Curtiss-Wright Reports Third Quarter and Nine Months 2011 Financial Results

NET SALES UP 11%; NET EARNINGS UP 24%; DILUTED EPS OF $0.73; RAISES FULL YEAR 2011 GUIDANCE

PARSIPPANY, N.J., Oct. 27, 2011 (GLOBE NEWSWIRE) -- Curtiss-Wright Corporation (NYSE:CW) today reports financial results for the third quarter and nine months ended September 30, 2011. The highlights are as follows:

THIRD QUARTER 2011 OPERATING HIGHLIGHTS

• Net sales increased 11% to $516 million from $466 million in 2010; Organic sales up 4%;
• Operating income increased 4% to $50 million from $48 million in 2010; Organic operating income up 7%;
• Net earnings increased 24% to $34 million, or $0.73 per diluted share, from $28 million, or $0.60 per diluted share, in 2010; The current year quarter included a Research and Development ("R&D") tax benefit of $4 million; and
• New orders were $580 million, up 25% from 2010, due largely to higher orders in the power generation market, increased demand in the oil and gas market for Maintenance, Repair and Overhaul (MRO) products, strong demand in the commercial aerospace market due to production rate increases by the OEM's and increased orders in the naval defense market for the CVN-79 program.

NINE MONTHS 2011 OPERATING HIGHLIGHTS

• Net sales increased 9% to $1.49 billion from $1.37 billion in 2010;
• Operating income increased 17% to $144 million from $123 million in 2010; 
• Net earnings increased 29% to $91 million, or $1.93 per diluted share, from $70 million, or $1.51 per diluted share, in 2010; and
• New orders were $1.56 billion, up 15% from 2010. At September 30, 2011, backlog was $1.73 billion, up 4% from $1.67 billion at December 31, 2010.  

"We are pleased with our solid overall performance in the third quarter, with double-digit growth in sales, net earnings and earnings per share," said Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "As an established leader in our niche markets, we strive to maintain a well-balanced and diversified portfolio of products and services that generates consistent growth in sales and profitability, which is aided by our continued focus on lowering our cost base through operational improvements. We are particularly pleased with the strong demand for our advanced technologies, as we experienced new order growth within our commercial and defense markets of 35% and 12%, respectively.

"Sales in our commercial markets surged 20% over the prior year quarter, led by strong, double-digit growth in our base businesses and contributions from our 2011 acquisitions with the largest growth generated in our commercial aerospace, power generation and general industrial markets. Meanwhile, our defense revenues declined 1% over the prior year period, despite increased sales related to our content on military aircraft and helicopter programs, particularly as they relate to Intelligence, Surveillance and Reconnaissance (ISR) applications, which were partially offset by lower sales for submarines and aircraft carriers, primarily due to timing on long-term contracts. Year-to-date, our defense sales are up 5%."

THIRD QUARTER 2011 OPERATING RESULTS

SALES

Sales of $516 million increased $50 million, or 11%, compared to the prior year period. Sales grew in all three of our segments, with growth of 36% in Metal Treatment, 9% in Motion Control and 6% in Flow Control. Acquisitions accounted for approximately $26 million, or 6%, of the sales growth. In addition, favorable foreign currency translation added $5 million, or 1%, to sales during the quarter. Excluding acquisitions, divestitures and foreign currency translation, sales increased 4% organically.

Sales were higher within all of our commercial markets, led by a 43% surge in commercial aerospace, along with solid gains in both the power generation and general industrial markets, which grew 18% and 14%, respectively. Sales in the oil and gas market increased a modest 4% in the quarter, due primarily to increased demand for our MRO products. Defense sales were driven by a solid 8% increase in aerospace defense, but were offset by a 9% reduction in naval defense and 5% decline in ground defense.

OPERATING INCOME

Operating income increased 4% to $50 million, up $2 million compared to the prior year period, driven by a solid 120% increase in our Metal Treatment segment due to strong demand across all of our major lines of business and markets. This increase in operating income was offset by declines of 13% in Motion Control and 5% in Flow Control. Meanwhile, unfavorable foreign currency translation lowered current quarter results by approximately $2 million, or 3%, mainly impacting our Motion Control segment. Acquisitions and divestitures had a minimal net impact on the current quarter operating income. Excluding acquisitions, divestitures and foreign currency translation, operating income grew 7% organically.  

Overall operating margin in the quarter was 9.7%, a 60 basis point reduction compared to 10.3% reported in the prior year period. However, excluding foreign currency translation, acquisitions and divestitures, our organic operating margin was 10.7%, up 30 basis points compared to the prior period.  

Organic segment operating margin was 11.9%, up 40 basis points compared to the prior year quarter, driven by a significant improvement in our Metal Treatment segment somewhat offset by lower than expected performance in our oil and gas market.

Non-segment operating costs of $6 million increased by approximately $1 million compared with the prior year period, mainly due to foreign exchange transactional gains recognized in the prior year that did not recur in the current year period.

NET EARNINGS

Net earnings increased 24% from the comparable prior year period, mainly due to higher operating income, lower interest expense and a lower effective tax rate. Lower interest expense for the third quarter of 2011 was due to lower borrowing rates and lower average debt levels compared to the prior year period. Our effective tax rate for the current quarter was 23.8%, well below the 34.4% tax rate from the prior year period, largely due to a $4 million tax benefit recognized in the current quarter for R&D tax credits.

CASH FLOW

Free cash flow was $15 million, a $4 million decline over the prior year period. Net cash generated from operating activities increased by $4 million from the prior year period, mainly due to higher net income. Capital expenditures were $24 million in the third quarter of 2011, an increase of $7 million from the prior year period, largely driven by our facility expansions within our oil and gas and commercial aerospace businesses.   

SEGMENT PERFORMANCE

Flow Control — Sales for the third quarter of 2011 were $265 million, an increase of $16 million, or 6%, over the comparable prior year period. The performance was led by solid growth within the power generation and general industrial markets, but partially offset by lower sales in the naval defense market. Sales in the power generation market were led by AP1000 reactor projects both domestically and internationally. In addition, increased demand for our control systems for commercial heating, ventilation, and air conditioning ("HVAC") customers internationally drove the higher sales in the general industrial market. Those gains were offset by lower sales in the naval defense market primarily due to the winding down of production on the CVN-78 Ford class aircraft carrier program, and lower sales on the Virginia class submarine program due to timing on long-term contracts. Within the oil and gas market, improved MRO sales were essentially offset by reduced international project sales. Additionally, our 2011 acquisition of Douglas Equipment Ltd. contributed approximately $10 million in sales in the current quarter, primarily within the commercial aerospace market.

Operating income in the third quarter of 2011 was $25 million, a decrease of 5% from the comparable prior year period, while operating margin declined 100 basis points to 9.4%. The decrease in operating income and operating margin is primarily due to lower than expected overall performance in our oil and gas market due to the under absorption of fixed overhead costs relative to our large, international projects business, and the start-up costs relative to our super vessel business. These decreases were partially offset by higher sales volumes and resultant favorable absorption in the general industrial and power generation markets. Acquisitions and foreign currency translation had a minimal impact on operating income in the current year quarter.   

Motion Control — Sales for the third quarter of 2011 were $177 million, an increase of $15 million, or 9%, over the comparable prior year period. We experienced solid sales growth in both our commercial and defense markets, which grew 18% and 4%, respectively. Growth in our commercial markets was largely driven by a 21% increase in sales in the commercial aerospace market due to increases on Boeing 737, 747, 777 and 787 aircraft, as well as healthy demand for sensor and control products on various commercial aircraft.  In addition, increased demand for sensor and control products drove the higher sales in the general industrial market. We also experienced modest overall growth within the defense markets, as increases in our aerospace defense market offset lower sales in ground defense.  The increase in the aerospace defense market was driven by higher sales related to our embedded computing and sensor and control products supporting ISR applications, including higher sales on various helicopter programs, mainly the Blackhawk, as well as higher sales on the V-22 Osprey program.  Those gains were offset by lower sales on the Global Hawk program as well as the expected decrease in sales related to the previous cancellation of the F-22 program. Meanwhile, the decrease in ground defense market sales was largely driven by lower sales on the Bradley platform, partially offset by higher sales of turret drive systems to international customers. Our 2011 acquisitions of ACRA Control, Ltd. and Predator Systems Incorporated contributed approximately $5 million in sales in the current quarter, while favorable foreign currency translation added approximately $2 million.

Operating income for the third quarter of 2011 was $19 million, a decrease of approximately $3 million, or 13%, compared to the prior year period, while operating margin decreased 270 basis points from the prior year period to 10.7%. Current quarter operating income and margin were impacted by acquisitions, a divestiture and unfavorable foreign currency translation. Excluding the effects of these items, our operating income increased 3% organically, and generated an organic operating margin of 13.2%, a 20 basis point decrease from the prior year period primarily due to strategic investments in several long-term ISR-related defense programs. 

Metal Treatment — Sales for the third quarter of 2011 were $74 million, an increase of $20 million, or 36%, compared to the prior year period. We continue to benefit from improved global economic conditions and increased demand across all major lines of business and markets, most notably for shot peening and coatings services to commercial markets. The performance was led by strong growth within the commercial aerospace and general industrial markets, which grew 41% and 27%, respectively, along with solid growth in our power generation market. Additionally, our 2011 acquisitions of the BASF Surface Technologies business and IMR Test Labs contributed approximately $11 million in sales in the current quarter, while favorable foreign currency translation added $1 million.

Operating income in the third quarter of 2011 was $12 million, an increase of nearly $7 million, or 120%, compared to the prior year period. Operating margin amounted to 16.8%, or 640 basis points higher than the prior year period, with acquisitions contributing nearly $2 million to operating income in the current quarter. The significant improvement in operating income was primarily driven by higher sales volumes resulting in favorable absorption of fixed overhead costs across all of our major lines of business, as well as a favorable, non-recurring insurance recovery. 

FULL YEAR 2011 GUIDANCE

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

(Free cash flow is defined as cash flow from operations less capital expenditures and includes payments of $34 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.

Mr. Benante concluded, "Our third quarter operating results met our expectations despite some on-going challenges in the oil and gas market. We expect the positive momentum from most of our businesses and markets to continue into the fourth quarter, which is expected to be our largest and most profitable quarter of the year. We have increased our full year sales guidance range to reflect the improved performance within our commercial markets, particularly in our commercial aerospace and power generation markets and have also raised our diluted earnings per share guidance to reflect operational improvements and lower costs of $0.05, the impact of the R&D tax credit of $0.09, partially offset the expected additional dilution from our recently completed acquisitions of ($0.04). In addition, our backlog and capitalization remain strong, and we expect to continue to demonstrate our ability to produce long-term organic growth through our portfolio of highly engineered products and to strategically reinvest in both our technologies and strategic acquisitions in order to enhance our portfolio and market diversification. Overall, we are encouraged by our performance thus far in 2011 and look forward to delivering solid results with strong profitability to conclude the year."

CONFERENCE CALL INFORMATION

The Company will host a conference call to discuss the third quarter 2011 results at 10:00 A.M. EDT on Friday, October 28, 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 Corporation

Curtiss-Wright Corporation is an innovative engineering company that provides highly engineered, critical function products, systems and services in the areas of flow control, motion control and metal treatment to the defense, energy and commercial/industrial markets. The legacy company of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of design and manufacturing innovation along with long-standing customer relationships. The company employs approximately 8,700 people worldwide. For more information, visit 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, financial performance guidance, quarterly and annual revenue, net income, 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, 2010, as amended, and subsequent reports filed with the Securities and Exchange Commission.

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

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