News Details
CURTISS-WRIGHT REPORTS 2009 THIRD QUARTER AND NINE MONTH FINANCIAL RESULTS; UPDATES FULL YEAR GUIDANCE
October 29, 2009
PARSIPPANY, N.J., Oct 29, 2009 /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, 2009. The results are as follows:
THIRD QUARTER 2009 OPERATING RESULTS
-- Net sales of $436 million were essentially flat with sales in 2008
-- Operating income decreased 25% to $36 million from $48 million in 2008;
2009 included a $4.7 million charge to correct an error made by our
external actuary in our pension expense calculation
-- Net earnings decreased 27% to $20 million, or $0.44 per diluted share,
from $28 million, or $0.60 per diluted share, in 2008; 2009 included a
$0.07 per diluted share charge to correct the pension expense error
-- New orders were $425 million, down 4% compared to the third quarter of
2008
NINE MONTHS 2009 OPERATING RESULTS
-- Net sales decreased 1% to $1.31 billion from $1.32 billion in 2008
-- Operating income decreased 20% to $111 million from $139 million in 2008
-- Net earnings decreased 21% to $60 million, or $1.32 per diluted share,
from $76 million, or $1.68 per diluted share, in 2008
-- New orders were $1.29 billion, down 27% compared to 2008; 2008 included
an award in excess of $300 million from Westinghouse for new commercial
nuclear power plant construction
-- Backlog was $1.68 billion as of September 30, 2009, essentially
unchanged from December 31, 2008
"The third quarter did not meet our expectations as the magnitude of the continued global recession was greater than expected and continued to negatively affect our businesses that are more sensitive to the macro-economic environment, specifically our Metal Treatment segment and oil and gas businesses. Despite the general optimism that exists, we have yet to see the rebound in the economy in our affected commercial businesses," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "However, due to our strategic diversification, we were able to largely offset the impact of these sales declines with strong performance in other key markets, most notably commercial power and defense which grew organically by 17% and 12%, respectively."
"Our Motion Control segment experienced solid organic operating income growth of 26% in the third quarter of 2009 as compared to the prior year period, however, this increase was not enough to offset the dramatic decline in organic operating income and operating margin in our Metal Treatment segment and oil and gas businesses due to the significant under-absorption of overhead costs resulting from the sharp decline in sales. We have implemented cost reduction and business restructuring initiatives and have begun to realize the benefits while also continuing to opportunistically invest to better position ourselves for when the economy eventually improves."
SALES
Sales of $436 million in the third quarter of 2009 were essentially unchanged from the prior year period. Incremental sales, primarily from our 2008 and 2009 acquisitions, contributed $12 million, while foreign currency translation decreased sales by $6 million. The remaining sales decrease was due to lower organic sales of $6 million, or 1%. The organic sales decline was driven by our Metal Treatment segment which declined $14 million, or 22%, partially offset by an increase in sales in our Flow Control segment which grew $8 million, or 4%. Organic sales in our Motion Control segment were essentially flat.
From a market perspective, organic sales, excluding foreign currency translation, declined $28 million, or 10% in our commercial markets despite strong growth in our commercial nuclear power market, as sharp declines were seen in our general industrial, oil and gas and commercial aerospace markets. These declines were mostly mitigated by a strong increase in sales to our defense markets of $21 million, or 13%, driven by solid growth in both our naval and aerospace defense programs.
OPERATING INCOME
Operating income of $36 million decreased $12 million, or 25% in the third quarter of 2009 as compared to the prior year. Excluding the impact of foreign currency translation, organic operating income declined $10 million or 21%, while our 2008 and 2009 acquisitions negatively impacted operating income by $2 million. In the third quarter of 2009, we generated an organic operating margin of 9.2% as compared to 11.1% in the prior year period. Foreign currency translation favorably impacted consolidated operating income and operating margin by $1 million, or 30 basis points, primarily in our Motion Control segment.
Excluding foreign currency translation, organic operating income in our Metal Treatment and Flow Control segments declined $9 million, or 64%, and $2 million, or 7%, respectively, mainly due to under-absorption of overhead costs resulting from significantly lower volumes in our general industrial and oil and gas markets, offset partially by cost reduction programs. These declines were mitigated by an increase of $3 million in our Motion Control segment due to lower expenses resulting from cost reduction programs. Our segment organic operating margin was 130 basis points lower in the third quarter mainly driven by the under-absorption of fixed costs in our general industrial and oil and gas businesses.
Non-segment operating expense increased by $2 million from the prior year period mainly due to higher pension and medical expenses, partially offset by lower foreign currency exchange losses, as well as reduced compensation and legal expenses.
NET EARNINGS
Net earnings for the third quarter of 2009 decreased 27% 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 slightly lower effective tax rate. The lower interest expense was due to lower average interest rates, partially offset by higher average debt levels. Our effective tax rate for the third quarter of 2009 was 34.3% versus 34.4% for the third quarter of 2008.
CASH FLOW
Our free cash flow, defined as cash flow from operations less capital expenditures, was $23 million for the third quarter of 2009 as compared to negative $8 million in the prior year period. Net cash provided by operating activities in the third quarter was $47 million, an increase of $31 million as compared to the prior year period. The increase is mainly due to working capital improvements in accounts receivable and accounts payable, partially offset by lower net earnings. Capital expenditures were $23 million in the third quarter of 2009 versus $24 million in the comparable prior year period.
SEGMENT PERFORMANCE
Flow Control - Sales for the third quarter of 2009 were $238 million, an increase of $11 million or 5% over the comparable prior year period. Incremental sales, primarily from our 2009 acquisitions of EST and Nu-Torque, contributed $5 million to the sales growth in the third quarter of 2009 while organic sales, excluding foreign currency translation, increased $8 million or 4%. Foreign currency translation negatively impacted sales by $2 million or 1%. The higher organic sales growth of 4% was driven by a strong sales increase in our naval defense market across several programs, most notably the Virginia class submarine and Ford class aircraft carrier programs. In addition, we had increased sales of helicopter handling systems for naval applications. Our commercial nuclear power market also generated strong growth due to increased demand for upgrades and plant maintenance, as well as higher revenues from our AP1000 reactor coolant pumps for the domestic new build programs. These organic sales increases were partially offset by a decline in our oil and gas businesses of 14% due primarily to the timing of new order placement and decreased global demand for energy. In addition, our general industrial market declined approximately 30% due to continued depressed economic conditions.
Operating income for this segment was $22 million, a decrease of $2 million, or 8% from the comparable prior year period. Our 2009 acquisitions and foreign currency translation had a minimal impact on operating income during the third quarter. The decrease in organic operating income was largely due to the significantly lower sales volume and resultant under-absorption of overhead costs in our oil and gas and general industrial markets, as well as cost overruns on the DDG1000 program. These declines were partially offset by stronger performance in our commercial nuclear power market.
Motion Control - Sales for the third quarter of 2009 were $148 million, an increase of $5 million, or 4% over the comparable prior year period. This increase was driven by incremental sales from our 2008 acquisitions of VMetro and Mechetronics which added $7 million, or 5% of sales growth in the quarter. Foreign currency translation decreased sales by $2 million, or 2%. Excluding the impact of foreign currency translation, organic sales were essentially flat with the comparable prior year period. Higher organic sales in our aerospace and naval defense markets were largely offset by declines in our ground defense, commercial aerospace and general industrial markets. The organic sales increase in our aerospace defense market was realized across several platforms including the Global Hawk, Black Hawk and various helicopter programs. Naval defense had higher sales due to increased demand for our radar and display systems used on naval vessels. These increases were partially offset by lower ground defense sales driven primarily by the cancellation of the Army's Future Combat Systems for the Manned Ground Vehicle program, as well as lower sales of our embedded computing products for tanks and light armored vehicles. Commercial aerospace also experienced a decrease in organic sales as higher sales to Boeing, primarily the 737 series, were more than offset by a decline in regional business jets, primarily due to the Eclipse bankruptcy in early 2009, and customer inventory burn off, which reduced orders for sensors. In addition, our general industrial market had lower organic sales due to reduced demand for integrated sensing products resulting from the economic slowdown.
Operating income for the third quarter of 2009 was $17 million, an increase of $2 million, or 10%, over the comparable prior year period. Acquisitions had $2 million of operating losses in the third quarter of 2009, primarily due to higher amortization expense, which generally runs higher in the early period of ownership. Foreign currency translation favorably impacted organic operating income by $1 million in the third quarter of 2009. Excluding the favorable impact of foreign currency translation, organic operating income increased $3 million, or 18% and organic operating margin improved by 190 basis points to 12.4% in the third quarter of 2009. These improvements were mainly driven by cost reduction initiatives.
Metal Treatment - Sales for the third quarter of 2009 were $50 million, a decrease of $16 million, or 25%, as compared to the prior year period. Foreign currency translation decreased sales by $2 million in the third quarter of 2009 compared to the prior year period. Excluding this impact, organic sales declined $14 million, or 22%. 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.
Operating income decreased $9 million, or 68% for the third 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 fixed overhead costs. These declines were partially offset by lower SG&A expenses resulting from cost reduction initiatives and lower compensation expense. Operating income in this segment was negatively affected by foreign currency translation by less than $1 million in the third quarter of 2009 as compared to the prior year period.
UPDATED FULL YEAR 2009 GUIDANCE
-- Total sales $1.795- $1.825 billion
(previously $1.830-$1.850 billion)
-- Operating Income $171 - $178 million
(previously $194 - $201 million)
-- Diluted Earnings Per Share $2.05- $2.15
(previously $2.35 - $2.45)
-- Diluted Shares Outstanding 46.0 million
(No Change)
-- Effective Tax Rate 35.1%
(previously 35.3%)
-- Free Cash Flow $80 - $90 million
(No Change)
The estimated impact of major business events on updated full-year diluted earnings per share are as follows:
Metal Treatment volume decline $(0.10)
Increase in pension expense $(0.08)
Oil and Gas order delays $(0.10)
Mr. Benante concluded, "As we indicated on our second quarter call, we were anticipating significant new orders for our coker products and expecting a modest rebound in our Metal Treatment business for the second half of the year. During the third quarter, we continued to see order delays in the oil and gas market as our customers postponed capital spending on major projects. In addition, our Metal Treatment business did not generate a sequential improvement during the third quarter and still has yet to see an improvement in demand. As a result, we are reducing our guidance for the full year 2009 primarily to reflect the continued order delays, unprecedented declines in our Metal Treatment business, and higher pension expense. Despite these challenges, we remain confident about the growth opportunities in our commercial power and defense markets, and are optimistic that when the global economic recovery truly gains momentum, we are strategically positioned to benefit with our unique technologies. Furthermore, we continue to focus on reducing our costs and improving our cash flow to better leverage our profitability in the future. Long-term, our diversification, strong backlog, and emphasis on advanced technologies will continue to provide profound value across a broad spectrum of high performance markets."
The Company will host a conference call to discuss the 2009 third quarter results at 10:00 A.M. EDT Friday, October 30, 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)
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share data)
Three Months Ended
September 30, Change
2009 2008 $ %
---- ---- ----------------
Net sales $435,750 $435,699 $51 0.0%
Cost of sales 293,435 287,908 5,527 1.9%
------- ------- -----
Gross profit 142,315 147,791 (5,476) (3.7%)
Research & development expenses 13,824 10,955 2,869 26.2%
Selling expenses 25,407 25,839 (432) (1.7%)
General and administrative
expenses 66,866 62,807 4,059 6.5%
------ ------
Operating income 36,218 48,190 (11,972) (24.8%)
Other income, net 309 371 (62) (16.7%)
Interest expense (5,923) (6,611) 688 10.4%
------ ------ ---
Earnings before income taxes 30,604 41,950 (11,346) (27.0%)
Provision for income taxes 10,489 14,427 (3,938) (27.3%)
------ ------ ------
Net earnings $20,115 $27,523 ($7,408) (26.9%)
======= ======= =======
Basic earnings per share $0.44 $0.61
===== =====
Diluted earnings per share $0.44 $0.60
===== =====
Dividends per share $0.08 $0.08
===== =====
Weighted average shares
outstanding:
Basic 45,356 44,779
Diluted 45,828 45,505
Nine Months Ended
September 30, Change
2009 2008 $ %
---- ---- ----------------
Net sales $1,306,913 $1,322,542 ($15,629) (1.2%)
Cost of sales 884,256 879,048 5,208 0.6%
------- ------- -----
Gross profit 422,657 443,494 (20,837) (4.7%)
Research & development expenses 40,148 36,808 3,340 9.1%
Selling expenses 78,685 80,021 (1,336) (1.7%)
General and administrative
expenses 192,700 188,076 4,624 2.5%
------- -------
Operating income 111,124 138,589 (27,465) (19.8%)
Other income, net 657 1,069 (412) (38.5%)
Interest expense (19,405) (21,370) 1,965 9.2%
------- ------- -----
Earnings before income taxes 92,376 118,288 (25,912) (21.9%)
Provision for income taxes 32,002 41,909 (9,907) (23.6%)
------ ------ ------
Net earnings $60,374 $76,379 ($16,005) (21.0%)
======= ======= ========
Basic earnings per share $1.34 $1.71
===== =====
Diluted earnings per share $1.32 $1.68
===== =====
Dividends per share $0.24 $0.24
===== =====
Weighted average shares
outstanding:
Basic 45,165 44,672
Diluted 45,617 45,369
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
September 30, December 31, Change
2009 2008 $ %
------------ ----------- ------ ------
Assets
Current Assets:
Cash and cash
equivalents $72,499 $60,705 $11,794 19.4%
Receivables, net 399,547 395,659 3,888 1.0%
Inventories, net 308,181 281,508 26,673 9.5%
Deferred income taxes 38,385 37,314 1,071 2.9%
Other current assets 41,663 26,833 14,830 55.3%
------ ------ ------
Total current assets 860,275 802,019 58,256 7.3%
------- ------- ------
Property, plant, &
equipment, net 400,271 364,032 36,239 10.0%
Goodwill, net 639,375 608,898 30,477 5.0%
Other intangible assets,
net 239,232 234,596 4,636 2.0%
Deferred tax assets, net 16,355 23,128 (6,773) (29.3%)
Other assets 10,372 9,357 1,015 10.8%
------ ----- -----
Total Assets $2,165,880 $2,042,030 $123,850 6.1%
========== ========== ========
Liabilities
Current Liabilities:
Short-term debt $77,649 $3,249 $74,400 2289.9%
Accounts payable 109,147 140,954 (31,807) (22.6%)
Dividends payable 3,653 - 3,653 100.0%
Accrued expenses 92,304 103,973 (11,669) (11.2%)
Income taxes payable 4,515 8,213 (3,698) (45.0%)
Deferred revenue 162,925 138,753 24,172 17.4%
Other current
liabilities 40,404 56,542 (16,138) (28.5%)
------ ------ -------
Total current
liabilities 490,597 451,684 38,913 8.6%
Long-term debt 470,645 513,460 (42,815) (8.3%)
Deferred income taxes 27,866 26,850 1,016 3.8%
Accrued pension & other
postretirement benefit
costs 141,533 125,762 15,771 12.5%
Long-term portion of
environmental reserves 18,971 20,377 (1,406) (6.9%)
Other liabilities 45,372 37,135 8,237 22.2%
------ ------ -----
Total Liabilities 1,194,984 1,175,268 19,716 1.7%
--------- --------- ------
Stockholders' Equity
Common stock, $1 par
value 48,214 47,903 311 0.6%
Additional paid in
capital 106,788 94,500 12,288 13.0%
Retained earnings 949,388 899,928 49,460 5.5%
Accumulated other
comprehensive income (38,135) (72,551) 34,416 47.4%
------- ------- ------
1,066,255 969,780 96,475 9.9%
Less: cost of treasury
stock 95,359 103,018 (7,659) (7.4%)
------ ------- ------
Total Stockholders'
Equity 970,896 866,762 104,134 12.0%
------- ------- -------
Total Liabilities and
Stockholders' Equity $2,165,880 $2,042,030 $123,850 6.1%
========== ========== ========
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION (UNAUDITED)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
Change Change
2009 2008 % 2009 2008 %
---- ---- ------ ---- ---- ------
Sales:
------
Flow Control $237,931 $226,951 4.8% $710,717 $684,403 3.8%
Motion Control 148,303 143,148 3.6% 444,760 434,813 2.3%
Metal Treatment 49,516 65,600 (24.5%) 151,436 203,326 (25.5%)
------ ------ ------- -------
Total Sales $435,750 $435,699 0.0% $1,306,913 $1,322,542 (1.2%)
Operating Income:
-----------------
Flow Control $22,274 $24,260 (8.2%) $57,333 $60,386 (5.1%)
Motion Control 16,512 15,002 10.1% 50,291 44,084 14.1%
Metal Treatment 4,354 13,407 (67.5%) 15,426 41,436 (62.8%)
----- ------ ------ ------
Total Segments 43,140 52,669 (18.1%) 123,050 $145,906 (15.7%)
Corporate & Other (6,922) (4,479) 54.5% (11,926) (7,317) 63.0%
------ ------ ------- ------
Total Operating
Income $36,218 $48,190 (24.8%) $111,124 $138,589 (19.8%)
======= ======= ======= ======== ======== =======
Operating Margins:
------------------
Flow Control 9.4% 10.7% 8.1% 8.8%
Motion Control 11.1% 10.5% 11.3% 10.1%
Metal Treatment 8.8% 20.4% 10.2% 20.4%
Total Curtiss-Wright 8.3% 11.1% 8.5% 10.5%
Segment Margins 9.9% 12.1% 9.4% 11.0%
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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Cash Provided by $46,774 $15,586 $81,039 $74,775
Operating Activities
Capital Expenditures (23,498) (23,915) (61,026) (70,511)
------- ------- ------- ------
Free Cash Flow (1) $23,276 $(8,329) $20,013 $4,264
======= ======= ======= ======
Cash Conversion (1) 116% (30%) 33% 6%
--- ---- -- -
(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 7,500 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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