Curtiss-Wright Reports 2009 Financial Results
Free Cash Flow of $121 Million and Solid Backlog of $1.6 Billion Provide Momentum For 2010
PARSIPPANY, N.J., Feb. 15 /PRNewswire-FirstCall/ -- Curtiss-Wright Corporation (NYSE: CW) today reports financial results for the fourth quarter and full year ended December 31, 2009. The highlights are as follows:
Fourth Quarter 2009 Operating Highlights
- Net sales decreased 1% to $503 million from $508 million in 2008;
- Operating income of $58 million was essentially flat with 2008;
- Net earnings increased 6% to $35 million, or $0.76 per diluted share, from $33 million, or $0.73 per diluted share, in 2008;
- New orders were $444 million, down 4% compared to 2008; and
- Free cash flow of $101 million increased 40% from $72 million in 2008.
Full Year 2009 Operating Highlights
- Net sales decreased 1% to $1,810 million from $1,830 million in 2008;
- Operating income decreased 14% to $169 million from $197 million in 2008;
- Net earnings decreased 13% to $95 million, or $2.08 per diluted share, from $109 million, or $2.41 per diluted share, in 2008;
- New orders were $1.7 billion, down 22% compared to 2008. The prior year included a large order in excess of $300 million for AP1000 nuclear power plants. At December 31, 2009, our backlog was $1.6 billion, down from $1.7 billion at December 31, 2008; and
- Free cash flow of $121 million increased 59% from $76 million in 2008.
"We are pleased to report that sales and net earnings were in line with our guidance, while free cash flow significantly exceeded our expectations. In addition, our year-end backlog of $1.6 billion provides momentum heading into 2010," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "Despite a challenging year and difficult economic environment, especially in our commercial businesses, we were largely able to offset the effects of the sluggish economy with our strategic diversification and strong performance in other key markets, most notably commercial power and defense which both grew 15% in 2009."
"Our Motion Control segment in particular demonstrated solid execution, achieving robust organic operating income growth of 35% over 2008, excluding favorable foreign currency translation. However, this increase was not enough to offset the dramatic decline in our Metal Treatment segment and oil and gas businesses due to significant under-absorption of overhead costs resulting from a sharp decline in sales. While we cannot predict when the economic recovery will provide increased demand for our technologies, we continue to execute on our business restructuring and cost reduction programs which will enable us to opportunistically invest and better position ourselves for when the economy improves."
Sales
Sales in the fourth quarter of 2009 decreased $5 million (or 1%) as compared to the prior year period. The sales change in the quarter consisted of a $17 million (or 3%) organic sales decrease, partially offset by $7 million of incremental revenues from our 2009 acquisitions of EST and Nu-Torque, as well as favorable foreign currency translation which increased sales $6 million. Organic sales were primarily impacted by our Flow Control and Metal Treatment segments, which declined 7% and 17%, respectively. These declines were partially offset by solid organic growth of 9% in our Motion Control segment. From a market perspective, our overall sales to commercial markets declined by 9% due to lower sales in our commercial power, oil and gas and general industrial markets. These declines were partially mitigated by strong overall sales growth in our defense markets of 12%, particularly aerospace defense.
Sales for the full year of 2009 were lower by $20 million (or 1%) as compared to 2008. The sales decline was driven by a decrease in organic sales of $37 million (or 2%), unfavorable foreign currency translation of $27 million and lower sales of $9 million due to the divestiture of two businesses in 2008 and 2009. Our 2008 and 2009 acquisitions, primarily VMetro, Mechetronics, EST, and Nu-Torque, contributed $52 million in sales during 2009. Our 2009 organic sales decrease was the result of a sharp decline in our Metal Treatment segment of $51 million (or 19%) in lower sales, partially offset by an increase in our Motion Control segment, which grew organically by $15 million (or 3%). Organic sales in our Flow Control segment were essentially flat. From a market perspective, our overall sales to commercial markets were lower by 10% despite strong double digit growth in our commercial power market, as continuing declines were experienced in our general industrial, oil and gas, and commercial aerospace markets. Our defense markets generated strong 15% growth, driven by naval and aerospace programs.
Operating Income
Operating income of $58 million in the fourth quarter of 2009 was essentially flat with the fourth quarter of 2008. Our organic operating income increased $2 million (or 3%); however, this was offset by unfavorable foreign currency translation of $2 million. Acquisitions had a minimal impact on our fourth quarter operating income. Excluding foreign currency translation, our Motion Control segment generated $33 million of organic operating income, more than double from the prior year. However, this increase was negated by declines in our Flow Control and Metal Treatment segments of $7 million (or 17%) and $6 million (or 60%), respectively.
Our segment operating margin increased 90 basis points in the fourth quarter of 2009, excluding the impact of foreign currency translation which negatively impacted our operating margins by 50 basis points. In the fourth quarter of 2009, our organic businesses generated an operating margin of 12.2% as compared to 11.5% in the prior year period. The higher segment operating margin was due in part to cost reductions and business restructuring activities.
Non-segment operating costs of $12 million in the fourth quarter of 2009 increased by $1 million as compared with prior year period. The increase was mainly due to higher pension and legal costs, partially offset by lower foreign exchange transaction losses.
For the full year of 2009, operating income of $169 million decreased 14% as compared to the prior year period. The operating income change consisted of an organic decrease of $30 million (or 15%), operating losses on acquisitions of $5 million, partially offset by favorable foreign currency translation of $8 million. Excluding foreign currency translation, our Metal Treatment and Flow Control segments were lower organically by 57% and 14%, respectively. These declines were partially offset by strong growth of 35% in our Motion Control segment.
Our segment operating margin decreased 160 basis points in 2009, excluding the impact of foreign currency translation which had a positive impact on our operating margins of 60 basis points. In 2009, our organic businesses generated an operating margin of 9.3% as compared to 10.8% in the prior year period.
Non-segment operating costs in 2009 amounted to $24 million, an increase of $6 million from the prior year. The increase was mainly due to higher pension costs, partially offset by lower foreign exchange transaction losses.
Net Earnings
Net earnings for the fourth quarter of 2009 increased 6% from the comparable prior year period mainly due to a decrease in interest expense and a lower effective tax rate. The lower interest expense resulted from lower average borrowing rates, partially offset by higher average debt levels. The effective tax rate in the fourth quarter of 2009 and 2008 was 34.1% and 35.0%, respectively. The lower effective tax rate was mainly due to higher foreign research and development tax benefits that were realized in the fourth quarter of 2009 as compared to the prior year period.
Net earnings for the full year 2009 decreased 13% from the comparable prior year period. This decline was due to the lower operating income which was partially offset by lower interest expense and a lower effective tax rate of 34.4% in 2009 as compared to 35.3% in 2008. The lower interest expense and effective tax rate changes are discussed above and are the same as the fourth quarter.
Cash Flow
Our free cash flow, defined as cash flow from operations less capital expenditures, was $101 million and $121 million for the fourth quarter and full year 2009, respectively, as compared to $72 million and $76 million for the fourth quarter and full year 2008, respectively. Net cash provided by operating activities in the fourth quarter and full year increased $10 million and $17 million, respectively, from the prior year periods primarily as a result of improvements in working capital, specifically inventory and advanced payments. Capital expenditures were $15 million and $76 million for the fourth quarter and full year 2009, respectively, a decrease of $19 million and $28 million, respectively, as compared to the prior year periods. The decrease was primarily due to the completion of our new manufacturing facility expansion in Cheswick, PA.
Segment Performance
Flow Control – Sales for the fourth quarter of 2009 were $274 million, a decrease of 4% from the prior year. The sales decrease was due to lower organic sales of $21 million, partially offset by incremental sales of $7 million from our 2009 acquisitions of EST and Nu-Torque and favorable foreign currency translation of $2 million. Organic sales in our commercial markets decreased 14%, due in large part to lower commercial nuclear power revenues for the AP1000 program resulting from the timing of work completions, as well as the suspension of one of our domestic orders. In addition, we had lower sales in our oil and gas market due to delays in the timing of new order placement for our coker products due to tightening credit markets, reduced energy demand, and weak global economic conditions. Our defense market had solid organic sales growth of 9%, mainly related to our naval defense programs for the Ford class aircraft carriers, most notably our Electro-Magnetic Advanced Launching System ("EMALS"). In addition, our Virginia Class submarine development and production programs had increased sales due to the commencement of procurement for the ramp up in production from one to two submarines per year.
Operating income in the fourth quarter of 2009 amounted to $35 million, a decrease of 16% from the prior year, almost all of which was organic. Foreign currency translation had a minimal impact on operating income. Organic operating margin declined to 13.2% for the fourth quarter of 2009, a decrease of 150 basis points from the fourth quarter of 2008, mainly due to lower sales volumes and under-absorption of overhead costs in our oil and gas businesses, as well as changes in long-term contracts in both the current and prior year. These declines were somewhat mitigated by savings generated by our cost reduction and business restructuring activities.
Motion Control – Sales for the fourth quarter of 2009 were $176 million, an increase of 10% over the comparable prior year period. The sales increase was due to higher organic sales of $14 million (or 9%) and favorable foreign currency translation of $3 million. From a market perspective, both our defense and commercial markets experienced solid organic growth of 10% and 7%, respectively, as compared to the prior year period. The organic sales growth in defense was driven by strong growth in aerospace defense mainly due to increased demand for our electronic systems and embedded computing products on programs such as the Global Hawk, V-22, F-35 JSF, and the Blackhawk helicopter. Organic sales in our commercial markets, primarily commercial aerospace, were higher due in large part to increases on Boeing 737 and 747 production due to the strike in the prior year fourth quarter, which negatively impacted the prior year results.
Operating income in the fourth quarter of 2009 amounted to $31 million, an increase of 88% over the prior year period. Organic operating income increased $16 million (or 101%), but was partially offset by unfavorable foreign currency translation of $1 million. Organic operating margin improved to 18.8% in the fourth quarter of 2009, an increase of 860 basis points from the fourth quarter of 2008, due to the higher sales volumes noted above and certain one-time adjustments recorded in the prior year quarter that did not recur in 2009, most notably the Eclipse asset write-off of approximately $4 million and $3 million of deferred contract costs due to a contract cancellation. In addition, the current year gross margins were positively impacted by favorable mix, which was partially due to termination claims that occurred in 2009 and lower expenses resulting from cost reduction and business restructuring efforts.
Metal Treatment – Sales for the fourth quarter of 2009 were $52 million, a decrease of $9 million (or 14%) as compared to the prior year period. Foreign currency translation had a $1 million favorable impact on sales for the fourth quarter of 2009. The weak global economic environment resulted in a reduction in demand across most of our primary service offerings, most notably shot peening, and all key markets, with the largest decrease in our general industrial market.
Operating income in the fourth quarter of 2009 amounted to $4 million, a decrease of $6 million (or 58%) from the prior period. Foreign currency translation had a minimal impact on operating income during the fourth quarter. Operating income and operating margin were negatively impacted by the under-absorption of overhead costs due to the sharply lower volumes, as compared to the prior year.
Full Year 2010 Guidance
The Company is providing its full year 2010 financial guidance as follows:
-- Total Sales $1.80 - $1.85 billion
-- Operating Income $176 - $183 million
-- Diluted Earnings Per Share $2.15 - $2.25
-- Effective Tax Rate 33.5%
-- Diluted Shares Outstanding 46.5 million
-- Free Cash Flow $75 - $85 million
(Free cash flow is defined as cash flow from operations less capital expenditures.)
Mr. Benante concluded, "We are cautiously optimistic that the global economy will improve in 2010 and anticipate sales and earnings per share to grow based upon our solid backlog, our key positions on long-term defense programs and the continuing demand for our advanced technologies that provide significant life cycle benefits for our customers. The beginning of the year will remain challenging as our economically sensitive businesses will not likely see any meaningful improvement until later in the year. However, our strong capitalization will enable us to actively pursue our strategic growth plan and, as the economic recovery gains momentum in 2010, our portfolio of highly engineered products will be well-positioned to benefit from increasing demand. 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 2009 results and 2010 guidance at 10:00 A.M. EST Tuesday February 16, 2010. A live webcast of the call can be heard on the Internet by visiting the company's website at www.curtisswright.com and clicking on the investor information page or by visiting other websites that provide links to corporate webcasts.
(Tables to Follow)
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, Change December 31, Change
2009 2008 % 2009 2008 %
---- ---- --- ---- ---- ---
Net sales $502,777 $507,598 (0.9%) $1,809,690 $1,830,140 (1.1%)
Cost of sales 329,903 335,013 (1.5%) 1,214,159 1,214,061 0.0%
------- ------- --------- ---------
Gross
profit 172,874 172,585 0.2% 595,531 616,079 (3.3%)
Research &
development
expenses 14,497 12,807 13.2% 54,645 49,615 10.1%
Selling
expenses 27,502 27,287 0.8% 106,187 107,308 (1.0%)
General and
administrative
expenses 72,680 74,518 (2.5%) 265,380 262,594 1.1%
------ ------ ------- -------
Operating
income 58,195 57,973 0.4% 169,319 196,562 (13.9%)
Other income,
net 349 516 (32.4%) 1,006 1,585 (36.5%)
Interest
expense (5,661) (7,675) (26.2%) (25,066) (29,045) (13.7%)
------ ------ ------- -------
Earnings before
income taxes 52,883 50,814 4.1% 145,259 169,102 (14.1%)
Provision for
income taxes 18,036 17,803 1.3% 50,038 59,712 (16.2%)
------ ------ ------ ------
Net earnings $34,847 $33,011 5.6% $95,221 $109,390 (13.0%)
======= ======= ======= ========
Basic earnings
per share $0.77 $0.74 $2.10 $2.45
===== ===== ===== =====
Diluted earnings
per share $0.76 $0.73 $2.08 $2.41
===== ===== ===== =====
Dividends per
share $0.08 $0.08 $0.32 $0.32
===== ===== ===== =====
Weighted average
shares
outstanding:
Basic 45,462 44,861 45,237 44,716
Diluted 45,941 45,403 45,695 45,374
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
December 31, December 31, Change
2009 2008 $ %
---- ---- --- ---
Assets
Current Assets:
Cash and cash
equivalents $65,010 $60,705 $4,305 7.1%
Receivables, net 404,539 395,659 8,880 2.2%
Inventories, net 285,608 281,508 4,100 1.5%
Deferred income taxes 48,777 37,314 11,463 30.7%
Other current assets 33,567 26,833 6,734 25.1%
------ ------ -----
Total current assets 837,501 802,019 35,482 4.4%
------- ------- ------
Property, plant, &
equipment, net 401,149 364,032 37,117 10.2%
Goodwill, net 648,452 608,898 39,554 6.5%
Other intangible assets,
net 242,506 234,596 7,910 3.4%
Deferred income taxes 1,994 23,128 (21,134) (91.4%)
Other assets 10,439 9,357 1,082 11.6%
------ ----- -----
Total Assets $2,142,041 $2,042,030 $100,011 4.9%
========== ========== ========
Liabilities
Current Liabilities:
Short-term debt $80,981 $3,249 $77,732 2392.5%
Accounts payable 129,880 140,954 (11,074) (7.9%)
Accrued expenses 90,855 103,973 (13,118) (12.6%)
Income taxes payable 4,212 8,213 (4,001) (48.7%)
Deferred revenue 167,683 138,753 28,930 20.8%
Other current liabilities 50,708 56,542 (5,834) (10.3%)
------ ------ ------
Total current liabilities 524,319 451,684 72,635 16.1%
------- ------- ------
Long-term debt 384,112 513,460 (129,348) (25.2%)
Deferred income taxes 25,549 26,850 (1,301) (4.8%)
Accrued pension & other
postretirement benefit
costs 120,930 125,762 (4,832) (3.8%)
Long-term portion of
environmental reserves 18,804 20,377 (1,573) (7.7%)
Other liabilities 41,570 37,135 4,435 11.9%
------ ------ -----
Total Liabilities 1,115,284 1,175,268 (59,984) (5.1%)
--------- --------- -------
Stockholders' Equity
Common stock, $1 par
value 48,214 47,903 311 0.6%
Additional paid in
capital 111,707 94,500 17,207 18.2%
Retained earnings 980,590 899,928 80,662 9.0%
Accumulated other
comprehensive income (19,605) (72,551) 52,946 73.0%
------- ------- ------
1,120,906 969,780 151,126 15.6%
Less: cost of treasury
stock 94,149 103,018 (8,869) (8.6%)
------ ------- ------
Total Stockholders'
Equity 1,026,757 866,762 159,995 18.5%
--------- ------- -------
Total Liabilities and
Stockholders' Equity $2,142,041 $2,042,030 $100,011 4.9%
========== ========== ========
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION (UNAUDITED)
(In thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
Change Change
2009 2008 % 2009 2008 %
---- ---- --- ---- ---- ---
Sales:
------
Flow Control $274,455 $287,341 (4.5%) $985,172 $971,744 1.4%
Motion Control 176,278 159,563 10.5% 621,038 594,376 4.5%
Metal Treatment 52,044 60,694 (14.3%) 203,480 264,020 (22.9%)
------ ------ ------- -------
Total Sales $502,777 $507,598 (0.9%) $1,809,690 $1,830,140 (1.1%)
Operating Income:
-----------------
Flow Control $35,388 $42,008 (15.8%) $92,721 $102,394 (9.4%)
Motion Control 30,658 16,275 88.4% 80,949 60,359 34.1%
Metal Treatment 4,465 10,706 (58.3%) 19,891 52,142 (61.9%)
----- ------ ------ ------
Total Segments 70,511 68,989 2.2% $193,561 214,895 (9.9%)
Corporate &
Other (12,316) (11,016) 11.8% (24,242) (18,333) 32.2%
------- ------- ------- -------
Total Operating
Income $58,195 $57,973 0.4% $169,319 $196,562 (13.9%)
======= ======= === ======== ======== ====
Operating Margins:
------------------
Flow Control 12.9% 14.6% 9.4% 10.5%
Motion Control 17.4% 10.2% 13.0% 10.2%
Metal Treatment 8.6% 17.6% 9.8% 19.7%
Total Curtiss-
Wright 11.6% 11.4% 9.4% 10.7%
Segment Margins 14.0% 13.6% 10.7% 11.7%
Note: The 2008 segment financial data has been reclassified to conform
with our 2009 financial statement presentation.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
(In thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Net Cash Provided by $115,540 $105,046 $196,579 $179,821
Operating Activities
Capital Expenditures (14,617) (33,146) (75,643) (103,657)
Free Cash Flow (1) $100,923 $71,900 $120,936 $76,164
======== ======= ======== =======
Cash Conversion (1) 290% 218% 127% 70%
--- --- --- --
(1) The Corporation discloses free cash flow and cash conversion because
the Corporation believes that they are measurements of cash flow
that are 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. Cash conversion is defined as free cash flow
divided by net earnings. Free cash flow, as we define it, may differ from
similarly named measures used by entities and, consequently, could be
misleading unless all entities calculate and define free cash flow in the
same manner.
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 www.curtisswright.com.
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, 2008 and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information is available at www.curtisswright.com.
SOURCE Curtiss-Wright Corporation
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article