Curtiss-Wright Reports Fourth Quarter and Full Year 2010 Financial Results

FULL YEAR NET SALES INCREASE 5%; NET EARNINGS INCREASE 12%; DILUTED EPS OF $2.30; FREE CASH FLOW OF $119 MILLION AND SOLID BACKLOG OF $1.7 BILLION

PARSIPPANY, N.J., Feb. 14, 2011 (GLOBE NEWSWIRE) -- Curtiss-Wright Corporation (NYSE:CW) today reports financial results for the fourth quarter and full year ended December 31, 2010. The highlights are as follows:

FULL YEAR 2010 OPERATING HIGHLIGHTS

• Net sales increased 5% to $1.89 billion from $1.81 billion in 2009;
• Operating income increased 6% to $180 million from $169 million in 2009; Operating income increased 12% over 2009, excluding the unfavorable impact of foreign currency translation;
• Net earnings increased 12% to $107 million, or $2.30 per diluted share, from $95 million, or $2.08 per diluted share, in 2009; and
• New orders were $1.92 billion, up 11% compared to 2009. At December 31, 2010, our backlog was $1.67 billion, up 3% from $1.63 billion at December 31, 2009.

FOURTH QUARTER 2010 OPERATING HIGHLIGHTS

• Net sales increased 4% to $523 million from $503 million in 2009;
• Operating income decreased 2% to $57 million from $58 million in 2009; Operating income increased 5%, excluding costs for a legal matter recorded in the fourth quarter of 2010;  
• Net earnings increased 5% to $37 million, or $0.79 per diluted share, from $35 million, or $0.76 per diluted share, in 2009; Net earnings increased 13%, excluding costs for a legal matter recorded in the fourth quarter of 2010; and
• New orders were $560 million, up 26% compared to 2009.    

"We are pleased to report a strong finish to the year with net sales, net earnings and free cash flow all exceeding the high end of our guidance range. In addition, we ended the year with a backlog of $1.7 billion, driven by an 11% increase in new orders, which provides momentum heading into 2011," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "I am particularly pleased that we grew our full year operating income by 12% and expanded our operating margin 70 basis points over the prior year, excluding the unfavorable impact of foreign currency translation, with strong contributions coming from each of our three business segments. This was achieved through supply chain management and lean initiatives, as well as benefits generated from our cost reduction and restructuring programs.  

"From a market perspective, sales for 2010 increased 6% in our commercial markets, driven by a strong rebound in our general industrial and commercial aerospace markets, which grew 18% and 11%, respectively, over the prior year. In addition, our defense markets grew 3% over the prior year, led by strong double-digit growth in both naval and aerospace defense, as we experienced solid sales related to our content on submarines, aircraft carriers, helicopters and Intelligence, Surveillance, and Reconnaissance applications such as unmanned aerial vehicles.  Our strategic diversification and strong position on key defense programs enabled us to offset the expected lower sales in our ground defense market.  

"Looking ahead in 2011, we anticipate slow sales growth in both our defense and commercial markets with improved profitability. In defense markets, we are expecting that our Intelligence, Surveillance, and Reconnaissance related content to continue to do well across various end markets, which will help mitigate the expected declines in the F-22 and other defense program cancellations. In commercial markets, aerospace continues to be positive and our general industrial and oil and gas markets should trend higher with improving global economic conditions."   

SALES

Sales of $523 million in the fourth quarter of 2010 increased $21 million, or 4%, compared to the prior year period. The increase was largely due to higher organic sales of $11 million, or 2%, and incremental sales of $10 million, or 2%, related to our 2009 and 2010 acquisitions of Skyquest Systems Ltd., Hybricon Corporation, and Specialist Electronics Services, Ltd. The sales increase was generated across all three segments with growth of 13% in Metal Treatment, 3% in Flow Control, and 3% in Motion Control.      

From a market perspective, commercial markets grew 6% in the fourth quarter led by strong increases in the power generation (+10%), commercial aerospace (+10%) and general industrial (+6%) markets, compared to the prior year period. These increases were partially offset by a 3% decline in the oil and gas market. Defense markets experienced overall growth of 2%, led by a strong increase in naval defense, which grew 14% over the prior year quarter. This increase was partially offset by a 17% decline in the ground defense market due to the cancellation of the Future Combat System ("FCS") and lower sales on the Bradley platform, while our aerospace defense sales were essentially flat with the prior year quarter.   

Sales of $1.89 billion for the full year of 2010 were higher by $83 million, or 5%, compared to 2009. This increase was driven from higher organic sales of $55 million, or 3%, incremental sales from our 2009 and 2010 acquisitions of $26 million, or 1%, and favorable foreign currency translation of $3 million.  

From a market perspective, commercial markets grew 6% in 2010 driven by higher sales in the general industrial (+18%), commercial aerospace (+11%), and power generation markets (+3%). The sole decline in commercial markets was a 4% decrease in the oil and gas market. Defense markets increased 3%, led by double-digit growth in both naval and aerospace defense, due to strong sales on the CVN-79 Ford class aircraft carrier, Virginia class submarines, Intelligence, Surveillance, and Reconnaissance ("ISR") applications such as the Global Hawk unmanned aerial vehicle ("UAV") program, and various military helicopter platforms. These increases were largely offset by a sharp decline in ground defense due to the cancellation of the FCS program and lower sales on the Bradley platform. In addition, we also had lower sales relating to the cancellation of the F-22 program.    

OPERATING INCOME

Operating income of $57 million in the fourth quarter of 2010 decreased $1 million, or 2%, compared to the prior year period, and was essentially flat excluding the unfavorable impact of foreign currency translation.  The Metal Treatment and Flow Control segments generated growth of 73% and 4%, respectively, compared to the fourth quarter of 2009, but were mostly offset by a 14% decline in the Motion Control segment.

Segment operating margin of 13.6% decreased by 40 basis points in the fourth quarter of 2010, mainly due to unfavorable foreign currency translation and the impact of our 2009 and 2010 acquisitions, which generally carry lower operating margins in the early period of ownership.  

Non-segment operating costs of $14 million in the fourth quarter of 2010 increased by $1 million compared with the prior year period. The increase was mainly due to higher legal and pension costs.

For the full year of 2010, operating income of $180 million increased $11 million, or 6%, compared to 2009. However, excluding $10 million of unfavorable foreign currency translation, operating income increased $21 million, or 12%, generated by strong increases in each of our three business segments with an improvement of 32% in Metal Treatment, 15% in Flow Control, and 8% in Motion Control.   

Segment operating margin of 11.1% increased by 40 basis points compared to the full year of 2009, or 90 basis points excluding the impact of unfavorable foreign currency translation. This improvement was mainly due to higher overhead absorption on increased sales volumes and benefits generated from our cost reduction and restructuring programs.

Non-segment operating costs in 2010 were $31 million, an increase of $7 million from the prior year mainly due to higher pension and medical expenses.

NET EARNINGS

Net earnings of $37 million in the fourth quarter of 2010 increased 5% from the prior year period mainly due to a lower effective tax rate. The effective tax rate in the fourth quarter of 2010 was 30.0% compared to 34.1% in the fourth quarter of 2009, and resulted in a $0.05 favorable impact on diluted earnings per share. The lower effective tax rate was mainly due to higher foreign tax credits that were generated by a repatriation of cash from foreign locations in the fourth quarter of 2010.   

For the full year 2010, net earnings of $107 million increased 12% from the prior year period. Improved operating income, lower interest expense, and a lower effective tax rate all contributed to the strong increase in net earnings. The lower interest expense was due to both lower average interest rates and lower average outstanding debt. The effective tax rate in 2010 and 2009 was 32.7% and 34.4%, respectively, with the decrease largely due to the repatriation of cash from foreign operations.   

CASH FLOW

Free cash flow, defined as cash flow from operations less capital expenditures, for the fourth quarter of 2010 was $120 million compared to $101 million in the prior year period. Net cash provided by operating activities in the fourth quarter of 2010 increased $18 million from the prior year period largely due to improvements in working capital, specifically accounts receivable. Capital expenditures of $14 million were essentially flat with the prior year quarter.  

For the full year of 2010, free cash flow was $119 million compared to $121 million in the prior year period. Net cash provided by operating activities in 2010 decreased $25 million from the prior year period primarily as a result of higher accounts receivable and lower deferred revenue. Capital expenditures were $53 million, a decrease of $23 million from the prior year. The AP1000 program accounted for the majority of this decrease as our facility expansion was completed in 2009.   

SEGMENT PERFORMANCE

Flow Control — Sales for the fourth quarter of 2010 were $283 million, an increase of $9 million, or 3%, from the prior year mainly driven by solid double-digit growth in naval defense, which had higher sales from the Virginia class submarine due to the ramp up in production from one to two submarines per year. In addition, sales increased on the CVN-79 Ford class aircraft carrier program due to the transition from the CVN-78 program to the CVN-79 program. These increases were partially offset by a reduction on the DDG1000 destroyer program as we completed work on the third and final ship in the fourth quarter of 2010. Sales in commercial markets were essentially flat, despite strong growth of 10% in the power generation market largely due to increased demand for upgrades and plant maintenance on domestic nuclear reactors. This increase was mostly offset by a decline in the general industrial market due to the completion of several large international projects in the prior year.

Operating income in the fourth quarter of 2010 amounted to $37 million, an increase of 4% from the prior year. Operating margin increased to 13.0% in the fourth quarter of 2010, an increase of 10 basis points from the fourth quarter of 2009, mainly due to improved absorption of fixed overhead costs and benefits generated by our cost reduction and restructuring programs.  These improvements were mostly offset by a shift in mix towards lower margin products.

For the full year of 2010, operating income increased 13% on a sales increase of 4%, over the prior year period, despite having to make $7 million in strategic investments in the AP1000 program that will benefit us on future orders, and absorbing consolidation costs in our oil and gas business. This was largely achieved by the realization of benefits from our cost reduction and restructuring programs.     

Motion Control — Sales for the fourth quarter of 2010 were $182 million, an increase of $5 million, or 3%, over the prior year period, primarily due to our 2009 and 2010 acquisitions of Skyquest Systems Ltd., Hybricon Corporation, and Specialist Electronics Services, Ltd., which added $10 million of sales during the quarter.  

Our commercial markets experienced double-digit sales growth driven by increased demand for sensors and controls products on commercial aircraft, as well as higher sales of flight controls on the Boeing 787 series aircraft as production levels continue to ramp up.  These increases were somewhat offset by a double-digit decline in ground defense, mainly driven by lower sales for the Bradley Fighting Vehicle as well as the cancellation of the FCS program. In addition, aerospace defense was lower by 3%, despite strong sales for helicopter programs, due to the cancellation of the F-22 program.    

Operating income for the fourth quarter of 2010 amounted to $26 million, a decrease of $4 million, or 14%, compared to the prior year period. Operating margin was 14.5%, a decrease of 290 basis points over the prior year period. This reduction was mainly due to investments in long-term contracts in the current year, as well as a shift in mix towards lower margin products. The prior year quarter also included margin on revenues from termination claims that did not recur in the current year. These reductions were offset, in part, by benefits generated by our cost reduction and restructuring programs.  

For the full year of 2010, operating income increased 8% on a 4% increase in sales, excluding the unfavorable impact of foreign currency translation, due primarily to benefits generated by our cost reduction and restructuring programs.

Metal Treatment — Sales for the fourth quarter of 2010 were $59 million, an increase of $7 million, or 13%, compared to the prior year period. The sales increase was driven primarily by higher demand for shot peening and heat treating services within our general industrial market, in particular automotive.

Operating income in the fourth quarter of 2010 amounted to $8 million, an increase of $3 million, or 73%, from the prior period. Operating margin in the fourth quarter amounted to 13.1%, a 450 basis point improvement over the prior year period. For the full year of 2010, operating income increased 30% on a sales increase of 9%, from the prior year period. The significant improvements in operating income for the fourth quarter and full year were primarily driven by higher volumes resulting in favorable absorption of overhead costs and benefits generated from our cost reduction and restructuring programs.  

FULL YEAR 2011 GUIDANCE

The Company is providing its full year 2011 financial guidance as follows:

(Free cash flow is defined as cash flow from operations less capital expenditures and includes estimated payments of $36 million to the Curtiss-Wright Pension Plan in 2011)

Note: A more detailed breakdown of our 2011 guidance by segment and by market can be found on the attached accompanying schedules. The 2011 guidance excludes the impact of the pending acquisition of BASF's Surface Technologies Business.

Mr. Benante concluded, "In 2010, we successfully executed our strategy and generated long-term shareholder value as a result of our strong earnings growth and strong cash flow performance. Due to our strategic diversification, we were able to grow our defense and commercial sales with increased profitability, despite cancellations and reductions in several defense programs and customer capital spending delays in the oil and gas market. In addition, we continued to make substantial strategic investments in new product development, new programs and new facilities that will position us well for the future.

"Our backlog and capitalization provide us confidence heading into 2011 and we expect to continue to demonstrate our ability to produce long-term growth through our diversified portfolio of highly engineered products and end markets. We also plan to continue to strategically invest in both our technologies and acquisitions in order to enhance our portfolio and market diversification.  I am optimistic that 2011 will be another strong year for Curtiss-Wright and expect double-digit earnings growth based upon our solid backlog, key positions on long-term defense programs and the continuing demand for our advanced technologies, which provide significant life cycle benefits for our customers. Long-term, our diversification 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 2010 results and 2011 guidance at 10:00 A.M. EST Tuesday, February 15, 2011. A live webcast of the call and the accompanying financial presentation will be made available on the internet by visiting the Investor Relations section of the company's website at curtisswright2014.q4web.com.

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.

The Curtiss-Wright Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7709

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, 2009, as amended, and subsequent reports filed with the Securities and Exchange Commission.

This press release and additional information is available at curtisswright2014.q4web.com.

CONTACT: Jim Ryan  
 (973) 541-3766 
[email protected]

Source: Curtiss-Wright Corporation

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