| • | | Net sales for the first quarter of 2007 increased 18% to $332.6 million from $282.6 million in |
| | | the first quarter of 2006. |
| |
| • | | Operating income in the first quarter of 2007 increased 43% to $35.1 million from $24.6 |
| | | million in the first quarter of 2006. |
| |
| • | | Net earnings for the first quarter of 2007 increased 59% to $19.5 million, or $0.44 per diluted |
| | | share, from $12.3 million, or $0.28 per diluted share, in the first quarter of 2006. |
| |
| • | | New orders received in the first quarter of 2007 were $392.7 million, up 1% compared to the |
| | | first quarter of 2006. |
| |
| • | | Backlog reached a new record high level of $936.3 million at March 31, 2007, up 7% from |
| | | $875.5 million at December 31, 2006. |
Curtiss-Wright Corporation, Page 2
“We are pleased to report a great start to 2007 with strong revenue growth along with increased operating income, net earnings, and cash flow from operations in the first quarter of 2007,” commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. “Our strong earnings performance in the first quarter was driven by improvements in operational efficiencies in our Motion Control segment, which experienced organic sales and operating income growth of 22% and 158%, respectively, compared to the prior year. In addition, our Metal Treatment segment experienced strong organic sales and operating income growth of 13% and 30%, respectively, in the first quarter of 2007. From a market perspective, our commercial sales grew 24%, led by strong organic growth of 39% in the oil and gas market and 17% in the commercial aerospace market. Our record backlog is a clear indication of the success of our products and programs and provides great momentum heading into the rest of the year. We continue to invest in a number of military and commercial development programs and have recently introduced many new products to the marketplace. We expect these investments to provide significant future opportunities and improved profitability.”
Sales
Sales growth in first quarter of 2007 was generated by strong organic growth of 14% from the prior year. This organic sales growth was driven primarily by our Motion Control and Metal Treatment segments, which experienced organic growth of 22% and 13%, respectively, compared to the prior year period. Our Flow Control segment’s organic sales increased 8% in the first quarter of 2007 as compared to the prior year period. The acquisitions made in 2006 contributed $9.6 million in incremental sales during the first quarter of 2007 over the comparable period in 2006.
In our base businesses, higher sales from our Flow Control segment to the oil and gas market, higher sales from our Motion Control segment to the commercial and defense aerospace and ground defense markets, and higher sales from our Metal Treatment segment of global shot peening and specialty coatings services, all contributed to the strong organic sales growth. Foreign currency translation favorably impacted sales by $5.0 million in the first quarter of 2007 compared to the prior year period.
Operating Income
Operating income in the first quarter of 2007 increased 43% over the comparable prior year period. Our overall operating margins improved to 10.6% in the first quarter of 2007, up 190 basis points from the prior year period. The increase in operating income was mainly due to higher sales volume and its favorable impact on fixed cost absorption, as well as efficiency improvements in our Motion Control and Metal Treatment segments. This improvement was partially offset by lower margins in our Flow Control segment due to unfavorable sales mix resulting mainly from higher development work, lower naval defense sales, and business consolidation costs. Our 2006 acquisitions lowered operating income by $0.5 million in the first quarter of 2007 due to start-up costs and ongoing business consolidation costs. Lastly, foreign currency translation favorably impacted operating income by $1.0 million for the first quarter 2007, as compared to the prior year period.
Curtiss-Wright Corporation, Page 3
Net Earnings
Net earnings for the first quarter of 2007 of $19.5 million increased 59% from the comparable prior year period. Interest expense was flat year-over-year and our other non-operating income increased by $0.6 million, mainly due to higher investment income. Our effective tax rate for the first quarter of 2007 was 36%, as compared to 37% in the first quarter of 2006.
Cash Flow
Net cash used by operating activities for the first quarter of 2007 was ($7.7) million, an improvement of 78% from ($34.2) million in the first quarter of 2006. Our 2007 Free Cash Flow, defined as cash flow from operations less capital expenditures, was ($19.8) million, a 53% improvement from ($41.9) million in the first quarter of 2006. All three operating segments experienced improved results. Overall cash conversion, defined as Free Cash Flow divided by net earnings, reached (101%) in the first quarter of 2007 as compared to (341%) in the first quarter of 2006. The improved cash flow resulted from higher earnings and more efficient working capital management.
Segment Performance
Flow Control – Sales for the first quarter of 2007 were $137.7 million, up 14% over the comparable period last year due to solid organic growth of 8% and the contribution from our 2006 acquisitions, which provided $6.5 million in incremental sales. The organic sales growth was due to higher sales to the oil and gas market, led by continued strong demand for our coker valve products, as well as higher sales to the commercial nuclear power market mainly due to the timing of refurbishment cycles and plant outages. Partially offsetting this growth was a decline in naval defense sales due to the timing of build schedules for the submarine and aircraft carrier programs. Sales of this business segment were favorably impacted by foreign currency translation of $0.4 million in the first quarter of 2007 compared to the prior year period.
Operating income for this segment decreased 8% in the first quarter of 2007 compared to the prior year period. Our 2006 acquisitions lowered operating income by $1.0 million in the first quarter of 2007 due to start-up costs and labor inefficiencies associated with our business consolidation efforts. Our organic operating income was essentially flat year-over-year as unfavorable sales mix associated with a greater degree of development work were offset by higher overall sales volume. Operating income of this business segment was minimally affected by foreign currency translation in the first quarter of 2007 compared to the prior year period.
Motion Control – Sales for the first quarter of 2007 of $131.3 million increased 22% over the comparable period last year, all from organic growth. This organic growth was due primarily to higher sales of OEM products to the commercial aerospace market and embedded computing products to the aerospace and ground defense markets. In addition, this segment had higher global sales of controllers and sensor products to the general industrial market. Sales of this business segment were favorably impacted by foreign currency translation of $2.4 million in the first quarter of 2007 compared to the prior year period.
Curtiss-Wright Corporation, Page 4
Operating income for this segment increased 158% in the first quarter of 2007 compared to the prior year period. The strong improvement was primarily driven by higher sales volume and its favorable impact on fixed cost absorption and post integration benefits in our embedded computing group. Operating income also benefited from favorable sales mix resulting from increased sales of higher margin products such as our helicopter handling systems, integrated sensors, and controllers. Operating income of this business segment was favorably impacted by foreign currency translation of $0.2 million in the first quarter of 2007 compared to the prior year period
Metal Treatment – Sales for the first quarter of 2007 of $63.7 million were 19% higher than the comparable period last year. The improvement in the first quarter of 2007 was due to organic growth of 13% and the contribution from our 2006 acquisition, which added $3.1 million in incremental sales. The organic sales growth was driven by higher global shot peening revenues to the commercial and defense aerospace markets along with strong demand in the automotive market for our specialty coatings services. Foreign currency translation favorably impacted sales by $2.2 million in the first quarter of 2007 as compared to the prior year period.
Operating income increased 35% for the first quarter of 2007 as compared to the prior year period, 30% of which was organic. Higher sales volume and its associated impact on fixed costs absorption were the main drivers for the margin improvement. Operating income of this segment was favorably impacted by foreign currency translation of $0.8 million in the first quarter of 2007 compared to the prior year period.
Mr. Benante concluded, “As we begin the year 2007, we are confident in our ability to generate long-term shareholder value by continuing to grow our sales and earnings. Much of our revenues are dependant upon customer delivery schedules which result in variability from quarter to quarter. However, our operational efficiencies were better than expected in the first quarter and, as a result, we are increasing our full year 2007 guidance to revenues in the range of $1.385 billion and $1.41 billion; operating income in the range of $168 million and $175 million; and fully diluted earnings per share in the range of $2.05 and $2.15.The revised 2007 guidance does not include any potential impact resulting from the recently announced selection of the AP-1000 design to be used in power plants by China.”
“Our backlog is strong and at a new record level. Our historical performance demonstrates our ability to execute our strategy and achieve our financial targets. We continue to experience increased demand for our new technologies, many of which are only at the beginning of their life cycles, which should continue to provide strong returns to our shareholders into the future. Our diversification strategy, the continued successful integration of our acquisitions, and ongoing emphasis on advanced technologies should continue to generate growth opportunities in each of our three business segments in 2007 and beyond.”
**********
The Company will host a conference call to discuss the first quarter 2007 results at 9:00 EST Friday, April 27, 2007. A live webcast of the call can be heard on the Internet by visiting the company’s website atwww.curtisswright.com and clicking on the investor information page or by visiting other websites that provide links to corporate webcasts.
Curtiss-Wright Corporation, Page 5
(Tables to Follow)
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
| | | Three Months Ended | | Three Months |
| | | March 31, | | Change |
| | | 2007 | | | 2006 | | | $ | | | | |
| |
| Net sales | | $ | 332,609 | | | $ | 282,552 | | | $ | 50,057 | | | 17.72 | % |
| Cost of sales | | | 221,222 | | | | 190,491 | | | | 30,731 | | | 16.13 | % |
| Gross profit | | | 111,387 | | | | 92,061 | | | | 19,326 | | | 20.99 | % |
| |
| Research & development expenses | | | 11,339 | | | | 9,971 | | | | 1,368 | | | 13.72 | % |
| Selling expenses | | | 20,272 | | | | 18,342 | | | | 1,930 | | | 10.52 | % |
| General and administrative expenses | | | 44,361 | | | | 39,342 | | | | 5,019 | | | 12.76 | % |
| Environmental remediation and administrative | | | | | | | | | | | | | | | |
| expenses, net | | | 162 | | | | (238 | ) | | | 400 | | | -168.07 | % |
| Loss on sale of real estate and fixed assets | | | 111 | | | | 25 | | | | 86 | | | 344.00 | % |
| |
| Operating income | | | 35,142 | | | | 24,619 | | | | 10,523 | | | 42.74 | % |
| |
| Other income, net | | | 884 | | | | 304 | | | | 580 | | | 190.79 | % |
| Interest expense | | | (5,500 | ) | | | (5,434 | ) | | | (66 | ) | | 1.21 | % |
| |
| Earnings before income taxes | | | 30,526 | | | | 19,489 | | | | 11,037 | | | 56.63 | % |
| Provision for income taxes | | | 11,023 | | | | 7,211 | | | | 3,812 | | | 52.86 | % |
| |
| Net earnings | | $ | 19,503 | | | $ | 12,278 | | | $ | 7,225 | | | 58.85 | % |
| |
| Basic earnings per share | | | 0.44 | | | $ | 0.28 | | | | | | | | |
| Diluted earnings per share | | | 0.44 | | | $ | 0.28 | | | | | | | | |
| |
| Dividends per share | | $ | 0.06 | | | $ | 0.06 | | | | | | | | |
| |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | |
| Basic | | | 44,150 | | | | 43,636 | | | | | | | | |
| Diluted | | | 44,720 | | | | 44,134 | | | | | | | | |
Curtiss-Wright Corporation, Page 6
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
| | | March 31, | | December 31, | | Change | | | |
| | | 2007 | | 2006 | | $ | | | |
| Assets | | | | | | | | | | | | | |
| Current Assets: | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 100,580 | | $ | 124,517 | | $ | (23,937 | ) | | -19.2 | % |
| Receivables, net | | | 291,454 | | | 284,774 | | | 6,680 | | | 2.3 | % |
| Inventories, net | | | 176,635 | | | 161,528 | | | 15,107 | | | 9.4 | % |
| Deferred income taxes | | | 24,696 | | | 32,485 | | | (7,789 | ) | | -24.0 | % |
| Other current assets | | | 22,295 | | | 19,341 | | | 2,954 | | | 15.3 | % |
| Total current assets | | | 615,660 | | | 622,645 | | | (6,985 | ) | | -1.1 | % |
| Property, plant, and equipment, net | | | 298,720 | | | 296,652 | | | 2,068 | | | 0.7 | % |
| Prepaid pension costs | | | 60,031 | | | 92,262 | | | (32,231 | ) | | -34.9 | % |
| Goodwill, net | | | 414,964 | | | 411,101 | | | 3,863 | | | 0.9 | % |
| Other intangible assets, net | | | 154,734 | | | 158,080 | | | (3,346 | ) | | -2.1 | % |
| Other assets | | | 11,667 | | | 11,416 | | | | | | 2.2 | % |
| |
| Total Assets | | $ | 1,555,776 | | $ | 1,592,156 | | $ | (36,380 | ) | | -2.3 | % |
| |
| Liabilities | | | | | | | | | | | | | |
| Current Liabilities: | | | | | | | | | | | | | |
| Short-term debt | | $ | 892 | | $ | 5,874 | | $ | (4,982 | ) | | -84.8 | % |
| Accounts payable | | | 93,634 | | | 96,023 | | | (2,389 | ) | | -2.5 | % |
| Accrued expenses | | | 67,139 | | | 81,532 | | | (14,393 | ) | | -17.7 | % |
| Income taxes payable | | | 14,187 | | | 23,003 | | | (8,816 | ) | | -38.3 | % |
| Deferred revenue | | | 62,253 | | | 57,305 | | | 4,948 | | | 8.6 | % |
| Other current liabilities | | | 28,143 | | | 28,388 | | | (245 | ) | | -0.9 | % |
| Total current liabilities | | | 266,248 | | | 292,125 | | | (25,877 | ) | | -8.9 | % |
| Long-term debt | | | 358,996 | | | 359,000 | | | (4 | ) | | 0.0 | % |
| Deferred income taxes | | | 52,670 | | | 57,055 | | | (4,385 | ) | | -7.7 | % |
| Accrued pension & other postretirement benefit costs | | | 40,081 | | | 71,006 | | | (30,925 | ) | | -43.6 | % |
| Long-term portion of environmental reserves | | | 21,023 | | | 21,220 | | | (197 | ) | | -0.9 | % |
| Other liabilities | | | 29,990 | | | 29,676 | | | 314 | | | 1.1 | % |
| Total Liabilities | | | 769,008 | | | 830,082 | | | (61,074 | ) | | -7.4 | % |
| |
| |
| Stockholders' Equity | | | | | | | | | | | | | |
| Common stock, $1 par value | | | 47,626 | | | 47,533 | | | 93 | | | 0.2 | % |
| Additional paid in capital | | | 72,956 | | | 69,887 | | | 3,069 | | | 4.4 | % |
| Retained earnings | | | 732,648 | | | 716,030 | | | 16,618 | | | 2.3 | % |
| Accumulated other comprehensive income | | | 56,872 | | | 55,806 | | | 1,066 | | | 1.9 | % |
| | | | 910,102 | | | 889,256 | | | 20,846 | | | 2.3 | % |
| Less: cost of treasury stock | | | 123,334 | | | 127,182 | | | (3,848 | ) | | -3.0 | % |
| |
| Total Stockholders' Equity | | | 786,768 | | | 762,074 | | | 24,694 | | | 3.2 | % |
| |
| Total Liabilities and Stockholders' Equity | | $ | 1,555,776 | | $ | 1,592,156 | | $ | (36,380 | ) | | -2.3 | % |
Curtiss-Wright Corporation, Page 7
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
| | | Three Months Ended |
| | | March 31, |
| | | | | | | | | | | % |
| | | 2007 | | | 2006 | | | Change |
| Sales: | | | | | | | | | | |
| Flow Control | | $ | 137,693 | | | $ | 121,167 | | | 13.6% |
| Motion Control | | | 131,257 | | | | 107,746 | | | 21.8% |
| Metal Treatment | | | 63,659 | | | | 53,639 | | | 18.7% |
| |
| Total Sales | | $ | 332,609 | | | $ | 282,552 | | | 17.7% |
| |
| Operating Income: | | | | | | | | | | |
| Flow Control | | $ | 9,980 | | | $ | 10,866 | | | -8.2% |
| Motion Control | | | 13,061 | | | | 5,055 | | | 158.4% |
| Metal Treatment | | | 12,970 | | | | 9,580 | | | 35.4% |
| |
| Total Segments | | $ | 36,011 | | | $ | 25,501 | | | 41.2% |
| Corporate & Other | | | (869 | ) | | | (882 | ) | | -1.5% |
| | | | | | | | | | | |
| Total Operating Income | | | 35,142 | | | | 24,619 | | | 42.7% |
| |
| |
| Operating Margins: | | | | | | | | | | |
| Flow Control | | | 7.2% | | | | 9.0% | | | |
| Motion Control | | | 10.0% | | | | 4.7% | | | |
| Metal Treatment | | | 20.4% | | | | 17.9% | | | �� |
| Total Curtiss-Wright | | | 10.6% | | | | 8.7% | | | |
Curtiss-Wright Corporation, Page 8
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
(In thousands)
| | | Three Months Ended | |
| | | March 31, | |
| | | 2007 | | 2006 | |
| Net Cash Used by Operating | | $ | (7,698 | ) | | $ | (34,235 | ) |
| Activities | | | | | | | | |
| | | | | | | | | |
| Capital Expenditures | | | (12,069 | ) | | | (7,686 | ) |
| | | | | | | | | |
| Free Cash Flow(1) | | | (19,767 | ) | | | (41,921 | ) |
| | | | | | | | | |
| Cash Conversion(1) | | | -101% | | | | -341% | |
(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.
Curtiss-Wright Corporation, Page 9
About Curtiss-Wright
Curtiss-Wright Corporation is a diversified company headquartered in Roseland, 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 6,300 people. More information on Curtiss-Wright can be found atwww.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, 2006 and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information is available atwww.curtisswright.com.
| Contact: | | Alexandra M. Deignan |
| | | (973)597-4734 |
| | | adeignan@curtisswright.com |
