Sales in the fourth quarter of 2008 increased 2% as compared to the prior year period. Our base businesses were essentially flat with the comparable prior year period, while incremental sales, primarily from our 2008 acquisitions, contributed $12 million in the quarter. In our base businesses, higher sales to the power generation market were mostly offset by declines in the oil and gas, commercial aerospace, and the general industrial markets primarily related to the automotive industry, as compared to the prior year period. In addition, foreign currency translation negatively impacted fourth quarter sales by $13 million, compared to the prior year period.
Sales growth of 15% for the full year 2008 was driven by solid organic growth of 6% and incremental sales of $140 million from our 2007 and 2008 acquisitions, net of the 2008 divestiture of our commercial aerospace repair and overhaul facility. Our full year 2008 organic growth was the result of increases across all three segments led by our Flow Control segment, which grew organically by 9%, followed by our Motion Control and Metal Treatment segments, which experienced organic increases of 4% and 3%, respectively.
Operating income in the fourth quarter of 2008 was essentially flat with the fourth quarter of 2007. Our base businesses increased 1% in the fourth quarter of 2008 as strong organic growth in our Flow Control and Motion Control segments of 12% and 11%, respectively, were mostly offset by a decline in our Metal Treatment segment of 13%, as compared to the prior year period. The organic growth at our Flow Control segment was due to higher volumes and improved profitability on long-term contracts while our Motion Control segment benefited from favorable foreign currency translation, partially offset by lower volumes due to the Boeing strike and delays on the Boeing 787 and Eclipse programs. Our Metal Treatment segment had lower organic operating income due to unfavorable foreign currency translation. Our 2008 incremental operating income, primarily from the 2008 acquisitions, had minimal impact in the fourth quarter of 2008. In addition, foreign currency translation favorably impacted our results by $4 million or 150 basis points in the fourth quarter of 2008.
Curtiss-Wright Corporation, Page 3
Our segment operating margin improved 40 basis points in the fourth quarter of 2008, as compared to the prior year period. In the fourth quarter of 2008, our base businesses generated operating margin of 12.5% as compared to 12.2% in the prior year period.
For the full year 2008, operating income increased 11%, as compared to the prior year period. Overall organic operating income increased 9% driven primarily by our Flow Control segment, which experienced strong organic growth of 26% while our Motion Control and Metal Treatment segments experienced growth of 7% and 2%, respectively. In addition, our 2008 results benefited from $3 million of incremental operating income from our 2007 and 2008 acquisitions, net of the 2008 divestiture of our commercial aerospace repair and overhaul facility.
Our segment operating margin for the full year 2008 was flat as compared to the prior year period. Intangible asset amortization increased $8 million for the full year 2008 as compared to the prior year, mainly as a result of our 2007 and 2008 acquisitions. For the full year of 2008, our base businesses generated an operating margin of 11.6% as compared to 11.3% in the prior year period.
Non-segment operating expense increased during the fourth quarter and full year 2008, compared to the prior year periods primarily due to higher pension, medical, and legal costs, as well as higher foreign exchange losses, due primarily to a forward exchange transaction associated with the acquisition of VMetro.
Net Earnings
Net earnings for the fourth quarter of 2008 declined 9% from the comparable prior year period mainly due to a higher effective tax rate. Our higher effective tax rate of 35.0% in the fourth quarter of 2008, as compared to the prior year period of 28.4%, was due to tax benefits that were realized in the fourth quarter of 2007 resulting from tax law changes in Canada, the United Kingdom, and Germany.
Net earnings for the full year 2008 increased 6% over the comparable prior year period. This improvement was achieved by solid operating income growth, partially offset by higher interest expense and a higher effective tax rate in 2008 compared to 2007.
Cash Flow
Our free cash flow, defined as cash flow from operations less capital expenditures, was $72 million and $76 million for the fourth quarter and full year 2008, respectively, as compared to $74 million and $85 million for the fourth quarter and full year 2007, respectively. Net cash provided by operating activities in the fourth quarter and full year increased $12 million and $41 million, respectively, primarily as a result of improvements in working capital, specifically accounts receivable. Capital expenditures were $33 million and $104 million for the fourth quarter and full year 2008, an increase of $14 million and $49 million, respectively, as compared to the prior year periods. The majority of the increase was due to the facility expansion at Cheswick, PA for our AP1000 nuclear power program.
Curtiss-Wright Corporation, Page 4
Segment Performance
Flow Control – Sales for the fourth quarter of 2008 were $274 million, up 8% over the comparable prior year period due to strong organic growth. The organic sales increase was led by higher sales to the power generation market, driven by revenues for our AP1000 reactor coolant pumps for new power plants in China and the U.S. This increase was partially offset by a decline in our oil and gas market, which resulted from delays in new order placement for our coker systems and cat cracking units due to tightening credit markets and reduced demand for petroleum products in general. In addition, sales of this segment were negatively affected by foreign currency translation of $2 million in the fourth quarter of 2008, as compared to the prior year period.
Operating income for this segment increased 12% for the fourth quarter of 2008 as compared to the prior year period, all of which was organic. Organic operating margin improved to 14.2% for the fourth quarter of 2008, an increase of 60 basis points over the fourth quarter of 2007. The increase in organic operating income and operating margin was largely due to higher sales volumes as noted above, improved profitability on several long-term contracts, and reduced development costs primarily related to the AP1000 design. In addition, operating income of this segment was favorably affected by foreign currency translation of $1 million in the fourth quarter of 2008, as compared to the prior year period.
Motion Control – Sales for the fourth quarter of 2008 were $173 million, a decrease of 3%, as compared to the prior year period. Excluding the impact of the divestiture of our commercial aerospace overhaul and repair business earlier this year and the unfavorable effect of foreign currency translation of $6 million in the fourth quarter of 2008, sales increased 2%. This increase was due primarily to incremental sales from our 2008 acquisitions amounting to $16 million, partially offset by lower organic sales to our commercial aerospace market as a result of the Boeing strike and significant delays on the Boeing 787 and Eclipse programs.
Operating income for this segment increased 4% in the fourth quarter of 2008, as compared to the prior year period, driven by organic operating income growth of 11%, offset partially by incremental operating income of negative $1 million. Organic operating income and margin benefited from favorable foreign currency translation which increased operating income by $5 million in the fourth quarter of 2008, as compared to the prior year period. Excluding the favorable impact of foreign exchange translation, organic operating income and operating margin were lower as a result of the lower organic sales volumes noted above, higher bad debt expense due to the Eclipse bankruptcy, and increased costs associated with the cancellation of a contract.
Metal Treatment – Sales for the fourth quarter of 2008 were $61 million, a decrease of 6% as compared to the prior year period. Excluding the impact of the unfavorable effect of foreign currency translation of $5 million in the fourth quarter of 2008, sales increased 1%. The largest increase was in the commercial aerospace market driven by our shot peening and coatings services, partially offset by a decline in the general industrial market, primarily related to the automotive industry, due to lower sales in our North American shot peening business.
Operating income decreased 13% for the fourth quarter of 2008, as compared to the prior year period, primarily due to the unfavorable effect of foreign currency translation of $2 million. Excluding this impact, operating income and operating margin would have been flat with the comparable prior year period.
Curtiss-Wright Corporation, Page 5
Full Year 2009 Guidance
The Company is providing its full year 2009 financial guidance as follows:
| • | Total Sales | $1.890 - $1.930 billion |
| • | Operating Income | $210 - $217 million |
| • | Diluted Earnings Per Share | $2.48 - $2.58 |
| • | Effective Tax Rate | 36.0% |
| • | Diluted Shares Outstanding | 46.2 million |
| • | Free Cash Flow | $80 - $90 million |
Free cash flow is defined as cash flow from operations less capital expenditures and includes approximately $15 million for the final phase of our EMD facility expansion in Cheswick, PA.
Mr. Benante concluded, “In 2008, we successfully executed our strategy, generating long-term shareholder value as a result of our strong, profitable growth and balanced capital deployment. We experienced double digit growth in both sales and operating income and have made strategic acquisitions that we expect to provide growth in 2009 and beyond. Despite challenging global market conditions, we anticipate another year of growth in 2009 based upon our solid backlog, our key positions on long-term defense programs and the continuing demand for our advanced technologies, which provide significant life cycle benefits for our customers. The beginning of the year will be particularly challenging as our customers are resetting inventory levels which will shift new orders and existing backlog to later in the year. Our commercial power generation market remains strong and is still in the early stages of a renaissance. Since 2000, the beginning of the last economic downturn, we have continued to demonstrate our ability to produce organic growth while successfully reinvesting in both our technologies and select acquisitions in order to enhance our portfolio and market diversification while delivering superior value to our shareholders.”
Curtiss-Wright Corporation, Page 6
**********
The Company will host a conference call to discuss the 2008 results and 2009 guidance at 10:00 A.M. EDT Wednesday February 18, 2009. 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.
(Tables to Follow)
Curtiss-Wright Corporation, Page 7
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 |
| | | 2008 | | 2007 | | % | | 2008 | | 2007 | | % |
| |
| Net sales | | $ | 507,598 | | | $ | 497,671 | | | 2.0 | % | | $ | 1,830,140 | | | $ | 1,592,124 | | | 14.9 | % |
| Cost of sales | | | 332,393 | | | | 333,277 | | | (0.3 | %) | | | 1,211,441 | | | | 1,068,500 | | | 13.4 | % |
| Gross profit | | | 175,205 | | | | 164,394 | | | 6.6 | % | | | 618,699 | | | | 523,624 | | | 18.2 | % |
| |
| Research & development expenses | | | 12,807 | | | | 12,448 | | | 2.9 | % | | | 49,615 | | | | 47,929 | | | 3.5 | % |
| Selling expenses | | | 27,287 | | | | 25,737 | | | 6.0 | % | | | 107,308 | | | | 92,129 | | | 16.5 | % |
| General and administrative expenses | | | 74,518 | | | | 65,064 | | | 14.5 | % | | | 262,594 | | | | 204,382 | | | 28.5 | % |
| |
| Operating income | | | 60,593 | | | | 61,145 | | | (0.9 | %) | | | 199,182 | | | | 179,184 | | | 11.2 | % |
| |
| Other income, net | | | 516 | | | | 788 | | | (34.5 | %) | | | 1,585 | | | | 2,369 | | | (33.1 | %) |
| Interest expense | | | (7,675 | ) | | | (8,466 | ) | | (9.3 | %) | | | (29,045 | ) | | | (27,382 | ) | | 6.1 | % |
| |
| Earnings before income taxes | | | 53,434 | | | | 53,467 | | | (0.1 | %) | | | 171,722 | | | | 154,171 | | | 11.4 | % |
| Provision for income taxes | | | 18,723 | | | | 15,208 | | | 23.1 | % | | | 60,632 | | | | 49,843 | | | 21.6 | % |
| |
| Net earnings | | $ | 34,711 | | | $ | 38,259 | | | (9.3 | %) | | $ | 111,090 | | | $ | 104,328 | | | 6.5 | % |
| |
| Basic earnings per share | | $ | 0.77 | | | $ | 0.86 | | | | | | $ | 2.48 | | | $ | 2.35 | | | | |
| Diluted earnings per share | | $ | 0.76 | | | $ | 0.85 | | | | | | $ | 2.45 | | | $ | 2.32 | | | | |
| |
| Dividends per share | | $ | 0.08 | | | $ | 0.08 | | | | | | $ | 0.32 | | | $ | 0.28 | | | | |
| |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 44,861 | | | | 44,470 | | | | | | | 44,716 | | | | 44,313 | | | | |
| Diluted | | | 45,403 | | | | 45,219 | | | | | | | 45,374 | | | | 44,979 | | | | |
Curtiss-Wright Corporation, Page 8
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
| | | December 31, | | December 31, | | Change |
| | | 2008 | | 2007 | | $ | | | % |
| Assets | | | | | | | | | | | | | | | |
| Current Assets: | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 60,705 | | | $ | 66,520 | | | $ | (5,815 | ) | | (8.7 | %) |
| Receivables, net | | | 395,659 | | | | 392,918 | | | | 2,741 | | | 0.7 | % |
| Inventories, net | | | 284,137 | | | | 241,728 | | | | 42,409 | | | 17.5 | % |
| Deferred income taxes | | | 36,391 | | | | 30,208 | | | | 6,183 | | | 20.5 | % |
| Other current assets | | | 26,833 | | | | 26,807 | | | | 26 | | | 0.1 | % |
| Total current assets | | | 803,725 | | | | 758,181 | | | | 45,544 | | | 6.0 | % |
| Property, plant, & equipment, net | | | 364,032 | | | | 329,657 | | | | 34,375 | | | 10.4 | % |
| Prepaid pension costs | | | - | | | | 73,947 | | | | (73,947 | ) | | (100.0 | %) |
| Goodwill, net | | | 608,898 | | | | 570,419 | | | | 38,479 | | | 6.7 | % |
| Other intangible assets, net | | | 234,596 | | | | 240,842 | | | | (6,246 | ) | | (2.6 | %) |
| Deferred income taxes | | | 23,128 | | | | - | | | | 23,128 | | | 100.0 | % |
| Other assets | | | 9,357 | | | | 12,514 | | | | (3,157 | ) | | (25.2 | %) |
| Total Assets | | $ | 2,043,736 | | | $ | 1,985,560 | | | $ | 58,176 | | | 2.9 | % |
| |
| Liabilities | | | | | | | | | | | | | | | |
| Current Liabilities: | | | | | | | | | | | | | | | |
| Short-term debt | | $ | 3,249 | | | $ | 923 | | | $ | 2,326 | | | 252.0 | % |
| Accounts payable | | | 140,954 | | | | 137,401 | | | | 3,553 | | | 2.6 | % |
| Accrued expenses | | | 103,973 | | | | 103,207 | | | | 766 | | | 0.7 | % |
| Income taxes payable | | | 8,213 | | | | 13,260 | | | | (5,047 | ) | | (38.1 | %) |
| Deferred revenue | | | 138,753 | | | | 105,421 | | | | 33,332 | | | 31.6 | % |
| Other current liabilities | | | 56,542 | | | | 38,403 | | | | 18,139 | | | 47.2 | % |
| Total current liabilities | | | 451,684 | | | | 398,615 | | | | 53,069 | | | 13.3 | % |
| Long-term debt | | | 513,460 | | | | 510,981 | | | | 2,479 | | | 0.5 | % |
| Deferred income taxes | | | 26,850 | | | | 62,416 | | | | (35,566 | ) | | (57.0 | %) |
| Accrued pension & other postretirement benefit costs | | | 125,762 | | | | 39,501 | | | | 86,261 | | | 218.4 | % |
| Long-term portion of environmental reserves | | | 20,377 | | | | 20,856 | | | | (479 | ) | | (2.3 | %) |
| Other liabilities | | | 37,135 | | | | 38,406 | | | | (1,271 | ) | | (3.3 | %) |
| Total Liabilities | | | 1,175,268 | | | | 1,070,775 | | | | 104,493 | | | 9.8 | % |
| |
| |
Stockholders' Equity | | | | | | | | | | | | | | | |
| Common stock, $1 par value | | | 47,903 | | | | 47,715 | | | | 188 | | | 0.4 | % |
| Additional paid in capital | | | 94,500 | | | | 79,550 | | | | 14,950 | | | 18.8 | % |
| Retained earnings | | | 901,628 | | | | 807,413 | | | | 94,215 | | | 11.7 | % |
| Accumulated other comprehensive income | | | (72,545 | ) | | | 93,327 | | | | (165,872 | ) | | (177.7 | %) |
| | | | 971,486 | | | | 1,028,005 | | | | (56,519 | ) | | (5.5 | %) |
| Less: cost of treasury stock | | | 103,018 | | | | 113,220 | | | | (10,202 | ) | | (9.0 | %) |
| |
| Total Stockholders' Equity | | | 868,468 | | | | 914,785 | | | | (46,317 | ) | | (5.1 | %) |
| |
| Total Liabilities and Stockholders' Equity | | $ | 2,043,736 | | | $ | 1,985,560 | | | $ | 58,176 | | | 2.9 | % |
Curtiss-Wright Corporation, Page 9
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION (UNAUDITED)
(In thousands)
| | | Three Months Ended | | Twelve Months Ended |
| | | December 31, | | December 31, |
| | | | | | | | | | | Change | | | | | | | | | | Change |
| | | 2008 | | 2007 | | % | | | 2008 | | | | 2007 | | | % |
| Sales: | | | | | | | | | | | | | | | | | | | | | | |
| Flow Control | | $ | 274,197 | | | $ | 254,551 | | | 7.7 | % | | $ | 928,052 | | | $ | 746,253 | | | 24.4 | % |
| Motion Control | | | 172,707 | | | | 178,302 | | | (3.1 | %) | | | 638,068 | | | | 591,032 | | | 8.0 | % |
| Metal Treatment | | | 60,694 | | | | 64,818 | | | (6.4 | %) | | | 264,020 | | | | 254,839 | | | 3.6 | % |
| |
| Total Sales | | $ | 507,598 | | | $ | 497,671 | | | 2.0 | % | | $ | 1,830,140 | | | $ | 1,592,124 | | | 14.9 | % |
| |
| Operating Income: | | | | | | | | | | | | | | | | | | | | | | |
| Flow Control | | $ | 38,807 | | | $ | 34,718 | | | 11.8 | % | | $ | 97,214 | | | $ | 73,476 | | | 32.3 | % |
| Motion Control | | | 22,096 | | | | 21,211 | | | 4.2 | % | | | 68,159 | | | | 64,837 | | | 5.1 | % |
| Metal Treatment | | | 10,706 | | | | 12,326 | | | (13.1 | %) | | | 52,142 | | | | 50,880 | | | 2.5 | % |
| |
| Total Segments | | | 71,609 | | | | 68,255 | | | 4.9 | % | | $ | 217,515 | | | | 189,193 | | | 15.0 | % |
| Corporate & Other | | | (11,016 | ) | | | (7,110 | ) | | 54.9 | % | | | (18,333 | ) | | | (10,009 | ) | | 83.2 | % |
| |
| Total Operating Income | | $ | 60,593 | | | $ | 61,145 | | | (0.9 | %) | | $ | 199,182 | | | $ | 179,184 | | | 11.2 | % |
| |
| |
| Operating Margins: | | | | | | | | | | | | | | | | | | | | | | |
| Flow Control | | | 14.2 | % | | | 13.6 | % | | | | | | 10.5 | % | | | 9.8 | % | | | |
| Motion Control | | | 12.8 | % | | | 11.9 | % | | | | | | 10.7 | % | | | 11.0 | % | | | |
| Metal Treatment | | | 17.6 | % | | | 19.0 | % | | | | | | 19.7 | % | | | 20.0 | % | | | |
| Total Curtiss-Wright | | | 11.9 | % | | | 12.3 | % | | | | | | 10.9 | % | | | 11.3 | % | | | |
| |
| Segment Margins | | | 14.1 | % | | | 13.7 | % | | | | | | 11.9 | % | | | 11.9 | % | | | |
Curtiss-Wright Corporation, Page 10
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
(In thousands)
| | | Three Months Ended | | Twelve Months Ended |
| | | December 31, | | December 31, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
| Net Cash Provided by | | $ | 105,039 | | | $ | 92,943 | | | $ | 179,814 | | | $ | 139,136 | |
| Operating Activities | | | | | | | | | | | | | | | | |
| Capital Expenditures | | | (33,146 | ) | | | (18,937 | ) | | | (103,657 | ) | | | (54,433 | ) |
| Free Cash Flow(1) | | $ | 71,893 | | | $ | 74,006 | | | $ | 76,157 | | | $ | 84,703 | |
| Cash Conversion(1) | | | 207 | % | | | 193 | % | | | 69 | % | | | 81 | % |
(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 11
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 8,000 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, 2007 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 |
