Curtiss-Wright Reports Second Quarter and Six Months 2012 Financial Results

NET SALES UP 4%; DILUTED EPS OF $0.48; COMPANY UPDATES FULL YEAR 2012 GUIDANCE

PARSIPPANY, N.J., Aug. 2, 2012 (GLOBE NEWSWIRE) -- Curtiss-Wright Corporation (NYSE:CW) today reports financial results for the second quarter and six months ended June 30, 2012. All figures presented below, unless stated otherwise, reflect results from continuing operations and exclude the impact of the first quarter 2012 sale of the heat treating business from current and prior year periods.

SECOND QUARTER 2012 OPERATING HIGHLIGHTS FROM CONTINUING OPERATIONS

• Net sales increased 4% to $526 million from $506 million in 2011;
• Operating income decreased 17% to $41 million from $49 million in 2011, due primarily to restructuring costs of $8 million across all three segments and approximately $6 million in AP1000 strategic investments, most of which were previously announced. Excluding these items, operating income increased 10%;
• Net earnings decreased 24% to $23 million, or $0.48 per diluted share, from $30 million, or $0.64 per diluted share, in 2011; Excluding the impact of the aforementioned charges, second quarter diluted earnings per share increased 5% from the prior year period; and
• New orders totaled $485 million, up 1% from 2011, primarily led by solid demand in the naval defense market supporting the ramp-up in construction for the CVN-79 Aircraft Carrier and development on the Ohio Class Replacement Submarine program, as well as continued solid demand in the commercial aerospace market due to production rate increases by Boeing and Airbus.

SIX MONTHS 2012 OPERATING HIGHLIGHTS FROM CONTINUING OPERATIONS

• Net sales increased 7% to $1.03 billion from $959 million in 2011;
• Operating income decreased 14% to $76 million from $88 million in 2011; Excluding the impact of the aforementioned charges, operating income grew 5% from the prior year;
• Net earnings decreased 20% to $43 million, or $0.90 per diluted share, from $53 million, or $1.13 per diluted share, in 2011; Excluding the impact of the aforementioned charges, diluted earnings per share was comparable to the prior year; and
• New orders totaled $1.0 billion, up 4% from 2011. At June 30, 2012, backlog was $1.7 billion, essentially in line with December 31, 2011.

"Overall, our second quarter 2012 results were at the high end of our revised guidance, as we generated diluted earnings per share of $0.48," said Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "We produced sales growth of 4%, led by a strong performance in our Metal Treatment segment, and concluded the second quarter with solid 9% growth in our commercial markets led by 21% growth in our commercial aerospace market.

"We expected our second quarter results would be impacted by restructuring charges and additional investments in the AP1000 program. Excluding the impact of these items, operating income grew 10% in the second quarter as we continue to reposition Curtiss-Wright for significantly improved profitability in the latter half of 2012 and beyond."

SECOND QUARTER 2012 OPERATING RESULTS

SALES

Sales of $526 million in the second quarter of 2012 increased $21 million, or 4%, compared to the prior year period, aided by incremental sales from our acquisitions, which contributed $23 million of sales in the current quarter. Sales grew in all three of our segments, with gains of 13% in Metal Treatment, 3% in Flow Control and 3% in Motion Control. Foreign currency translation negatively impacted sales by approximately $5 million, or 1%.

From a market perspective, sales to our commercial markets increased 9% but were somewhat offset by a 3% decrease in defense sales. The strong performance in our commercial markets was driven by a 21% increase in our commercial aerospace market, 19% of which was organic.  Within our energy markets, we experienced a solid 8% increase in our power generation market and a 4% gain in our oil and gas market.  In our defense markets, solid sales growth of 7% in aerospace defense was more than offset by a 16% decline in ground defense and a 5% reduction in naval defense.

OPERATING INCOME

Operating income decreased 17% to $41 million in the second quarter of 2012, down approximately $8 million compared to the prior year period as a result of restructuring charges of $8 million and approximately $6 million of AP1000 strategic investments.  Excluding these restructuring charges and AP1000 strategic investments, operating income increased $5 million, or 10%. Acquisitions contributed approximately $3 million or 7% to the current quarter results, primarily in the Motion Control segment, while foreign currency translation had a minimal impact on current quarter results. 

Within our segments, the Metal Treatment segment reported operating income was $6 million, a decrease of approximately $2 million, or 22%, compared to the prior year period, while operating margin was 8.4%. Excluding the restructuring charges, this segment experienced solid operating income growth of 46% and an operating margin of 15.8% due primarily to higher demand for shot peening services in our commercial aerospace markets. In the Flow Control segment, reported operating income was $19 million, a decrease of $8 million, or approximately 30%, from the comparable prior year period, while operating margin was 6.8%. Excluding the AP1000 strategic investments and $2 million of restructuring costs, operating income in this segment decreased 1% or 40 basis points to 9.6%, due to the expected initial low margin orders associated with our super vessel business. The restructuring actions implemented in the second quarter are expected to improve profitability in the second half of the year. In the Motion Control segment, reported operating income grew 25% due to higher sales to the commercial aerospace market, ongoing cost containment efforts, and the benefits from our previously announced restructuring initiatives.  

Reported operating margin in the second quarter was 7.7%. Operating margin, adjusted to exclude the restructuring charges and AP1000 investments, was 10.3%, up 60 basis points from the prior year due to solid margin expansion in both our Motion Control and Metal Treatment segments. Reported segment operating margin in the second quarter was 9.1%. Segment operating margin, adjusted to exclude the restructuring and AP1000 investments, was 11.7%, an increase of 120 basis points over the prior year quarter.  

Non-segment operating costs increased $3 million in the second quarter of 2012 as compared with the prior year period, mainly due to higher pension and medical expenses.  

NET EARNINGS

Second quarter net earnings decreased 24% from the comparable prior year period, due to the aforementioned one-time charges, higher interest expense, and a slightly higher effective tax rate.  The higher interest expense is a result of our December 2011 private placement debt offering which led to higher average debt levels and borrowing rates compared to the prior year period.  Our effective tax rate for the current quarter was 33.1%, an increase from 31.6% in the prior year period, mainly due to foreign tax return true-ups.

FREE CASH FLOW     

Free cash flow was $2 million for the second quarter of 2012, compared to $40 million in the prior year period, primarily due to timing as our year-to-date free cash flow as of June 30, 2012, is essentially the same as the comparable prior year period.  Net cash from operating activities decreased by $35 million from the prior year period, mainly due to lower accounts payable and lower advanced payments on several long-term projects, somewhat offset by improved collections.  Capital expenditures during the second quarter of 2012 were $21 million, an increase of $2 million as compared to the prior year, due to the additional expansion and investments being made in our Metal Treatment segment.

OTHER ITEMS

The Company repurchased approximately 156,000 shares of its common stock during the second quarter of 2012 at an average price of $31.85 for approximately $5.0 million.

On May 8, the Company's Board of Directors declared a dividend of $0.09 per share of common stock, a 12.5% increase compared to the prior year dividend of $0.08 per share.

SEGMENT PERFORMANCE

Flow Control — Sales for the second quarter of 2012 were $275 million, an increase of $8 million, or 3%, over the comparable prior year period. The performance was led by a solid 11% increase in our power generation market due to increased production on AP1000 reactor projects in the U.S. and China, as well as higher demand for aftermarket products for existing operating reactors. Our 2011 acquisitions of Anatec and LMT contributed approximately $8 million in sales in the current quarter to this market. Within the oil and gas market, which had slightly higher sales overall, stronger global Maintenance, Repair and Overhaul (MRO) products and vessel sales were mostly offset by lower demand in our large international projects business. In addition, general industrial sales were lower in the quarter, primarily due to slower demand for our control systems for commercial heating, ventilation, and air conditioning ("HVAC") customers.  Meanwhile, we experienced a reduction in the naval defense market, despite increased production on the CVN-79 Ford class aircraft carrier program, primarily due to lower revenues on the Virginia class submarine program, which had a very strong first quarter, based on timing on long-term contracts. In addition, the completion of production on the Electromagnetic Aircraft Launching System and Advanced Arresting Gear programs also contributed to the lower sales as compared to the prior year period. On a year-to-date basis, defense sales in our Flow Control segment were higher by 4% versus the comparable prior year period.  

Operating income in the second quarter of 2012 was $19 million, a decrease of $8 million, or approximately 30%, from the comparable prior year period. The current quarter results were impacted by the expected additional $6 million in investments on AP1000 contracts in our power generation market and the impact of approximately $2 million in restructuring activities in the current quarter, which will yield higher profitability in the second half of the year. In addition, the current year quarter had lower margins on long-term contracts within our super vessel business in the oil and gas market. 

Motion Control — Sales for the second quarter of 2012 were $181 million, an increase of approximately $5 million, or 3%, over the comparable prior year period.  Solid sales growth of 15% in our commercial markets was partially offset by a 4% reduction in sales to our defense markets. Growth in our commercial markets was largely driven by a strong 24% increase in sales in the commercial aerospace market due to increases on all major Boeing aircraft, including new sales being generated by our emergent operations facility in support of the Boeing 787 program. In addition, we also had strong demand for sensor and control products serving the regional jet and commercial helicopter markets. Meanwhile, we experienced mixed performance in our defense markets, as reduced demand in ground defense outpaced higher aerospace defense sales. The decrease in ground defense was largely driven by lower comparable sales on several large platforms and various ground defense applications, partially offset by higher sales of both turret drive systems and ammunition handling systems to international customers. Meanwhile, the increase in aerospace defense was driven by higher sales related to our embedded computing products supporting various helicopter programs, primarily on the Blackhawk helicopter, and was offset by lower sales on the Global Hawk program as the development phase for this program is winding down. Additionally, our 2011 acquisitions of ACRA Control Limited and South Bend Controls contributed approximately $11 million in sales in the current quarter, while unfavorable foreign currency translation reduced sales by nearly $2 million.

Operating income for the second quarter of 2012 grew 25% over the prior year period, on a 3% increase in sales, resulting in operating margin expansion of 230 basis points to 13.0%. The increases in operating income and operating margin were primarily driven by higher demand for our sensor and control products supporting the commercial aerospace market, as well as our ongoing cost containment efforts and the benefits from our previously announced restructuring initiatives. We anticipate that these initiatives will result in improved operating margins in the second half of the year. Acquisitions and foreign currency translation added approximately $3 million and $1 million, respectively, to operating income in the current year quarter.

Metal Treatment — Sales for the second quarter of 2012 were $71 million, an increase of $8 million, or 13%, compared to the prior year period. Our 2011 acquisition of IMR Test Labs contributed approximately $4 million in sales in the current quarter, primarily within the general industrial market. The higher sales were driven by solid demand across most major service offerings and markets, most notably for shot peening services to commercial markets, and the expansion and integration of our recently acquired highly technical thermal spray coatings and analytical services into our global network of existing facilities. From a market perspective, we experienced strong growth in the general industrial and commercial aerospace markets, which grew 21% and 8%, respectively, along with solid sales of coatings in our aerospace defense market.  

Reported operating income in the second quarter of 2012 was $6 million, a decrease of approximately $2 million, or 22%, compared to the prior year period, while operating margin was 8.4%, down 380 basis points. Excluding the impact of the $5 million of restructuring charges, operating income increased 46% while operating margin was 15.8%, up 360 basis points compared to the prior year period. These solid improvements in operating income and margin were primarily driven by higher sales volumes across nearly all major service offerings and markets, resulting in favorable absorption of fixed overhead costs.

FULL YEAR 2012 GUIDANCE

The Company is adjusting its full year 2012 sales guidance to $2.15 - $2.19 billion, compared to prior guidance of $2.19 - $2.23 billion. Pursuant to the June 28, 2012 press release, operating income is expected to range from $207 - $215 million. All other prior guidance remains unchanged.

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

Mr. Benante concluded, "Overall, we expect that the solid performance exhibited by most of our businesses and markets thus far in 2012, coupled with our actions to improve profitability across all three of our segments, should provide solid financial performance for Curtiss-Wright in 2012. We have taken numerous actions this year and in prior years to further improve our profitability by implementing various restructuring initiatives, including the recent divestiture of a non-core business which we believe will provide margin expansion in 2013.

"We have revised our sales outlook across both our defense and commercial markets and now expect sales growth of 10-12% in our commercial markets, led by nearly 20% growth in our commercial aerospace market. In our defense markets, we remain cautiously optimistic based on our position as a key supplier on critical defense platforms. However, given the current uncertain defense environment and a slight reduction in demand, we have reduced our full-year expectations slightly to 2-4% growth in our defense markets. These expectations are supported by our 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. While we are reducing our sales estimates, we are maintaining our earnings per share guidance as previously implemented business restructuring initiatives will lead to increased profitability in the second half of the year.

"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 technologies and acquisitions in order to enhance both our portfolio of highly engineered products and services and our market diversification. We expect to achieve this growth based upon our solid backlog, continued strength in our commercial markets, key positions on long-term defense programs, and operational improvements. Overall, I remain optimistic that 2012 will be another solid year for Curtiss-Wright, with the expectation that our operating income growth once again will exceed our growth in sales, and we remain well positioned for long-term profitability and growth."

CONFERENCE CALL INFORMATION

The Company will host a conference call to discuss the second quarter 2012 results and guidance at 10:00 a.m. EDT on Friday, August 3, 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.

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]