News Details
CURTISS-WRIGHT REPORTS 2006 THIRD QUARTER AND NINE MONTH FINANCIAL RESULTS
October 26, 2006
Sales and Operating Income increased 15% and Net Earnings increased 16% in the Third Quarter of 2006
ROSELAND, N.J., Oct 26, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Curtiss-Wright Corporation (NYSE: CW) today reports financial results for the third quarter and nine months ended September 30, 2006. The highlights are as follows:
THIRD QUARTER 2006 OPERATING HIGHLIGHTS
- Net sales for the third quarter of 2006 increased 15% to $311.8 million from $271.4 million in the third quarter of 2005.
- Operating income in the third quarter of 2006 increased 15% to $37.3 million from $32.4 million in the third quarter of 2005. Operating income was negatively impacted in the third quarter of 2006 by $1.1 million of costs associated with the adoption of FAS 123R and higher pension expense of $0.8 million from the Curtiss-Wright pension plans as compared to the prior year period.
- Net earnings for the third quarter of 2006 increased 16% to $20.4 million, or $0.46 per diluted share, from $17.5 million, or $0.40 per diluted share, in the third quarter of 2005 (adjusted for 2-for-1 stock split in April 2006).
- New orders received in the third quarter of 2006 were $324.1 million, up 17% compared to the third quarter of 2005.
NINE MONTHS 2006 OPERATING HIGHLIGHTS
- Net sales for the first nine months of 2006 increased 11% to $904.0 million from $813.0 million in the first nine months of 2005.
- Operating income in the first nine months of 2006 increased 2% to $94.9 million from $93.1 million in the first nine months of 2005. Operating income was negatively impacted in the first nine months of 2006 by $3.4 million of costs associated with the adoption of FAS 123R and higher pension expense of $3.6 million from the Curtiss-Wright pension plans as compared to the prior year period. Operating income for the first nine months of 2005 included a one-time gain of $2.8 million related to the sale of non-operating property.
- Net earnings for the first nine months of 2006 increased 8% to $53.7 million, or $1.21 per diluted share, from $50.0 million, or $1.14 per diluted share, in the first nine months of 2005 (adjusted for 2-for-1 stock split in April 2006). Net earnings for the first nine months of 2006 were favorably impacted by a lower effective tax rate resulting from a Canadian tax benefit of $2.0 million, primarily related to higher than expected research and development credits for 2005, and an adjustment to our deferred tax accounts of $1.6 million based on new Canadian tax legislation which was enacted in late June 2006.
- New orders received in the first nine months of 2006 were $976.3 million, up 10% compared to the first nine months of 2005. At September 30, 2006, backlog was $893.4 million, up 11% from $805.6 million at December 31, 2005.
"We are pleased to report higher sales, operating income, and net earnings for the third quarter of 2006," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "In the third quarter 2006 we experienced solid organic growth in sales of 12% and operating income of 14%. Our year-to-date results continue to be strong despite some unanticipated obstacles, such as unfavorable foreign currency translation and increased material costs. In addition, we incurred significant business integration costs related to our 2006 acquisition in our Flow Control segment. Our commercial markets continue to be strong in the third quarter of 2006 with 12% organic sales growth, driven primarily by the oil and gas market at 28% and the commercial aerospace market at 17%. Our new orders continue to be strong which will provide momentum for our fourth quarter and heading into 2007. In addition, we have a number of military and commercial development contracts and have recently introduced many new products that should provide significant future opportunities."
SALES
Sales growth in the three months ended September 30, 2006 was driven by organic growth in our commercial businesses and contributions from our 2006 acquisitions. The base businesses generated overall organic growth of 12% for third quarter of 2006 as compared to the prior year period. Organic sales growth was strong in all three of our operating segments, with Motion Control at 14%, Flow Control at 11%, and Metal Treatment at 9%, as compared to the same period in the prior year. Acquisitions made since June 30, 2005 contributed $7.8 million in incremental sales for the third quarter of 2006, over the comparable prior year period.
In our base businesses, higher ground defense and commercial aerospace revenues from our Motion Control segment, higher sales to the oil and gas and commercial power markets from our Flow Control segment, and higher sales of global shot peening and heat treating services from our Metal Treatment segment, all contributed to the quarterly organic sales growth. In addition, foreign currency translation positively impacted sales by $3.1 million for three months ended September 30, 2006, as compared to the prior year period.
OPERATING INCOME
Operating income for the third quarter of 2006 increased 15% over the prior year period. Higher operating income in the third quarter of 2006 resulted from higher sales volume, a favorable sales mix, and cost control initiatives. Our consolidated operating margin for the third quarter of 2006 was essentially flat compared to the prior year period as improvements in the Motion Control and Metal Treatment segments were offset by lower operating margins in the Flow Control segment. The lower margins in our Flow Control segment were due to unfavorable sales mix, business integration costs, and higher material costs.
Overall organic operating income growth was 14% for the third quarter of 2006, led by our Motion Control segment at 37% and Metal Treatment segment at 20%. Operating income in the third quarter of 2006 was negatively impacted by $1.1 million of costs associated with the January 1, 2006 adoption of FAS 123R and higher pension expense of $0.8 million from the Curtiss-Wright pension plans. In addition, foreign currency translation adversely impacted operating income by $0.1 million in the third quarter 2006, as compared to the prior year period.
NET EARNINGS
Net earnings increased 16% for the third quarter of 2006 over the comparable prior year period. Operating income from our business segments increased $6.2 million for the three months ended September 30, 2006, over the prior year period. Higher interest expense due to higher interest rates, partially offset by lower average outstanding debt levels, lowered net earnings in the third quarter of 2006 by $0.5 million over the prior year period.
SEGMENT PERFORMANCE
Flow Control - Sales for the third quarter of 2006 were $129.8 million, up 16% over the comparable period last year due to solid organic growth and the contribution from the 2006 acquisition of Enpro Systems. Sales from the base businesses increased 11% in the third quarter of 2006 as compared to the prior year period. This organic sales growth was due to higher sales to the oil and gas market, led by increased demand for the coker valve products, as well as higher sales to the commercial power market due mainly to the timing of plant outages. Sales of this segment were favorably affected by foreign currency translation of $0.4 million in the third quarter of 2006 compared to the prior year period.
Operating income for this segment increased 2% in the third quarter of 2006 compared to the prior year period. The benefit of the higher sales volume was mostly offset by less favorable commercial power sales mix and higher material costs. In addition, this segment incurred business integration costs relative to our 2006 acquisition which should generate improved profitability beginning in 2007. Operating income of this segment was favorably affected by foreign currency translation of $0.1 million in the third quarter of 2006 compared to the prior year period.
Motion Control - Sales for the third quarter of 2006 of $125.6 million increased 14%, all organic, over the comparable period last year. This growth was due primarily to higher sales of embedded computing products to the ground defense market and increased sales of OEM and spares products and repair and overhaul services to the commercial aerospace market. This growth was partially offset by lower sales to the general industrial and defense aerospace markets. Sales of this segment were favorably affected by foreign currency translation of $1.7 million in the third quarter of 2006 compared to the prior year period.
Operating income for this segment increased 37% for the third quarter of 2006 compared to the prior year period. The operating income increase was primarily driven by higher sales volume, favorable sales mix within our embedded computing group, and increased efficiencies as a result of our business integration initiatives. In addition this segment experienced cost overruns on certain military contract work in the third quarter of 2005 that did not repeat in 2006. These improvements were partially offset by unfavorable foreign currency translation of $0.4 million and higher production start up costs relative to new programs.
Metal Treatment - Sales for the third quarter of 2006 of $56.3 million were 15% higher than the comparable period last year. The improvement was mainly due to organic sales growth of 9% and the contribution from our 2006 acquisition of Allegheny Coatings. The organic sales growth was driven by higher global shot peening revenues in the aerospace and automotive markets along with strong demand in the heat treating business from the general industrial and automotive markets. Sales of this segment were favorably affected by foreign currency translation of $1.0 million in the third quarter of 2006 compared to the prior year period.
Operating income increased 21% for the third quarter of 2006 as compared to the prior year period, primarily as a result of the higher sales volume. Operating income of this segment was favorably affected by foreign currency translation of $0.2 million in the third quarter of 2006 compared to the prior year period.
Mr. Benante concluded, "In 2006, we continue to demonstrate our ability to generate long-term shareholder value by growing our sales and earnings. Our strong performance demonstrates our ability to execute our growth strategy while continuing to achieve our financial targets. We expect the fourth quarter of 2006 to benefit from the ramp up of our defense programs and the continued strength in our commercial markets, as well as additional benefits achieved from our integration and cost control efforts. Our diversification strategy, the successful integration of our acquisitions, and our continued emphasis on providing advanced new products and technologies should continue to generate growth opportunities in each of our three business segments in 2006 and beyond."
The Company will host a conference call to discuss the third quarter 2006 results at 11:00 EDT Friday, October 27, 2006. A live webcast of the call can be heard on the internet by visiting the company's website at 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 Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Net sales $311,801 $271,355 $903,988 $813,035
Cost of sales 205,783 177,840 600,356 533,452
Gross profit 106,018 93,515 303,632 279,583
Research & development
expenses 7,227 8,504 28,531 30,312
Selling expenses 19,382 16,738 57,004 51,633
General and administrative
expenses 41,936 35,546 122,720 106,515
Environmental remediation and
administrative expenses, net 273 188 362 844
(Gain) Loss on sale of real
estate and fixed assets. (51) 98 68 (2,827)
Operating income 37,251 32,441 94,947 93,106
Other (expenses) income, net (18) 279 295 (421)
Interest expense (5,721) (4,912) (17,103) (13,993)
Earnings before income taxes 31,512 27,808 78,139 78,692
Provision for income taxes 11,156 10,289 24,413 28,716
Net earnings $ 20,356 $ 17,519 $ 53,726 $ 49,976
Basic earnings per share $ 0.46 $ 0.40 $ 1.23 $ 1.16
Diluted earnings per share $ 0.46 $ 0.40 $ 1.21 $ 1.14
Dividends per share $ 0.06 $ 0.05 $ 0.18 $ 0.14
Weighted average shares
outstanding:
Basic 43,903 43,376 43,779 43,206
Diluted 44,338 43,946 44,254 43,780
Three Months Nine Months
Change Change
$ % $ %
Net sales $40,446 14.91% $90,953 11.19%
Cost of sales 27,943 15.71% 66,904 12.54%
Gross profit 12,503 13.37% 24,049 8.60%
Research & development expenses (1,277) -15.02% (1,781) -5.88%
Selling expenses 2,644 15.80% 5,371 10.40%
General and administrative expenses 6,390 17.98% 16,205 15.21%
Environmental remediation and
administrative expenses, net 85 45.21% (482) -57.11%
(Gain) Loss on sale of real estate
and fixed assets. (149) -152.04% 2,895 102.41%
Operating income 4,810 14.83% 1,841 1.98%
Other (expenses) income, net (297) -106.45% 716 -170.07%
Interest expense (809) 16.47% (3,110) 22.23%
Earnings before income taxes 3,704 13.32% (553) -0.70%
Provision for income taxes 867 8.43% (4,303) -14.98%
Net earnings $ 2,837 16.19% $ 3,750 7.50%
Certain prior year information has been reclassified to conform to current presentation.
Shares and per share amounts have been adjusted on a pro forma basis for the April 21, 2006 2-for-1 stock split.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31, Change
2006 2005 $ %
Assets
Current Assets:
Cash and cash equivalents $ 47,377 $ 59,021 $(11,644) -19.7%
Receivables, net 280,705 244,689 36,016 14.7%
Inventories, net 178,983 146,297 32,686 22.3%
Deferred income taxes 21,268 28,844 (7,576) -26.3%
Other current assets 13,076 11,615 1,461 12.6%
Total current assets 541,409 490,466 50,943 10.4%
Property, plant, and
equipment, net 290,080 274,821 15,259 5.6%
Prepaid pension costs 72,121 76,002 (3,881) -5.1%
Goodwill, net 414,286 388,158 26,128 6.7%
Other intangible assets,
net 157,194 158,267 (1,073) -0.7%
Other assets 12,110 12,571 (461) -3.7%
Total Assets $1,487,200 $1,400,285 $86,915 6.2%
Liabilities
Current Liabilities:
Short-term debt $ 5,941 $ 885 $5,056 571.3%
Accounts payable 79,779 80,460 (681) -0.8%
Accrued expenses 68,800 74,252 (5,452) -7.3%
Income taxes payable 2,946 22,855 (19,909) -87.1%
Other current liabilities 55,758 43,051 12,707 29.5%
Total current liabilities 213,224 221,503 (8,279) -3.7%
Long-term debt 385,004 364,017 20,987 5.8%
Deferred income taxes 51,512 53,570 (2,058) -3.8%
Accrued pension & other
postretirement benefit
costs 72,686 74,999 (2,313) -3.1%
Long-term portion of
environmental reserves 21,477 22,645 (1,168) -5.2%
Other liabilities 28,294 25,331 2,963 11.7%
Total Liabilities 772,197 762,065 10,132 1.3%
Stockholders' Equity
Common stock, $1 par
value 47,533 25,493 22,040 86.5%
Additional paid in capital 68,813 59,806 9,007 15.1%
Retained earnings 691,823 667,892 23,931 3.6%
Unearned portion of
restricted stock (66) (12) (54) 450.0%
Accumulated other
comprehensive income 37,322 20,655 16,667 80.7%
845,425 773,834 71,591 9.3%
Less: cost of treasury
stock 130,422 135,614 (5,192) -3.8%
Total Stockholders'
Equity 715,003 638,220 76,783 12.0%
Total Liabilities and
Stockholders' Equity $1,487,200 $1,400,285 $ 86,915 6.2%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
Three Months Ended
September 30,
%
2006 2005 Change
Sales:
Flow Control $129,819 $112,126 15.8%
Motion Control 125,639 110,242 14.0%
Metal Treatment 56,343 48,987 15.0%
Total Sales $311,801 $271,355 14.9%
Operating Income:
Flow Control $ 14,014 $ 13,800 1.6%
Motion Control 15,310 11,203 36.7%
Metal Treatment 10,448 8,618 21.2%
Total Segments 39,772 33,621 18.3%
Corporate & Other (2,521) (1,180) 113.6%
Total Operating Income $ 37,251 $ 32,441 14.8%
Operating Margins:
Flow Control 10.8% 12.3%
Motion Control 12.2% 10.2%
Metal Treatment 18.5% 17.6%
Total Curtiss-Wright 11.9% 12.0%
Nine Months Ended
September 30,
%
2006 2005 Change
Sales:
Flow Control $380,277 $335,863 13.2%
Motion Control 356,496 328,180 8.6%
Metal Treatment 167,215 148,992 12.2%
Total Sales $903,988 $813,035 11.2%
Operating Income:
Flow Control $ 36,901 $ 36,905 0.0%
Motion Control 33,436 30,331 10.2%
Metal Treatment 31,630 25,547 23.8%
Total Segments 101,967 92,783 9.9%
Corporate & Other (7,020) 323 -2273.4%
Total Operating Income $ 94,947 $ 93,106 2.0%
Operating Margins:
Flow Control 9.7% 11.0%
Motion Control 9.4% 9.2%
Metal Treatment 18.9% 17.1%
Total Curtiss-Wright 10.5% 11.5%
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 6,300 people. More information on Curtiss-Wright can be found at curtisswright2014.q4web.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, 2005 and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information is available at curtisswright2014.q4web.com.
SOURCE Curtiss-Wright Corporation
Alexandra M. Deignan,
+1-973-597-4734,
[email protected]