“We are pleased to report increased sales, operating income, and net earnings for the second quarter and first half of 2005,” commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. “Our new orders were strong for the first half of 2005 which provides us with good momentum for the second half of the year and into 2006. We experienced strong overall organic sales and operating income growth of 8% and 17%, respectively, in the first half of 2005. The strong organic sales growth was in the oil and gas, commercial aerospace, and power generation markets. Many of our military programs are progressing through the procurement cycle and we expect a ramp-up in the second half of the year. In addition, we continue to progress on several developmental contracts that generally produce lower margins than production contracts; however, these contracts should provide us future opportunities. We are continuing to integrate our acquisitions and experienced some integration costs; however, these integration efforts are beginning to produce reduced costs and improved profitability that is expected to continue throughout the remainder of the year.”
Curtiss-Wright Corporation, Page 3
periods. This organic sales growth was led by our Metal Treatment segment, which experienced strong organic growth of 13%, followed by our Motion Control and Flow Control segments at 8% and 5%, respectively, for the first six months of 2005.
In our base businesses, higher sales from our Metal Treatment segment of global shot peening services, higher sales from our Motion Control segment to the global commercial aerospace, general industrial, and military aerospace markets, and higher sales from our Flow Control segment to the oil and gas and commercial power generation markets, all contributed to the organic growth in the first six months of 2005. In addition, foreign currency translation favorably impacted sales by $2.1 million and $4.3 million for the three and six months ended June 30, 2005, compared to the prior year periods.
Operating Income
Operating income for the three and six months ended June 30, 2005 increased 31% and 20%, respectively, over the 2004 prior year periods. The increases were due to higher sales volumes, favorable sales mix, and previously implemented cost control initiatives. Overall, operating income organic growth was 24% and 17% for the three and six months ended June 30, 2005, respectively, compared to the prior year periods. All three operating segments experienced strong organic operating income growth, led by our Metal Treatment segment, which grew 23% and 17% for the three and six months ended June 30, 2005, respectively, over the prior year periods. Operating income for the six months ended June 30, 2005 includes a gain of $2.8 million related to the sale of non-operating property. The higher segment operating income was partially offset by higher pension expense from the Curtiss-Wright Plans of $0.5 million and $0.9 million for the three and six months ended June 30, 2005, respectively, over the comparable prior year periods. In addition, foreign currency translation favorably impacted operating income by $0.3 million and $0.7 million for the three and six months ended June 30, 2005, respectively, compared to the prior year periods.
Net Earnings
Net earnings increased 25% and 8% for the three and six months ended June 30, 2005, respectively, over the comparable prior year periods. The improvement was due to strong operating income from our business segments, which increased $8.5 million and $7.7 million for the three and six months ended June 30, 2005, respectively, over the prior year periods. Curtiss-Wright achieved strong growth in the oil and gas, shot peening, military aerospace, and commercial power generation markets. Higher interest expense, due to both higher debt levels and higher interest rates, lowered net earnings in the second quarter and first six months of 2005 by $1.1 million and $2.4 million, respectively.
Curtiss-Wright Corporation, Page 4
Segment Performance
Flow Control – Sales for the second quarter of 2005 were $114.3 million, up 33% over the comparable period last year due to solid organic growth and the contributions from the 2004 acquisitions. Sales from the base businesses increased 12% in the second quarter of 2005 as compared to the prior year period. The organic sales growth was primarily from higher sales to the oil and gas market, led by higher demand for the Coker valve products, and higher sales of valves to the U.S. Navy. The improvement was partially offset by lower sales of electromechanical pump products to the U.S. Navy due to the timing of customer driven delivery schedules. Sales of this business segment also benefited from favorable foreign currency translation of $0.5 million in the second quarter of 2005 compared to the prior year period.
Operating income for this segment increased 47% in the second quarter of 2005 compared to the prior year period. The improvement was due to the higher sales volume and favorable sales mix for our oil and gas products, previously implemented cost control initiatives, higher sales volume for our valve products to the U.S. Navy, and the contributions from the 2004 acquisitions.
Motion Control – Sales for the second quarter of 2005 of $117.9 million increased 29% over last year, principally due to solid organic growth and the contributions from the 2004 and 2005 acquisitions. Sales from the base businesses increased 14% in the second quarter of 2005 as compared to the prior year period. This organic sales growth was due primarily to higher sales of OEM and spares products and repair and overhaul services to the commercial aerospace market, higher sales of industrial sensor products, and higher sales of embedded computing products to the defense aerospace market, as compared to the prior year period. Partially offsetting these increases are lower sales of F-16 spares, and lower sales of tilting train systems in Europe due to expiration of this program in 2004. Sales of this business segment also benefited from favorable foreign currency translation of $1.0 million in the second quarter of 2005 as compared to the prior year period.
Operating income for this segment increased 27% for the second quarter of 2005 compared to the prior year period. The increase was driven primarily by higher sales volume mentioned above and previously implemented cost control initiatives. The improvement was partially offset by less favorable sales mix resulting from decreased higher margin sales, such as the F-16 spares and tilting train program, and higher development work which generate lower margins. In addition, this segment continued to experience some business consolidation costs in the embedded computing group; however, these integration efforts have begun to produce reduced costs and improved profitability which are expected to continue in the future.
Metal Treatment – Sales for the second quarter of 2005 of $51.0 million were 14% higher than the comparable period last year. The improvement, all of which was organic, was driven by higher global shot peening revenues from the aerospace and automotive markets. Favorable
Curtiss-Wright Corporation, Page 5
foreign currency translation positively impacted sales by $0.6 million in the second quarter of 2005 as compared to the prior year period.
Operating income increased 23% for the second quarter of 2005 as compared to the prior year period, primarily as a result of the higher sales volume. Favorable foreign currency translation also contributed to the increase in operating income.
2005 Management Guidance
We are increasing our 2005 full-year guidance to reflect improved market conditions and incorporate our 2005 acquisition. We expect revenues in the range of $1.10 billion to $1.15 billion, operating income in the range of $135 - $145 million, and earnings per share in the range of $3.30 to $3.50 per share. This guidance reflects our expectations of 15-20% growth in revenue and operating income, and 10–15% growth in EPS. EPS guidance is based on estimated fully diluted shares outstanding of 22 million shares for the full year 2005.
Mr. Benante concluded, “In 2005, we will once again demonstrate our ability to generate long-term shareholder value by growing our sales and earnings. Our historical performance demonstrates our ability to execute our strategy and achieve our financial targets. Our strong performance in the first half of 2005 continues this trend. We expect the second half of 2005 to be even stronger as many of our defense programs ramp up, our commercial markets continue to strengthen, and we realize the benefits of integration efforts. Our diversification strategy and emphasis on new technologies, many of which are only at the beginning of their life cycles, should continue to generate growth opportunities in each of our three business segments in 2005 and beyond.”
**********
The Company will host a conference call to discuss the second quarter 2005 results at 9:00 EST Friday, July 29, 2005. 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, Page 6
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
| Three Months Ended
June 30, | | Six Months Ended
June 30, | | Three Months
Change | | Six Months
Change | |
|---|
| 2005 | | 2004 | | 2005 | | 2004 | | $ | | % | | $ | | % | |
|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net sales | | | $ | 283,193 | | $ | 222,428 | | $ | 541,680 | | $ | 437,361 | | $ | 60,765 | | | 27.32 | % | $ | 104,319 | | | 23.85 | % |
| Cost of sales | | | | 182,894 | | | 146,406 | | | 355,612 | | | 289,744 | | | 36,488 | | | 24.92 | % | | 65,868 | | | 22.73 | % |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross profit | | | | 100,299 | | | 76,022 | | | 186,068 | | | 147,617 | | | 24,277 | | | 31.93 | % | | 38,451 | | | 26.05 | % |
| Research & development expenses | | | | 11,580 | | | 7,754 | | | 21,808 | | | 15,966 | | | 3,826 | | | 49.34 | % | | 5,842 | | | 36.59 | % |
| Selling expenses | | | | 17,971 | | | 14,743 | | | 34,895 | | | 27,347 | | | 3,228 | | | 21.90 | % | | 7,548 | | | 27.60 | % |
| General and administrative expenses | | | | 36,501 | | | 27,789 | | | 69,969 | | | 53,038 | | | 8,712 | | | 31.35 | % | | 16,931 | | | 31.92 | % |
| Environmental remediation and administrative | | |
| expenses, net | | | | 573 | | | 51 | | | 656 | | | 291 | | | 522 | | | 1023.53 | % | | 365 | | | 125.43 | % |
| Pension expense (income), net | | | | 500 | | | 42 | | | 1,000 | | | 82 | | | 458 | | | 1090.48 | % | | 918 | | | 1119.51 | % |
| (Gain) Loss on sale of real estate and fixed assets | | | | (12 | ) | | 230 | | | (2,925 | ) | | 317 | | | (242 | ) | | -105.22 | % | | (3,242 | ) | | 1022.71 | % |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating income | | | | 33,186 | | | 25,413 | | | 60,665 | | | 50,576 | | | 7,773 | | | 30.59 | % | | 10,089 | | | 19.95 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other income (expenses), net | | | | (576 | ) | | 523 | | | (700 | ) | | 121 | | | (1,099 | ) | | -210.13 | % | | (821 | ) | | -678.51 | % |
| Interest expense | | | | (4,778 | ) | | (3,018 | ) | | (9,081 | ) | | (5,283 | ) | | (1,760 | ) | | 58.32 | % | | (3,798 | ) | | 71.89 | % |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Earnings before income taxes | | | | 27,832 | | | 22,918 | | | 50,884 | | | 45,414 | | | 4,914 | | | 21.44 | % | | 5,470 | | | 12.04 | % |
| Provision for income taxes | | | | 9,898 | | | 8,594 | | | 18,427 | | | 15,481 | | | 1,304 | | | 15.17 | % | | 2,946 | | | 19.03 | % |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net earnings | | | $ | 17,934 | | $ | 14,324 | | $ | 32,457 | | $ | 29,933 | | $ | 3,610 | | | 25.20 | % | $ | 2,524 | | | 8.43 | % |
| |
| |
| |
| |
| |
| | | |
| | | |
| Basic earnings per share | | | $ | 0.83 | | $ | 0.68 | | $ | 1.51 | | $ | 1.42 | | | | | | | | | | | | | |
| |
| |
| |
| |
| | | | | | | | | |
| Diluted earnings per share | | | $ | 0.82 | | $ | 0.67 | | $ | 1.49 | | $ | 1.40 | | | | | | | | | | | | | |
| |
| |
| |
| |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends per share | | | $ | 0.09 | | $ | 0.09 | | $ | 0.18 | | $ | 0.18 | | | | | | | | | | | | | |
| |
| |
| |
| |
| | | | | | | | | |
| | | |
| Weighted average shares outstanding: | | |
| Basic | | | | 21,608 | | | 21,136 | | | 21,557 | | | 21,013 | | | | | | | | | | | | | |
| Diluted | | | | 21,888 | | | 21,460 | | | 21,844 | | | 21,330 | | | | | | | | | | | | | |
Certain prior year information has been reclassified to conform to current presentation.
Curtiss-Wright Corporation, Page 7
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
| | June 30, | | | December 31, | | | Change | |
|---|
| 2005 | 2004 | $ | | | % |
|---|
| Assets | | | | | | | | | | | | | | |
| Current Assets: | | |
| Cash and cash equivalents | | | $ | 47,983 | | $ | 41,038 | | $ | 6,945 | | | 16.9 | % |
| Receivables, net | | | | 243,138 | | | 214,084 | | | 29,054 | | | 13.6 | % |
| Inventories, net | | | | 137,370 | | | 115,979 | | | 21,391 | | | 18.4 | % |
| Deferred income taxes | | | | 26,123 | | | 25,693 | | | 430 | | | 1.7 | % |
| Other current assets | | | | 10,416 | | | 12,460 | | | (2,044 | ) | | -16.4 | % |
| |
| |
| |
| | | |
| Total current assets | | | | 465,030 | | | 409,254 | | | 55,776 | | | 13.6 | % |
| |
| |
| |
| | | |
| Property, plant, and equipment, net | | | | 267,619 | | | 265,243 | | | 2,376 | | | 0.9 | % |
| Prepaid pension costs | | | | 76,865 | | | 77,802 | | | (937 | ) | | -1.2 | % |
| Goodwill, net | | | | 388,132 | | | 364,313 | | | 23,819 | | | 6.5 | % |
| Other intangible assets, net | | | | 152,111 | | | 140,369 | | | 11,742 | | | 8.4 | % |
| Other assets | | | | 17,542 | | | 21,459 | | | (3,917 | ) | | -18.3 | % |
| |
| |
| |
| | | |
| Total Assets | | | $ | 1,367,299 | | $ | 1,278,440 | | $ | 88,859 | | | 7.0 | % |
| |
| |
| |
| | | |
| Liabilities | | |
| Current Liabilities: | | |
| Short-term debt | | | $ | 934 | | $ | 1,630 | | $ | (696 | ) | | -42.7 | % |
| Accounts payable | | | | 66,626 | | | 65,364 | | | 1,262 | | | 1.9 | % |
| Accrued expenses | | | | 62,054 | | | 63,413 | | | (1,359 | ) | | -2.1 | % |
| Income taxes payable | | | | 12,517 | | | 13,895 | | | (1,378 | ) | | -9.9 | % |
| Other current liabilities | | | | 49,818 | | | 52,793 | | | (2,975 | ) | | -5.6 | % |
| |
| |
| |
| | | |
| Total current liabilities | | | | 191,949 | | | 197,095 | | | (5,146 | ) | | -2.6 | % |
| | | | | | | | | | | | | | | |
| Long-term debt | | | | 402,561 | | | 340,860 | | | 61,701 | | | 18.1 | % |
| Deferred income taxes | | | | 48,317 | | | 40,043 | | | 8,274 | | | 20.7 | % |
| Accrued pension & other postretirement benefit costs | | | | 81,545 | | | 80,612 | | | 933 | | | 1.2 | % |
| Long-term portion of environmental reserves | | | | 24,282 | | | 23,356 | | | 926 | | | 4.0 | % |
| Other liabilities | | | | 23,267 | | | 20,860 | | | 2,407 | | | 11.5 | % |
| |
| |
| |
| | | |
| Total Liabilities | | | | 771,921 | | | 702,826 | | | 69,095 | | | 9.8 | % |
| |
| |
| |
| | | |
| | | |
| Stockholders' Equity | | |
| Common stock, $1 par value | | | | 25,447 | | | 16,646 | | | 8,801 | | | 52.9 | % |
| Class B common stock, $1 par value | | | | — | | | 8,765 | | | (8,765 | ) | | -100.0 | % |
| Capital surplus | | | | 57,360 | | | 55,885 | | | 1,475 | | | 2.6 | % |
| Retained earnings | | | | 629,636 | | | 601,070 | | | 28,566 | | | 4.8 | % |
| Unearned portion of restricted stock | | | | (23 | ) | | (34 | ) | | 11 | | | -32.4 | % |
| Accumulated other comprehensive income | | | | 21,311 | | | 36,797 | | | (15,486 | ) | | -42.1 | % |
| |
| |
| |
| | | |
| | | | | 733,731 | | | 719,129 | | | 14,602 | | | 2.0 | % |
| Less: cost of treasury stock | | | | 138,353 | | | 143,515 | | | (5,162 | ) | | -3.6 | % |
| |
| |
| |
| | | |
| | | | | | | | | | | | | | | |
| Total Stockholders' Equity | | | | 595,378 | | | 575,614 | | | 19,764 | | | 3.4 | % |
| |
| |
| |
| | | |
| | | | | | | | | | | | | | | |
| Total Liabilities and Stockholders' Equity | | | $ | 1,367,299 | | $ | 1,278,440 | | $ | 88,859 | | | 7.0 | % |
| |
| |
| |
| | | |
Curtiss-Wright Corporation, Page 8
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
| | | | | | |
|---|
| Three Months Ended
June 30, | | Six Months Ended
June 30, | |
|---|
| 2005 | | 2004 | | %
Change | | 2005 | | 2004 | | %
Change | |
|---|
| Sales: | | | | | | | | | | | | | | | | | | | | |
| Flow Control | | | $ | 114,324 | | $ | 86,205 | | | 32.6 | % | $ | 223,737 | | $ | 175,600 | | | 27.4 | % |
| Motion Control | | | | 117,854 | | | 91,578 | | | 28.7 | % | | 217,938 | | | 174,922 | | | 24.6 | % |
| Metal Treatment | | | | 51,015 | | | 44,645 | | | 14.3 | % | | 100,005 | | | 86,839 | | | 15.2 | % |
| |
| |
| | | |
| |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Sales | | | $ | 283,193 | | $ | 222,428 | | | 27.3 | % | $ | 541,680 | | $ | 437,361 | | | 23.9 | % |
| | | |
| Operating Income: | | |
| Flow Control | | | $ | 12,756 | | $ | 8,654 | | | 47.4 | % | $ | 23,105 | | $ | 19,085 | | | 21.1 | % |
| Motion Control | | | | 12,738 | | | 10,025 | | | 27.1 | % | | 19,128 | | | 18,314 | | | 4.4 | % |
| Metal Treatment | | | | 9,112 | | | 7,439 | | | 22.5 | % | | 16,929 | | | 14,016 | | | 20.8 | % |
| |
| |
| | | |
| |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Segments | | | | 34,606 | | | 26,118 | | | 32.5 | % | | 59,162 | | | 51,415 | | | 15.1 | % |
| Pension (Expense)/Income | | | | (500 | ) | | (42 | ) | | 1090.5 | % | | (1,000 | ) | | (82 | ) | | 1119.5 | % |
| Corporate & Other | | | | (920 | ) | | (663 | ) | | 38.8 | % | | 2,503 | | | (757 | ) | | -430.6 | % |
| |
| |
| | | |
| |
| | | |
| |
| |
| |
| |
| |
| |
| |
| Total Operating Income | | | $ | 33,186 | | $ | 25,413 | | | 30.6 | % | $ | 60,665 | | $ | 50,576 | | | 19.9 | % |
| |
| |
| |
| |
| |
| |
| |
| | | | | | | |
|---|
| Operating Margins: | | | | | | |
|---|
| Flow Control | | | | 11.2 | % | | 10.0 | % | | | | | 10.3 | % | | 10.9 | % | | | |
| Motion Control | | | | 10.8 | % | | 10.9 | % | | | | | 8.8 | % | | 10.5 | % | | | |
| Metal Treatment | | | | 17.9 | % | | 16.7 | % | | | | | 16.9 | % | | 16.1 | % | | | |
| Total Curtiss-Wright | | | | 11.7 | % | | 11.4 | % | | | | | 11.2 | % | | 11.6 | % | | | |
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 5,900 people. More information on Curtiss-Wright can be found at www.curtisswright.com.
###
Forward-looking statements in this release are made pursuant to the Safe Harbor provisions 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, 2004 and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information is available at www.curtisswright.com.
Contact: | Alexandra M. Deignan | |
| (973) 597-4734 | |
| adeignan@curtisswright.com |
| | | |
