%
Accrued pension & other
postretirement benefit costs 81,545 80,612 933 1.2%
Long-term portion of
environmental reserves 24,282 23,356 926 4.0%
Other liabilities 23,267 20,860 2,407 11.5%
Total Liabilities 771,921 702,826 69,095 9.8%
Stockholders' Equity
Common stock, $1 par value 25,447 16,646 8,801 52.9%
Class B common stock, $1 par
value - 8,765 (8,765) -100.0%
Capital surplus 57,360 55,885 1,475 2.6%
Retained earnings 629,636 601,070 28,566 4.8%
Unearned portion of restricted
stock (23) (34) 11 -32.4%
Accumulated other
comprehensive income 21,311 36,797 (15,486) -42.1%
733,731 719,129 14,602 2.0%
Less: cost of treasury stock 138,353 143,515 (5,162) -3.6%
Total Stockholders' Equity 595,378 575,614 19,764 3.4%
Total Liabilities and
Stockholders' Equity $1,367,299 $1,278,440 $88,859 7.0%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
% %
2005 2004 Change 2005 2004 Change
Sales:
Flow Control $114,324 $86,205 32.6% $223,737 $175,600 27.4%
Motion Control 117,854 91,578 28.7% 217,938 174,922 24.6%
Metal Treatment 51,015 44,645 14.3% 100,005 86,839 15.2%
Total Sales $283,193 $222,428 27.3% $541,680 $437,361 23.9%
Operating Income:
Flow Control $12,756 $8,654 47.4% $23,105 $19,085 21.1%
Motion Control 12,738 10,025 27.1% 19,128 18,314 4.4%
Metal Treatment 9,112 7,439 22.5% 16,929 14,016 20.8%
Total Segments 34,606 26,118 32.5% 59,162 51,415 15.1%
Pension (Expense)
/Income (500) (42) 1090.5% (1,000) (82) 1119.5%
Corporate & Other (920) (663) 38.8% 2,503 (757) -430.6%
Total Operating
Income $33,186 $25,413 30.6% $60,665 $50,576 19.9%
Operating Margins:
Flow Control 11.2% 10.0% 10.3% 10.9%
Motion Control 10.8% 10.9% 8.8% 10.5%
Metal Treatment 17.9% 16.7% 16.9% 16.1%
Total
Curtiss-Wright 11.7% 11.4% 11.2% 11.6%
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 5,900 people. More information on Curtiss-Wright can be found at http://curtisswright2014.q4web.com.
Forward-looking statements in this release are made pursuant to the Safe Harbor provisions 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, 2004 and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information is available at http://curtisswright2014.q4web.com.
SOURCE Curtiss-Wright Corporation 07/28/2005
CONTACT:
Alexandra M. Deignan of Curtiss-Wright Corporation
+1-973-597-4734, [email protected]