Curtiss-Wright Reports First Quarter 2012 Diluted Earnings Per Share of $0.87 or $0.48 Excluding Gain on Divestiture, Beating Previously Issued Guidance

ON A CONTINUING OPERATIONS BASIS, NET SALES INCREASED 11%; OPERATING INCOME 9% LOWER; NET EARNINGS 14% LOWER; DILUTED EPS OF $0.42; COMPANY UPDATES FULL YEAR 2012 GUIDANCE

PARSIPPANY, N.J., May 1, 2012 (GLOBE NEWSWIRE) -- Curtiss-Wright Corporation (NYSE:CW) today reports financial results for the first quarter ended March 31, 2012. On March 30, 2012, Curtiss-Wright completed the sale of its heat treating business and recorded an after-tax gain on the sale of $18.4 million, or $0.39 per diluted share. All results presented below, unless stated otherwise, reflect results from continuing operations and exclude the impact of the heat treating business from our first quarter 2012 and prior year results:

FIRST QUARTER 2012 HIGHLIGHTS FROM CONTINUING OPERATIONS

• Net sales increased 11% to $502 million from $453 million in 2011;
• Operating income decreased 9% to $36 million from $39 million in 2011; 
• Net earnings decreased 14% to $20 million, or $0.42 per diluted share, from $23 million, or $0.49 per diluted share, in 2011; and
• New orders were $515 million, up 7% from 2011, due to solid demand for valves from the naval defense market and solid demand in the commercial aerospace market due to production rate increases by Boeing and Airbus.  At March 31, 2012, backlog was approximately $1.7 billion, essentially flat compared to December 31, 2011.  

"Overall, our first quarter 2012 results exceeded our initial expectations, as we generated diluted earnings per share of $0.48, including $0.06 of discontinued operations from our heat treating business, while excluding the gain on the sale," said Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "We produced solid sales growth of 11%, led by strong performances in our Metal Treatment and Flow Control segments.

"We expected that our first quarter results would be impacted by numerous issues, including restructuring activities, start-up costs and product development investments within our Motion Control segment, higher start-up costs in our oil and gas business within our Flow Control segment, as well as higher interest and pension costs compared to last year's results.  Despite these anticipated issues, some of which are essentially one-time in nature, we continue to reposition Curtiss-Wright for improved profitability in the latter half of 2012 and beyond.

"We also are considering actions in our Metal Treatment segment to shut-down certain less profitable operations in 2012. This would lead to operating margin expansion in 2013 upon completion of these restructuring actions.

"Furthermore, 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 concluded the first quarter with solid 17% sales growth in our commercial markets, led by strong performances in our commercial aerospace and oil and gas markets.  In addition, our defense markets grew 1% over the prior year, led by solid growth in naval defense, which offset lower sales in our ground and aerospace defense markets.  Overall, the strength of our business model positions us well heading into the future."

OPERATING RESULTS FROM CONTINUING OPERATIONS

SALES

Sales of $502 million in the first quarter of 2012 increased $49 million, or 11%, compared to the prior year period.  Acquisitions accounted for approximately $37 million, or 8%, of the sales growth. Sales grew in all three of our segments, with gains of 29% in Metal Treatment, 12% in Flow Control and 3% in Motion Control. Foreign currency translation had a minimal impact on our first quarter results.

First quarter sales to our commercial markets were up 17% compared to the prior year period, primarily driven by a strong 43% gain in our commercial aerospace market, 18% of which was organic.  Within our energy markets, we experienced a solid 15% increase in oil and gas due to continued demand for super vessels and refinery-related Maintenance, Repair and Overhaul (MRO) products from international customers, partially offset by the ongoing delays in capital spending on large, international projects.  Sales to our power generation market grew 9%, principally led by Westinghouse AP1000 sales related to new reactor construction in the U.S. Elsewhere, defense sales grew 1% in the first quarter of 2012, as a solid 7% increase in naval defense was offset by an 11% reduction in ground defense and a 3% decline in aerospace defense.

OPERATING INCOME

Operating income decreased 9% to $36 million, as anticipated, in the first quarter of 2012, down $4 million compared to the prior year period. This lower operating income was primarily driven by a 21% decrease in Motion Control, due to the impact of planned restructuring and consolidation activities, start-up costs and strategic investments. In addition, we also experienced a decline of approximately 1% in Flow Control, primarily due to higher long-term compensation costs and start-up costs associated with our super vessel business, compared to the prior year period.  Those decreases were partially offset by a strong 30% increase in our Metal Treatment segment, due to higher demand across nearly all major service offerings and markets. Acquisitions and foreign currency translation had a minimal impact on current quarter results.

Overall operating margin in the quarter was 7.1%, a decrease of 160 basis points from the prior year period. Segment operating margin for the first quarter of 2012 was 8.2%, down 120 basis points compared to 2011, primarily due to the above mentioned impacts to operating income, and includes margin dilution of 30 basis points from our recently completed acquisitions.

Non-segment operating costs increased $2 million in the first quarter of 2012 as compared with the prior year period, mainly due to higher pension costs, as well as foreign exchange gains in the prior year that did not recur in the current period, which were somewhat offset by lower legal costs compared to the first quarter of 2011.  

NET EARNINGS

First quarter net earnings decreased 14% from the comparable prior year period, reflecting lower operating income and higher interest expense. The higher interest expense is a result of our December 2011 private placement debt offering which increased our borrowing rates and debt levels compared to the prior year period. Our effective tax rate for the current quarter was 32.0%, slightly below the 32.7% tax rate from the prior year period.

FREE CASH FLOW

Free cash flow was ($25 million) for the first quarter of 2012, compared to ($63 million) in the prior year period, or a $38 million improvement. Net cash from operating activities improved by $38 million from the prior year period, mainly due to improved collections, timing of vendor payments and pension contributions, and the receipt of advanced payments on several long-term projects. Capital expenditures during the first quarter of 2012 were $19 million, consistent with the prior year period. 

OTHER ITEMS — DISCONTINUED OPERATIONS

On March 30, 2012, Curtiss-Wright completed the sale of its heat treating business to Bodycote plc and recorded an after-tax book gain on the sale in the first quarter of $18.4 million, or approximately $0.39 per diluted share.  This business also provided approximately $3.1 million in net income, or approximately $0.06 per diluted share, to our first quarter 2012 results, which included $0.01 per diluted share from a one-time favorable insurance settlement.  This transaction is expected to net Curtiss-Wright approximately $40 million in incremental cash in 2012. We elected to divest this business as it was deemed to be non-core and did not fit with our strategic direction to move towards more higher-end engineered services.  Furthermore, the business was capital intensive and very cyclical in nature, and its operating costs are highly sensitive to natural gas prices, which are currently near historic lows but are expected to rise as world economies improve. Moving forward, these operations, which previously had been reported under the Company's Metal Treatment segment, will be reflected as discontinued operations and have been removed from our financial guidance.

SEGMENT PERFORMANCE

Flow Control — Sales for the first quarter of 2012 were $267 million, an increase of $28 million, or 12%, over the comparable prior year period, led by solid increases in our oil and gas, naval defense and power generation markets.  Within the oil and gas market, super vessel sales drove the increase year over year as this is the first full year of production. In addition, this segment had higher sales in the power generation market for its AP1000 reactor projects in the U.S., offsetting lower demand for aftermarket products for existing operating reactors as compared to a stronger than normal prior year period.  We also experienced solid sales in the naval defense market, which grew 12% compared to the prior year period, primarily due to higher sales on the Virginia class submarine program based on timing on long-term contracts, as well as higher production on the CVN-79 Ford class aircraft carrier and Advanced Arresting Gear programs. Our 2011 acquisitions of Anatec and LMT, and Douglas Equipment Ltd, contributed approximately $16 million in sales in the current quarter.

Operating income in the first quarter of 2012 was $19 million, a decrease of approximately 1% from the comparable prior year period, while operating margin declined 90 basis points to 6.9% and included 40 basis points of margin dilution from our recently completed acquisitions.  The decrease in operating income was primarily due to higher long-term compensation costs compared to the prior year period, as well as start-up costs and the expected initial lower margins associated with our super vessel business. These decreases were partially offset by a favorable performance on long-term contracts related to the Virginia Class submarine program.  

Motion Control — Sales for the first quarter of 2012 were $165 million, an increase of $5 million, or 3%, over the comparable prior year period. We experienced solid sales growth of 26% in our commercial markets, which was partially offset by a 10% reduction in sales to our defense markets. Growth in our commercial markets was largely driven by a strong 38% increase in sales in the commercial aerospace market due to increases on all Boeing aircraft, as well as healthy demand for sensor and control products serving the regional jet and commercial helicopter markets.  Meanwhile, we experienced lower growth within the defense markets, primarily due to timing of contracts across various military platforms that led to lower aerospace and ground defense sales compared to the prior year period. The decrease in aerospace defense was primarily driven by lower sales on the Global Hawk program as the development phase for this program is winding down, lower Apache helicopter sales, and the expected decrease in sales related to previous program cancellations. Meanwhile, the decrease in ground defense was largely driven by lower comparable sales on several large ground defense platforms.  These decreases were partially offset by higher sales of both turret drive systems and ammunition handling systems to international customers and solid demand on the F-35 Joint Strike Fighter program. Additionally, our 2011 acquisitions contributed approximately $10 million in sales in the current quarter.

Operating income for the first quarter of 2012 was $13 million, a 21% reduction compared to the prior year period, while current quarter operating margin decreased 240 basis points to 7.8%. Current quarter operating income and margin were negatively impacted by approximately $3 million in planned restructuring activities in the current quarter, along with unfavorable sales volume and mix on certain defense programs, start-up costs and product development and qualification investments.  The cost savings generated by our restructuring activities are expected to result in improved profitability in the second half of the year.

Metal Treatment — Sales for the first quarter of 2012 were $70 million, an increase of $16 million, or 29%, compared to the prior year period. Our 2011 acquisitions of BASF Surface Technologies and IMR Test Labs contributed nearly $12 million in sales in the current quarter. The increase was driven by continued improvements in global economic conditions and higher demand across all major service offerings and markets, most notably for coatings and shot peening services to commercial markets.  Within our markets, we experienced strong growth in the commercial aerospace and general industrial markets, which grew 26% and 20%, respectively.  We also experienced solid sales of coatings in our aerospace defense market.  

Operating income in the first quarter of 2012 was $10 million, an increase of approximately $2 million, or 30%, compared to the prior year period. Operating margin was 14.1%, up 10 basis points compared to the prior year period, or 16.1% organically, excluding the dilution from acquisitions and impact of foreign currency translation. The solid improvement in operating income and margin were primarily driven by higher sales volumes resulting in favorable absorption of fixed overhead costs.

FULL YEAR 2012 GUIDANCE

The Company is updating its full year 2012 financial guidance as follows:

*Diluted Earnings per Share growth calculation excludes the Metal Treatment segment's potential restructuring charge of $0.17 from our 2012 results, as well as the prior year non-recurring R&D tax credit of $4 million, or $0.09 from our 2011 results.

**Free cash flow is defined as cash flow from operations less capital expenditures and includes estimated payments of approximately $45 million to the Curtiss-Wright Pension Plan and $32 million in interest in 2012.  The change in guidance from continuing operations is due to the removal of the heat treating business' operations from our 2012 projections.

Net cash from the sale of the heat treating business is expected to result in approximately $40 million of incremental cash in 2012.

Note: A more detailed breakdown of our 2012 guidance by segment and by market can be found on the attached accompanying schedules.

FULL YEAR 2012 DILUTED EPS GUIDANCE RECONCILIATION

The Company is updating its full year 2012 diluted EPS guidance as follows:

FULL YEAR 2012 METAL TREATMENT SEGMENT GUIDANCE RECONCILIATION

The Company is updating its full year 2012 Metal Treatment segment guidance as follows:

Pro-forma adjustment excluding potential restructuring from current year results:

Mr. Benante concluded, "Looking ahead, we are pleased that our first quarter results exceeded our guidance and expect that the positive momentum exhibited by most of our businesses and markets, coupled with our actions to improve profitability, should provide solid organic growth for Curtiss-Wright in 2012.  We expect strong sales growth of 13-15% in our commercial markets, led by nearly 20% growth in each of our commercial aerospace and nuclear power generation markets.  In our defense markets, we remain cautiously optimistic based on our stable position as a key supplier on critical defense platforms, and continue to expect that our sales growth in defense will outpace the DoD budget.  In particular, we have a solid presence on platforms and programs supporting Intelligence, Surveillance and Reconnaissance ("ISR"), electronic warfare and communications' applications, all of which are expected to receive increased funding in the defense budget in the future.

"Finally, our backlog and capitalization remain strong, and we look forward to delivering solid results again this year.  We will continue to demonstrate our ability to produce long-term organic growth and to strategically invest in both our technologies and acquisitions in order to enhance the strength of our portfolio of highly engineered products and services and our market diversification. We have taken some actions this year to further strengthen our Company by divesting a non-core business and are further evaluating a significant restructuring in our Metal Treatment segment going forward. I am optimistic that 2012 will be another strong year for Curtiss-Wright, with the expectation of double-digit growth in sales, operating income and earnings per share after excluding the non-recurring R&D tax credit from our 2011 results and the Metal Treatment segment's potential restructuring charge from our 2012 results. We expect to achieve this growth based upon our solid backlog, continued strength in our commercial markets, key positions on long-term defense programs, solid demand for our advanced technologies, and operational improvements.

"Curtiss-Wright remains committed to a disciplined capital deployment strategy that consists of reinvesting in our business and growing through acquisitions, combined with our continued commitment to increasing shareholder value through solid earnings per share growth, dividends and share repurchases.  Overall, we look forward to delivering another year of solid results with strong profitability in 2012."

CONFERENCE CALL INFORMATION

The Company will host a conference call to discuss the first quarter 2012 results and guidance at 10:00 a.m. EDT on Wednesday, May 2, 2012. 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.

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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 8,600 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, 2011, 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]