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Curtiss-Wright Reports First Quarter Financial Results

CHARLOTTE, N.C., April 29, 2015 (GLOBE NEWSWIRE) -- Curtiss-Wright Corporation (NYSE:CW) reported financial results for the first quarter ended March 31, 2015.

First Quarter 2015 Operating Highlights from Continuing Operations

  • Net sales increased 1% to $546 million, from $543 million in 2014; Organic sales up 3%;
  • Operating income increased 19% to $73 million, from $61 million in 2014;
  • Operating margin increased 210 basis points to 13.3%, from 11.2% in 2014;
  • Net earnings from continuing operations increased 19% to $43 million, or $0.89 per diluted share, from $36 million, or $0.74 per diluted share, in 2014;
  • New orders totaled $629 million, up 8% from 2014, primarily due to higher demand within the defense markets, driving book-to-bill to 1.15; and
  • Backlog of approximately $1.65 billion was nearly unchanged from December 31, 2014.

"We were pleased with our solid first quarter results, which were driven by 3% organic sales growth, and improved organic operating income and margin growth in our commercial businesses, generating $0.89 in diluted earnings per share," said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. "This performance reflects our drive for operating margin expansion as we continue to leverage the scale and critical mass of One Curtiss-Wright.

"Our first quarter results in the Power segment reflect the receipt of a termination change order on the former Progress Energy U.S. AP1000 plant, which ceased construction years ago due to state funding constraints. This order, originally anticipated in the second quarter, provided a one-time net benefit of $0.10 to the current quarter diluted EPS results. We are maintaining our current full-year diluted EPS guidance of $3.80 to $3.90, and anticipate solid margin improvement in all three segments during the second half of 2015.

"Further, as part of our commitment to buyback at least $200 million in stock in 2015, we repurchased approximately $47 million in stock in the first quarter. Overall, we believe that our steadfast commitment to improving profitability, generating strong free cash flow and maintaining a balanced capital allocation strategy will continue to enhance shareholder value."

First Quarter 2015 Operating Results from Continuing Operations

(In thousands) 1Q-2015 1Q-2014 % Change
Sales $ 546,199 $ 542,959 1%
Operating income 72,835 61,034 19%
Operating margin 13.3% 11.2% 210 bps

Sales

Sales of $546 million in the first quarter increased $3 million, or 1%, compared to the prior year period, driven by solid 3% organic growth (excluding effects of foreign currency translation, acquisitions and divestitures) across all three segments, offset by 2% in unfavorable foreign currency translation.

From an end market perspective, first quarter sales to the commercial markets decreased 1%, while sales to the defense markets increased 4%, compared to the prior year period. Please refer to the accompanying tables for a breakdown of sales by end market.

Operating Income

Operating income in the first quarter was $73 million, an increase of approximately $12 million or 19% compared to the prior year period. This improvement was primarily driven by the one-time benefit of the termination change order, as well as solid organic growth in the Commercial/Industrial segment. On an organic basis, operating income improved 16%, excluding $2 million in foreign currency translation.

Operating margin was 13.3%, an increase of 210 basis points over the prior year period, reflecting higher operating income in all three segments and the benefits of our ongoing margin improvement initiatives. On an organic basis, operating margin improved 150 basis points to 12.7%.

Non-segment operating expense

Non-segment costs were slightly higher as compared with the prior year period, primarily due to higher foreign exchange transactional losses partially offset by lower pension costs.

Net Earnings

First quarter net earnings increased 19% from the comparable prior year period. Interest expense of approximately $9 million was in-line with the prior year period. Our effective tax rate for the current quarter was 32.8%, an increase from 30.1% in the prior year period, driven by a decline in the manufacturing deduction as well as the mix of domestic income.

Free Cash Flow

(In thousands) 1Q-2015 1Q-2014
Net cash used for operating activities $ (171,091) $ (14,593)
Capital expenditures (9,096) (18,365)
Free cash flow $ (180,187) $ (32,958)
Pension payment 145,000 7,800
Adjusted free cash flow $ (35,187) $ (25,158)

Free cash flow, defined as cash flow from operations less capital expenditures, was ($180 million) for the first quarter of 2015, compared to ($33 million) in the prior year period, or a decrease of $147 million. Adjusted free cash flow, defined as free cash flow excluding pension contributions of $145 million and $8 million from current and prior year periods, respectively, decreased $10 million to approximately ($35) million, primarily due to higher tax payments in the current year period, partially offset by higher cash earnings. Capital expenditures of $9 million were $9 million lower in the first quarter of 2015, as the prior year period included investments in facility expansions that did not recur this year.

Other Items – Discontinued Operations

During the first quarter of 2015, the Company recorded an after-tax book charge on its discontinued operations of approximately $27 million, or $0.57 diluted earnings per share.

Other Items – Share Repurchase

Beginning in January 2015, the Company began to repurchase shares under its previously announced $200 million share repurchase program, which it expects to complete by year-end.

During the first quarter, the Company repurchased approximately 673,500 shares of its common stock for approximately $47 million.

Full-Year 2015 Guidance

The Company is maintaining its full-year 2015 financial guidance as follows:

2015 Guidance Chg vs. 2014
Total sales $2.28 - $2.33 billion 2% - 4%
Operating income $303 - $312 million 7% - 10%
Operating margin 13.3% - 13.4% + 70 - 80 bps
Interest expense $37 - 38 million
Effective tax rate ~32%
Diluted earnings per share $3.80 - $3.90 10% - 13%
Diluted shares outstanding 47.8 million
Free cash flow $100 - $120 million
Adjusted free cash flow * $245 - $265 million

Notes: A more detailed breakdown of our 2015 guidance by segment and by market can be found in the attached accompanying schedules.

Effective January 30, 2015, Curtiss-Wright elected to make a $145 million contribution to its corporate defined benefit pension plan, which is expected to significantly reduce annual pension expense and annual cash contributions going forward.

*Adjusted free cash flow guidance excludes the aforementioned pension contribution of $145 million.

First Quarter 2015 Segment Performance

Commercial/Industrial

(In thousands) 1Q-2015 1Q-2014 % Change
Sales $ 297,887 $ 300,953 (1%)
Operating income 43,289 38,496 12%
Operating margin 14.5% 12.8% 170 bps

Sales for the first quarter were approximately $298 million, a decrease of $3 million, or 1%, over the comparable prior year period. Organic sales increased 2% over the prior year period, excluding $9 million in unfavorable foreign currency translation. Within the commercial aerospace market, we experienced higher sales of OEM actuation systems and sensors and controls products, primarily on the Boeing 737 and Airbus A380 programs, offset by lower sales for surface treatment services primarily due to unfavorable foreign currency translation. In the general industrial market, lower international project sales of severe-service industrial valves serving the energy markets and unfavorable foreign currency translation were partially offset by higher domestic sales of industrial vehicle products.

Operating income in the first quarter was $43 million, an increase of $5 million, or 12%, from the comparable prior year period, while operating margin increased 170 basis points to 14.5%. The improvement in operating income and operating margin was primarily driven by higher sales of industrial vehicle products, as well as the benefit of our ongoing margin improvement initiatives. We also experienced higher profitability for surface treatment services and industrial valves products, despite lower sales volumes, due to ongoing cost reduction initiatives.

Defense

(In thousands) 1Q-2015 1Q-2014 % Change
Sales $ 113,500 $ 112,371 1%
Operating income 18,027 15,784 14%
Operating margin 15.9% 14.0% 190 bps

Sales for the first quarter were approximately $113 million, an increase of $1 million, or 1%, over the comparable prior year period. Organic sales increased 4% over the prior year period, excluding $4 million in unfavorable foreign currency translation. Our results reflect strong ground defense sales, driven by higher demand for turret drive stabilization systems from international customers and improved domestic Abrams platform sales. Those gains were offset by lower demand on several military helicopter programs, including the Apache and Chinook platforms.

Operating income in the first quarter was $18 million, an increase of approximately $2 million, or 14%, compared to the prior year period, while operating margin improved 190 basis points to 15.9%. This improvement in operating income and operating margin was primarily driven by higher sales of embedded computing products and the benefits of our ongoing margin improvement initiatives, largely offset by higher estimated costs on certain long-term development contracts. In addition, favorable foreign currency translation added approximately $2 million to current quarter results.

Power

(In thousands) 1Q-2015 1Q-2014 % Change
Sales $ 134,812 $ 129,635 4%
Operating income 19,512 14,275 37%
Operating margin 14.5% 11.0% 350 bps

Sales for the first quarter were approximately $135 million, an increase of approximately $5 million, or 4%, compared to the prior year period. Within the power generation market, our results reflect the benefit of the non-recurring termination order on the former Progress Energy domestic AP1000 plant. This improvement was partially offset by lower China AP1000 program revenues compared to the prior year period, as well as lower aftermarket sales supporting domestic nuclear operating reactors, as a result of ongoing deferred spending on maintenance and upgrades. Within the naval defense market, we experienced higher sales of pumps and generators supporting the Virginia-class submarine program, which were mainly offset by decreased production on the Ford-class aircraft carrier program.

Operating income in the first quarter was approximately $20 million, a 37% increase from the comparable prior year period, while operating margin increased 350 basis points to 14.5%. This improvement in operating income and operating margin was primarily driven by the aforementioned termination change order on the domestic AP1000 program.

Conference Call Information

The Company will host a conference call to discuss first quarter 2015 financial results and updates to 2015 guidance at 9:00 a.m. EDT on Thursday, April 30, 2015. 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 www.curtisswright.com.

(Tables to Follow)

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
($'s in thousands, except per share data)
Three Months Ended
March 31,
Change
2015 2014 $ %
Product sales $ 445,687 $ 436,227 $ 9,460 2%
Service sales 100,512 106,732 (6,220) (6%)
Total net sales 546,199 542,959 3,240 1%
Cost of product sales 293,009 288,934 4,075 1%
Cost of service sales 62,094 69,411 (7,317) (11%)
Total cost of sales 355,103 358,345 (3,242) (1%)
Gross profit 191,096 184,614 6,482 4%
Research and development expenses 15,262 16,877 (1,615) (10%)
Selling expenses 31,088 32,631 (1,543) (5%)
General and administrative expenses 71,911 74,072 (2,161) (3%)
Operating income 72,835 61,034 11,801 19%
Interest expense (8,996) (9,055) 59 1%
Other income, net 481 112 369 NM
Earnings before income taxes 64,320 52,091 12,229 23%
Provision for income taxes 21,097 15,661 5,436 35%
Earnings from continuing operations $ 43,223 $ 36,430 $ 6,793 19%
Loss from discontinued operations, net of tax $ (27,232) $ (1,266) $ (25,966) NM
Net earnings $ 15,991 $ 35,164 $ (19,173) (55%)
Basic earnings per share
Earnings from continuing operations $ 0.91 $ 0.76
Earnings from discontinued operations (0.57) (0.03)
Total $ 0.34 $ 0.73
Diluted earnings per share
Earnings from continuing operations $ 0.89 $ 0.74
Earnings from discontinued operations (0.56) (0.02)
Total $ 0.33 $ 0.72
Dividends per share $ 0.13 $ 0.13
Weighted average shares outstanding:
Basic 47,724 47,982
Diluted 48,732 49,130
NM- not meaningful
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($'s in thousands, except par value)
March 31,
2015
December 31,
2014
Change
%
Assets
Current assets:
Cash and cash equivalents $ 215,594 $ 450,116 (52%)
Receivables, net 496,019 495,480 0%
Inventories, net 390,188 388,670 0%
Deferred tax assets, net 45,953 44,311 4%
Assets held for sale 92,169 147,347 (37%)
Other current assets 100,925 45,151 124%
Total current assets 1,340,848 1,571,075 (15%)
Property, plant, and equipment, net 439,305 458,919 (4%)
Goodwill 983,996 998,506 (1%)
Other intangible assets, net 337,007 349,227 (3%)
Other assets 24,243 21,784 11%
Total assets $ 3,125,399 $ 3,399,511 (8%)
Liabilities
Current liabilities:
Current portion of long-term and short term debt $ 965 $ 1,069 (10%)
Accounts payable 131,887 152,266 (13%)
Accrued expenses 109,893 145,938 (25%)
Income taxes payable 5,543 22,472 (75%)
Deferred revenue 150,655 176,693 (15%)
Liabilities held for sale 29,138 35,392 (18%)
Other current liabilities 55,260 38,163 45%
Total current liabilities 483,341 571,993 (15%)
Long-term debt 965,189 953,279 1%
Deferred tax liabilities, net 105,328 51,554 104%
Accrued pension and other postretirement benefit costs 68,860 226,687 (70%)
Long-term portion of environmental reserves 14,024 14,911 (6%)
Other liabilities 87,950 102,654 (14%)
Total liabilities 1,724,692 1,921,078 (10%)
Stockholders' equity
Common stock, $1 par value 49,190 49,190 0%
Additional paid in capital 153,432 158,043 (3%)
Retained earnings 1,479,107 1,469,306 1%
Accumulated other comprehensive loss (182,481) (128,411) 42%
Less: cost of treasury stock (98,541) (69,695) 41%
Total stockholders' equity 1,400,707 1,478,433 (5%)
Total liabilities and stockholders' equity $ 3,125,399 $ 3,399,511 (8%)
NM-not meaningful
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION (UNAUDITED)
($'s in thousands)
Three Months Ended
March 31,
2015 2014 Change
%
Sales:
Commercial/Industrial $ 297,887 $ 300,953 (1%)
Defense 113,500 112,371 1%
Power 134,812 129,635 4%
Total sales $ 546,199 $ 542,959 1%
Operating income (expense):
Commercial/Industrial $ 43,289 $ 38,496 12%
Defense 18,027 15,784 14%
Power 19,512 14,275 37%
Total segments $ 80,828 $ 68,555 18%
Corporate and other (7,993) (7,521) (6%)
Total operating income $ 72,835 $ 61,034 19%
Operating margins:
Commercial/Industrial 14.5% 12.8%
Defense 15.9% 14.0%
Power 14.5% 11.0%
Total Curtiss-Wright 13.3% 11.2%
Segment margins 14.8% 12.6%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SALES BY END MARKET (UNAUDITED)
($'s in thousands)
Three Months Ended
March 31,
2015 2014 Change
$
Change
%
Defense markets:
Aerospace $ 71,346 $ 71,605 $ (259) --%
Ground 18,655 13,858 4,797 35%
Naval 89,062 87,886 1,176 1%
Other 2,726 957 1,769 NM
Total Defense $ 181,789 $ 174,306 $ 7,483 4%
Commercial markets:
Commercial Aerospace $ 101,020 $ 103,098 $ (2,078) (2%)
Power Generation 113,235 109,086 4,149 4%
General Industrial 150,155 156,469 (6,314) (4%)
Total Commercial $ 364,410 $ 368,653 $ (4,243) (1%)
Total Curtiss-Wright $ 546,199 $ 542,959 $ 3,240 1%
NM- not meaningful

Use of Non-GAAP Financial Information

The Corporation supplements our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. We believe that these non-GAAP measures provide investors with additional insight into the company's ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:

Organic Revenue and Organic Operating income

The Corporation discloses organic revenue and organic operating income because the Corporation believes it provides investors with insight as to the Company's ongoing business performance. Organic revenue and organic operating income are defined as revenue and operating income excluding the impact of foreign currency fluctuations and contributions from acquisitions made during the last twelve months.

Three Months Ended
March 31,
2015 vs 2014
Commercial/Industrial Defense Power Total Curtiss-Wright
Sales Operating
income
Sales Operating
income
Sales Operating
income
Sales Operating
income
Organic 2% 12% 4% (0%) 4% 38% 3% 16%
Acquisitions 0% (0%) 0% 0% 0% (1%) 0% (0%)
Foreign Currency (3%) (0%) (3%) 14% (0%) (0%) (2%) 3%
Total (1%) 12% 1% 14% 4% 37% 1% 19%

Free Cash Flow

The Corporation discloses free cash flow because the Corporation believes it measures cash flow 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.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
($'s in thousands)
Three Months Ended
March 31,
2015 2014
Net cash used by operating activities $ (171,091) $ (14,593)
Capital expenditures (9,096) (18,365)
Free cash flow $ (180,187) $ (32,958)
Pension Payment 145,000 7,800
Adjusted free cash flow $ (35,187) $ (25,158)
Cash conversion * (81%) (69%)
*Cash conversion is calculated as free cash flow from operations divided by earnings from continuing operations
CURTISS-WRIGHT CORPORATION
2015 Earnings Guidance (from Continuing Operations)
As of April 29, 2015
($'s in millions, except per share data)
2014 Pro 2015 Guidance
Forma Low High
Sales:
Commercial/Industrial $ 1,228 $ 1,265 $ 1,285
Defense 490 500 515
Power 525 515 530
Total sales $ 2,243 $ 2,280 $ 2,330
Operating income:
Commercial/Industrial $ 179 $ 188 $ 191
Defense 83 90 93
Power 51 59 61
Total segments 313 337 345
Corporate and other (30) (33) (33)
Total operating income $ 282 $ 303 $ 312
Interest expense $ (36) $ (37) $ (38)
Earnings before income taxes 247 267 274
Provision for income taxes (77) (85) (88)
Net earnings $ 170 $ 181 $ 187
Reported diluted earnings per share $ 3.46 $ 3.80 $ 3.90
Diluted shares outstanding 49.0 47.8 47.8
Effective tax rate 31.2% 32.0% 32.0%
Operating margins:
Commercial/Industrial 14.5% 14.8% 14.9%
Defense 16.9% 18.0% 18.1%
Power 9.8% 11.4% 11.5%
Total operating margin 12.6% 13.3% 13.4%
Note: Full year amounts may not add due to rounding
CURTISS-WRIGHT CORPORATION
2015 Sales Growth Guidance by End Market (from Continuing Operations)
As of April 29, 2015
2015 % Change (vs 2014)
Low High
Defense Markets
Aerospace (2%) 2%
Ground 26% 30%
Navy (2%) 2%
Total Defense (Including Other Defense) 2% 4%
Commercial Markets
Commercial Aerospace (2%) 2%
Power Generation (2%) 2%
General Industrial 5% 9%
Total Commercial 2% 4%
Total Curtiss-Wright Sales 2% 4%
Note: Full year amounts may not add due to rounding

About Curtiss-Wright Corporation

Curtiss-Wright Corporation (NYSE:CW) is a global innovative company that delivers highly engineered, critical function products and services to the commercial, industrial, defense and energy markets. Building on the heritage of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of providing reliable solutions through trusted customer relationships. The company employs approximately 9,000 people worldwide. For more information, visit www.curtisswright.com.

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, the successful integration of our acquisitions, the successful sale of our businesses held for sale, 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, 2014, and subsequent reports filed with the Securities and Exchange Commission.

This press release and additional information are available at www.curtisswright.com.

CONTACT: Jim Ryan (973) 541-3766 Jim.Ryan@curtisswright.com

Source:Curtiss-Wright Corporation