News Details
CURTISS-WRIGHT REPORTS 2009 SECOND QUARTER AND SIX MONTH FINANCIAL RESULTS; UPDATES FULL YEAR GUIDANCE
July 27, 2009
PARSIPPANY, N.J., July 27, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Curtiss-Wright Corporation (NYSE: CW) today reports financial results for the second quarter and six months ended June 30, 2009. The highlights are as follows:
SECOND QUARTER 2009 OPERATING HIGHLIGHTS
-- Net sales for the second quarter of 2009 decreased 1% to $447 million
from $453 million in the second quarter of 2008.
-- Operating income in the second quarter of 2009 decreased 12% to $44
million from $50 million in the second quarter of 2008.
-- Net earnings for the second quarter of 2009 decreased 10% to $24
million, or $0.54 per diluted share, from $27 million, or $0.60 per
diluted share, in the second quarter of 2008.
-- New orders received in the second quarter of 2009 were $404 million,
down 54% compared to the second quarter of 2008. The second quarter of
2008 included a large order in excess of $300 million for AP1000
nuclear power plants.
SIX MONTHS 2009 OPERATING HIGHLIGHTS
-- Net sales for the first six months of 2009 decreased 2% to $871 million
from $887 million in the first six months of 2008.
-- Operating income for the first six months of 2009 decreased 17% to $75
million from $90 million in the first six months of 2008.
-- Net earnings for the first six months of 2009 decreased 18% to $40
million, or $0.88 per diluted share, from $49 million, or $1.08 per
diluted share, for the first six months of 2008.
-- New orders received in the first six months of 2009 were $862 million,
down 35% compared to the first six months of 2008. At June 30, 2009, our
backlog was $1.69 billion, up slightly from $1.68 billion at December
31, 2008.
"Although the second quarter met our expectations, the magnitude of the negative impact the global recession has had, specifically in our Metal Treatment segment, our bellwether for economic activity, was unprecedented and greater than expected. Due to the highly technical nature of our products and our market leadership positions, we will continue to win new business, however, current demand is lackluster. In the general industrial, oil and gas, and commercial aerospace markets, lower capital spending, reduced demand, and delayed purchases, resulted in lower revenues and orders during the second quarter of 2009," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "Due to our strategic diversification, we were able to largely offset the impact of these sales declines with strong performance in some of the other key markets we serve, most notably commercial power, ground defense and naval defense, which grew organically by 38%, 26% and 20%, respectively."
"Our Motion Control and Flow Control segments experienced organic operating income growth of 36% and 1%, respectively, in the second quarter of 2009 as compared to the prior year period, however, these increases were not enough to offset the dramatic decline in operating income and operating margin in our Metal Treatment segment due to the significant under-absorption of overhead costs resulting from the sharp decrease in general industrial and commercial aerospace sales. We have implemented aggressive cost reduction and business restructuring initiatives and begun to realize some of the benefits while also continuing to opportunistically invest to better position ourselves when the economy improves."
SALES
Sales of $447 million decreased 1% in the second quarter of 2009 as compared to the prior year period. Organic sales were lower by 5%, while our 2008 and 2009 acquisitions contributed $19 million in the quarter. Organic sales in our Motion Control segment grew 1%, while our Flow Control and Metal Treatment segments declined 1% and 31%, respectively, as compared to the prior year period.
From a market perspective, we experienced lower organic sales to the general industrial, oil and gas and commercial aerospace markets, which were partially offset by strong organic sales to the commercial power and defense markets. In addition, foreign currency translation negatively impacted sales in the second quarter of 2009 by $13 million as compared to the prior year period.
OPERATING INCOME
Operating income of $44 million decreased 12% in the second quarter of 2009 as compared to the prior year. Organic operating income declined 8% in the second quarter of 2009, while our 2008 and 2009 acquisitions were lower by $2 million. Organic operating income in our Metal Treatment segment declined 71% from the second quarter of 2008, mainly due to under-absorption of overhead costs resulting from significantly lower volumes. This decline was partially offset by an organic operating income increase in our Motion Control and Flow Control segments of 36% and 1%, respectively. The strong organic operating income increase in the Motion Control segment was due to lower expenses resulting from cost reduction programs, as well as the favorable impact of foreign currency translation. Our Flow Control segment had a decline in organic operating income, excluding the impact of foreign currency translation, mainly due to the lower volumes and under-absorption of overhead costs. Foreign currency translation favorably impacted consolidated operating income by $5 million in the second quarter of 2009 as compared to the prior year.
Our segment operating margin is 130 basis points lower in the second quarter of 2009 as compared to the prior year period. The lower segment operating margin was mainly driven by under-absorption of fixed costs in our Metal Treatment and Flow Control segments. Non-segment operating expense decreased from the prior year period due to foreign currency exchange gains and lower legal costs partially offset by higher pension and medical expenses. In the second quarter of 2009, our base businesses generated an operating margin of 10.7%. Foreign currency translation favorably impacted operating margin by 130 basis points in the second quarter of 2009 as compared to the prior year period, primarily in our Motion Control segment.
NET EARNINGS
Net earnings for the second quarter of 2009 decreased 10% from the comparable prior year period. The lower net earnings were due to the decline in operating income, partially offset by lower interest expense and a lower effective tax rate. The lower interest expense for the second quarter of 2009 was due to lower average interest rates, partially offset by higher average debt levels as compared to the prior year period. The lower effective tax rate is primarily due to a higher Canadian research and development tax benefit in the second quarter of 2009 compared to the prior year. Our effective tax rate for the second quarter of 2009 was 34.4% versus 36.6% for the second quarter of 2008.
CASH FLOW
Our free cash flow, defined as cash flow from operations less capital expenditures, was $46 million for the second quarter of 2009 as compared to $55 million in the prior year period. Net cash provided by operating activities in the second quarter was $67 million, a decrease of $10 million as compared to the prior year period. The decrease is mainly due to lower accounts payable, deferred revenue, and net earnings, partially offset by improvements in inventory and accounts receivable, as compared to the prior year period. Capital expenditures were $21 million in the second quarter of 2009 versus $23 million in the comparable prior year period. The AP1000 program accounted for the majority of this decrease as our facility expansion is nearing completion.
SEGMENT PERFORMANCE
Flow Control - Sales for the second quarter of 2009 were $242 million, an increase of 2% over the comparable prior year period, mainly due to our 2009 acquisitions of EST and Nu-Torque, which contributed $8 million of sales in the second quarter of 2009. Organic sales were essentially flat excluding the effect of foreign currency translation. The slight decline in organic sales was mainly driven by lower sales in the oil and gas market due to the timing of new order placement for our coke de-heading system resulting from credit tightening and decreased demand globally for energy. In addition, our general industrial market declined due to depressed economic conditions. These decreases were partially offset by a strong increase in the commercial power market due to higher plant outages and plant maintenance, as well as higher production for our AP1000 reactor coolant pumps for China and the United States. Our naval defense market also had strong growth driven by the aircraft carrier program. Sales of this segment were negatively affected by foreign currency translation of $3 million in the second quarter of 2009 compared to the prior year period.
Operating income for this segment was $22 million, a decrease of 1% from the comparable prior year period. Our 2009 acquisitions had a minimal impact on operating income during the second quarter. Organic operating income was favorably impacted by foreign currency translation of $1 million in the second quarter of 2009 compared to the prior year period. Excluding the impact of foreign currency translation, organic operating income was down 5% due to the significantly lower volumes and under-absorption of overhead costs in our oil and gas and general industrial markets. These declines were mostly offset by higher volumes in our commercial power market, improved performance on certain long-term contracts and lower general and administrative costs due to cost reduction initiatives.
Motion Control - Sales for the second quarter of 2009 were $156 million, an increase of 7% over the comparable prior year period. This improvement was due to solid organic sales growth of 4%, excluding the negative impact of foreign currency translation. Sales from our 2008 acquisitions added $10 million in the second quarter of 2009. The organic sales growth was driven by higher sales across all of our defense markets. Our ground defense market was led by higher sales of our embedded computing products, in particular for the Bradley Fighting Vehicle. In addition, we experienced a strong sales increase in our aerospace defense market across several platforms including the F-22, JSF, Global Hawk, and various military helicopter programs. The strong performance in our defense markets was mostly offset by sharp declines in our general industrial and commercial aerospace markets. Sales of this segment were unfavorably affected by foreign currency translation of $5 million in the second quarter of 2009 compared to the prior year period.
Operating income for this segment increased 27% for the second quarter of 2009 over the comparable prior year period. Our acquisitions had $2 million of lower operating income in the second quarter of 2009, partially due to higher amortization expense, which generally runs higher in the early period of ownership. Organic operating income increased 36% mainly due to foreign currency translation which favorably impacted operating income and operating margin by $3 million and 260 basis points, respectively. Excluding the impact of foreign currency translation, organic operating income grew 16%, primarily due to higher organic sales and lower expenses due to cost reduction initiatives.
Metal Treatment - Sales for the second quarter of 2009 were $49 million, a decrease of 30% as compared to the prior year period. The weak global economic environment resulted in a reduction in demand across all primary service offerings and all key markets, in particular the general industrial market, primarily automotive. Sales of this segment were unfavorably impacted by foreign currency translation of $5 million in the second quarter of 2009 compared to the prior year period.
Operating income decreased 70% for the second quarter of 2009 as compared to the prior year period, primarily as a result of the significantly lower sales volume which resulted in under-absorption of overhead costs. The impact of this decline was partially offset by lower SG&A expenses resulting from cost reduction initiatives. Operating income in this segment was negatively affected by foreign currency translation of $1 million in the second quarter of 2009 compared to the prior year period.
UPDATED FULL YEAR 2009 GUIDANCE
The Company is updating its full year 2009 financial guidance:
- Total sales $1.83- $1.85 billion
(previously $1.87-$1.91 billion)
- Operating Income $194 - $201 million
(previously $209 - $216 million)
- Diluted Earnings Per Share $2.35- $2.45
(previously $2.48 - $2.58)
- Diluted Shares Outstanding 46.0 million
(previously 46.2 million)
- Effective Tax Rate 35.3%
(previously 35.5%)
- Free Cash Flow $80 - $90 million
(no change)
Free Cash Flow is defined as cash flow from operations less capital expenditures and includes approximately $15 million for the final phase of our EMD facility expansion in Cheswick, PA.
Mr. Benante concluded, "We are reducing our guidance for the full year 2009 primarily to reflect the unprecedented decline in our Metal Treatment business which we do not expect to improve in the second half of the year, and the continued order delay in the oil and gas market which we expect to improve slowly through the remainder of 2009. Despite these challenges, we remain optimistic about the growth opportunities in our commercial power and defense markets. Overall, we expect a sequential improvement in our third and fourth quarters despite the economic challenges that remain. Furthermore, we continue to focus on maintaining our cost levels that will better position us for the economic recovery. Despite the challenging conditions, 2009 is looking to be in line with last year. Our businesses remain strong and we are optimistic about our long-term prospects due to the unique engineering and profound value our products provide across a broad spectrum of high performance markets. Our diversification, strong backlog, continued integration of acquisitions, and on-going emphasis on advanced technologies should enable us to weather the current economic downturn better than most companies."
The Company will host a conference call to discuss the second quarter 2009 results at 10:00 A.M. EDT Tuesday, July 28, 2009. 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.
(Tables to Follow)
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share data)
Three Months Ended
June 30, Change
2009 2008 $ %
---- ---- ---- ----
Net sales $447,371 $453,464 ($6,093) (1.3%)
Cost of sales 302,789 296,230 6,559 2.2%
------- ------- -----
Gross profit 144,582 157,234 (12,652) (8.0%)
Research & development expenses 13,200 13,017 183 1.4%
Selling expenses 27,415 28,842 (1,427) (4.9%)
General and administrative
expenses 60,204 65,703 (5,499) (8.4%)
------ ------
Operating income 43,763 49,672 (5,909) (11.9%)
Other income, net 47 224 (177) (79.0%)
Interest expense (6,542) (7,176) 634 8.8%
------ ------ ---
Earnings before income taxes 37,268 42,720 (5,452) (12.8%)
Provision for income taxes 12,814 15,643 (2,829) (18.1%)
------ ------ ------
Net earnings $24,454 $27,077 ($2,623) (9.7%)
======= ======= =======
Basic earnings per share $0.54 $0.61
===== =====
Diluted earnings per share $0.54 $0.60
===== =====
Dividends per share $0.08 $0.08
===== =====
Weighted average shares outstanding:
Basic 45,127 44,631
Diluted 45,537 45,355
Six Months Ended
June 30, Change
2009 2008 $ %
---- ---- ---- ----
Net sales $871,163 $886,843 ($15,680) (1.8%)
Cost of sales 590,821 591,140 (319) (0.1%)
------- ------- ----
Gross profit 280,342 295,703 (15,361) (5.2%)
Research & development expenses 26,324 25,853 471 1.8%
Selling expenses 53,278 54,182 (904) (1.7%)
General and administrative
expenses 125,834 125,269 565 0.5%
------- -------
Operating income 74,906 90,399 (15,493) (17.1%)
Other income, net 348 698 (350) (50.1%)
Interest expense (13,482) (14,759) 1,277 8.7%
------- ------- -----
Earnings before income taxes 61,772 76,338 (14,566) (19.1%)
Provision for income taxes 21,513 27,482 (5,969) (21.7%)
------ ------ ------
Net earnings $40,259 $48,856 ($8,597) (17.6%)
======= ======= =======
Basic earnings per share $0.89 $1.10
===== =====
Diluted earnings per share $0.88 $1.08
===== =====
Dividends per share $0.16 $0.16
===== =====
Weighted average shares outstanding:
Basic 45,063 44,607
Diluted 45,504 45,290
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
June 30, December 31, Change
2009 2008 $ %
---- ---- ---- ----
Assets
Current Assets:
Cash and cash equivalents $59,209 $60,705 $(1,496) (2.5%)
Receivables, net 397,535 395,659 1,876 0.5%
Inventories, net 305,394 281,508 23,886 8.5%
Deferred income taxes 37,341 37,314 27 0.1%
Other current assets 35,655 26,833 8,822 32.9%
------ ------ -----
Total current assets 835,134 802,019 33,115 4.1%
------- ------- ------
Property, plant, & equipment,
net 389,927 364,032 25,895 7.1%
Goodwill, net 632,609 608,898 23,711 3.9%
Other intangible assets, net 243,929 234,596 9,333 4.0%
Deferred tax assets, net 16,998 23,128 (6,130) (26.5%)
Other assets 10,177 9,357 820 8.8%
------ ----- ---
Total Assets $2,128,774 $2,042,030 $86,744 4.2%
========== ========== =======
Liabilities
Current Liabilities:
Short-term debt $1,951 $3,249 $(1,298) (40.0%)
Accounts payable 107,327 140,954 (33,627) (23.9%)
Dividends payable 3,636 - 3,636 100.0%
Accrued expenses 84,140 103,973 (19,833) (19.1%)
Income taxes payable 3,498 8,213 (4,715) (57.4%)
Deferred revenue 162,236 138,753 23,483 16.9%
Other current liabilities 44,426 56,542 (12,116) (21.4%)
------ ------ -------
Total current liabilities 407,214 451,684 (44,470) (9.8%)
------- ------- -------
Long-term debt 559,449 513,460 45,989 9.0%
Deferred income taxes 26,173 26,850 (677) (2.5%)
Accrued pension & other
postretirement benefit costs 134,392 125,762 8,630 6.9%
Long-term portion of
environmental reserves 20,189 20,377 (188) (0.9%)
Other liabilities 45,381 37,135 8,246 22.2%
------ ------ -----
Total Liabilities 1,192,798 1,175,268 17,530 1.5%
--------- --------- ------
Stockholders' Equity
Common stock, $1 par value 48,042 47,903 139 0.3%
Additional paid in capital 99,830 94,500 5,330 5.6%
Retained earnings 932,934 899,928 33,006 3.7%
Accumulated other comprehensive
income (48,337) (72,551) 24,214 33.4%
------- ------- ------
1,032,469 969,780 62,689 6.5%
Less: cost of treasury stock 96,493 103,018 (6,525) (6.3%)
------ ------- ------
Total Stockholders' Equity 935,976 866,762 69,214 8.0%
------- ------- ------
Total Liabilities and
Stockholders' Equity $2,128,774 $2,042,030 $86,744 4.2%
========== ========== =======
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
Change Change
2009 2008 % 2009 2008 %
---- ---- ---- ---- ---- ----
Sales:
------
Flow Control $242,414 $237,133 2.2% $472,786 $457,452 3.4%
Motion Control 155,748 146,190 6.5% 296,457 291,665 1.6%
Metal Treatment 49,209 70,141 (29.8%) 101,920 137,726 (26.0%)
------ ------ ------- -------
Total Sales $447,371 $453,464 (1.3%) $871,163 $886,843 (1.8%)
Operating Income:
-----------------
Flow Control $21,728 $21,904 (0.8%) $35,059 $36,126 (3.0%)
Motion Control 19,513 15,375 26.9% 33,779 29,082 16.2%
Metal Treatment 4,458 14,929 (70.1%) 11,072 28,029 (60.5%)
----- ------ ------ ------
Total Segments 45,699 52,208 (12.5%) $79,910 $93,237 (14.3%)
Corporate &
Other (1,936) (2,536) (23.7%) (5,004) (2,838) 76.3%
------ ------ ------ ------
------- ------- ----- ------- ------- -----
Total Operating
Income $43,763 $49,672 (11.9%) $74,906 $90,399 (17.1%)
======= ======= ===== ======= ======= =====
Operating Margins:
------------------
Flow Control 9.0% 9.2% 7.4% 7.9%
Motion Control 12.5% 10.5% 11.4% 10.0%
Metal Treatment 9.1% 21.3% 10.9% 20.4%
Total Curtiss-
Wright 9.8% 11.0% 8.6% 10.2%
Segment Margins 10.2% 11.5% 9.2% 10.5%
Note: The 2008 segment financial data has been reclassified to conform
with our 2009 financial statement presentation.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Cash Provided by
Operating Activities $67,350 $77,741 $34,265 $59,189
Capital Expenditures (20,896) (23,052) (37,528) (46,596)
------- ------- ------- -------
Free Cash Flow (1) $46,454 $54,689 $(3,263) $12,593
======= ======= ======= =======
--- --- -- --
Cash Conversion (1) 190% 202% (8%) 26%
--- --- -- --
(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 Parsippany, 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 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, 2008 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
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