“We are pleased to report our tenth consecutive year of revenue growth along with higher operating income and earnings in 2005,” commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. “We also experienced strong overall organic operating income growth, led by our Metal Treatment segment at 21%, followed by the Motion Control and Flow Control segments which grew 15% and 10%, respectively, in 2005. Our diversification strategy has provided growth in 2005 for both our defense markets, which grew 19%, and commercial and industrial markets, which grew 17%, over the prior year period. Our backlog is at a new record level, which provides us with good momentum heading into 2006. Over the last five years, Curtiss-Wright has delivered a compounded annual growth rates of 28% in sales, 17% in operating income, and 11% in earnings per share. During this same time, our total shareholder return was 20%, which has outperformed the broad market indices and was one of the top performances in the aerospace and defense industry. Achievement of these results during a time in which we acquired over 30 businesses is a strong indication of our ability to integrate acquisitions quickly and profitably.”
Curtiss-Wright Corporation, Page 3
Sales
Sales growth in 2005 for the fourth quarter and full year as compared to 2004 was driven by organic growth in most of our base businesses and by contributions from acquisitions. Overall organic growth was 8% for both the quarter and full year ended December 31, 2005 over the prior year periods. The organic sales growth in the fourth quarter of 2005 was spread equally across all of our segments, with Flow Control at 8% and Metal Treatment and Motion Control both at 7%. Acquisitions made in 2004 and 2005 contributed $15.8 million and $100.5 million in incremental sales for the quarter and full year ended December 31, 2005, respectively, over the comparable periods in 2004.
In our base businesses, higher sales from our Flow Control segment to the oil and gas and U.S. Navy markets, higher sales from our Motion Control segment to the global ground defense, aerospace defense, and global commercial aerospace markets, and higher sales from our Metal Treatment segment of global shot peening services, all contributed to the organic growth. In addition, foreign currency translation unfavorably impacted sales by $3.3 million for the quarter ended December 31, 2005 and favorably impacted sales by $1.2 million for the full year ended December 31, 2005, as compared to the prior year periods.
Operating Income
Operating income in 2005 for the fourth quarter and full year increased 31% and 25%, respectively, over the 2004 prior year periods. The increases were due to higher sales volumes, previously implemented cost control initiatives, and favorable sales mix. Overall, organic operating income growth was 30% and 21% for the quarter and full year ended December 31, 2005, respectively, compared to the prior year periods. The strong quarterly operating income performance was led by our Motion Control and Metal Treatment segments, which produced organic growth of 23% and 22%, respectively, while the Flow Control segment grew organically by 12%, as compared to the prior year period.
On a consolidated basis, our operating margin was 14.1% in the fourth quarter of 2005 versus 12.2% in the prior year. All segments posted operating margin improvement in the fourth quarter of 2005 versus the prior year, led by our Metal Treatment segment. Our full year consolidated operating margin was 12.2% for 2005, up considerably from 11.6% in 2004, however, we experienced favorable results in 2005 as compared to 2004 from lower environmental remediation costs of $4.5 million, a gain on the sale of property for $2.8 million, and lower costs associated with Sarbanes-Oxley Section 404 compliance. These favorable impacts were partially offset by increased pension expense and additional infrastructure costs incurred to support our business growth. The overall segment operating margins were flat year-over-year at 12.3%. In addition to the strong organic operating income growth in the segments, foreign currency translation unfavorably impacted operating income by $0.6 million for the quarter ended December 31, 2005 and favorably impacted operating income by $0.2 million for the full year ended December 31, 2005, compared to the prior year periods.
Curtiss-Wright Corporation, Page 4
Net Earnings
Net earnings increased 24% and 16% for the quarter and full year ended December 31, 2005, respectively, over the comparable prior year periods. This improvement was achieved by strong operating income from our business segments, which increased $7.7 million and $22.0 million for the quarter and full year ended December 31, 2005, respectively, over the prior year periods.
These improvements were offset by higher interest expense associated with the debt incurred to fund our acquisition program and from higher interest rates. Net earnings for 2004 included nonrecurring tax benefits totaling $3.4 million.
Segment Performance
Flow Control – Sales for the fourth quarter of 2005 were $130.7 million, up 10% over the comparable period last year, principally due to solid organic growth of 8% in the base businesses, and contribution from the fourth quarter 2004 acquisition. The improvement in sales was mainly due to higher sales to the oil and gas market, led by the higher demand for our coker valve products. Higher sales of electronic products, such as the digital signal processing cards used on Naval ships, and JP-5 valve and ball valve products used on aircraft carriers and submarines, respectively, also contributed to the organic growth in 2005. Foreign currency translation had minimal impact on sales in the fourth quarter of 2005 as compared to the prior year period.
Operating income for this segment increased 13% in the fourth quarter of 2005 compared to the prior year period. The improvement was due to strong organic growth of 12%, lead by higher sales volume and favorable sales mix of our oil and gas products, higher volume of our U.S. Navy products, and previously implemented cost reduction initiatives.
Motion Control – Sales for the fourth quarter of 2005 of $137.3 million increased 18% over last year, principally due to the contribution from the 2005 acquisition, which contributed $12.9 million of incremental sales in the fourth quarter of 2005. Sales from the base businesses increased 7% in the fourth quarter of 2005 as compared to the prior year period. This organic growth was due to higher electronic sales to the global ground defense market, led by higher sales of spares for the Bradley Fighting Vehicle and higher drive systems spares to the European defense market. New orders for the AN-APR 39 Radar Warning System and production work on the F-22 drove sales increases in our defense aerospace market. Higher commercial aerospace aftermarket sales from our repair and overhaul and integrated sensors businesses also contributed to the organic growth. In addition, foreign currency translation unfavorably impacted sales of this business segment by $2.1 million in the fourth quarter of 2005 as compared to the prior year period.
Operating income for this segment increased 25% for the fourth quarter of 2005 compared to the prior year period. The improvement was driven by higher sales volume previously mentioned, favorable sales mix within our European drive system business, and previously implemented cost control initiatives.
Curtiss-Wright Corporation, Page 5
Metal Treatment – Sales for the fourth quarter of 2005 of $49.9 million were 7% higher than the comparable period last year. The improvement, all of which was organic, was driven by higher global shot peening revenues due mainly to production work on wing skin components to the commercial aerospace market. This segment also experienced organic growth in the coatings and heat treating businesses due to improved economic conditions. Foreign currency translation unfavorably impacted sales by $1.2 million in the fourth quarter of 2005 as compared to the prior year period.
Operating income increased 22% for the fourth quarter of 2005 as compared to the prior year period. Operating income improved due to increased sales volume in our shot peening division, favorable sales mix in our coatings division, and general administrative cost reduction programs. Foreign currency translation negatively impacted operating income for the fourth quarter of 2005 as compared to the prior year period.
2006 Management Guidance
For the full year 2006, management expects to achieve total revenues to be in the range of $1.225 billion and $1.250 billion, an increase of 8 to 10 percent over 2005. We anticipate operating income in the range of $155 million to $162 million, including $5 million of pension expense, which is a 12 to 17 percent increase over 2005. We are forecasting earnings per share on a pre-split basis between $3.60 and $3.80 per fully diluted share, or 5 to 10 percent EPS growth. Our EPS guidance assumes an average of 22.5 million shares outstanding. In addition, we are expecting free cash flow, defined as cash flow from operations less capital expenditures, to be between $65 million and $70 million in 2006.
Mr. Benante concluded, “In 2005, we continued to demonstrate our ability to generate long-term shareholder value by growing our sales and earnings. Over the past several years, our operating income has been growing faster than our sales while we executed a very active, yet disciplined, acquisition program. Our strong performance in 2005 once again demonstrates our ability to execute our strategy and achieve our financial targets. Our successful growth is the result of our diversification and ability to deliver the high performance, technologically advanced products for which Curtiss-Wright is world renowned. We continue to experience increasing 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 technology should continue to generate growth opportunities in each of our three business segments in 2006 and beyond.”
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The Company will host a conference call to discuss the 2005 results at 9:00 EST Friday, February 10, 2006. 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
December 31, | | Twelve Months Ended
December 31, | | Three Months
Change | | Twelve Months
Change | |
|---|
| 2005 | | 2004 | | 2005 | | 2004 | | $ | | % | | $ | | % | |
|---|
| Net sales | | | $ | 317,893 | | | $ | 281,104 | | | $ | 1,130,928 | | | $ | 955,039 | | | $ | 36,789 | | | | 13.09 | % | | $ | 175,889 | | | | 18.42 | % | |
| Cost of sales | | | | 206,964 | | | | 180,067 | | | | 740,416 | | | | 624,536 | | | | 26,897 | | | | 14.94 | % | | | 115,880 | | | | 18.55 | % | |
| Gross profit | | | | 110,929 | | | | 101,037 | | | | 390,512 | | | | 330,503 | | | | 9,892 | | | | 9.79 | % | | | 60,009 | | | | 18.16 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Research & development expenses | | | | 9,369 | | | | 9,416 | | | | 39,681 | | | | 33,825 | | | | (47 | ) | | | -0.50 | % | | | 5,856 | | | | 17.31 | % | |
| Selling expenses | | | | 18,054 | | | | 16,511 | | | | 69,687 | | | | 61,648 | | | | 1,543 | | | | 9.35 | % | | | 8,039 | | | | 13.04 | % | |
| General and administrative expenses | | | | 38,467 | | | | 35,199 | | | | 144,982 | | | | 118,270 | | | | 3,268 | | | | 9.28 | % | | | 26,712 | | | | 22.59 | % | |
Environmental remediation and
administrative expenses, net | | | | (26 | ) | | | 4,794 | | | | 818 | | | | 5,285 | | | | (4,820 | ) | | | -100.54 | % | | | (4,467 | ) | | | -84.52 | % | |
| Loss (Gain) on sale of real estate and fixed assets, net | | | | 189 | | | | 823 | | | | (2,638 | ) | | | 1,134 | | | | (634 | ) | | | -77.04 | % | | | (3,772 | ) | | | 332.63 | % | |
| |
| Operating income | | | | 44,876 | | | | 34,294 | | | | 137,982 | | | | 110,341 | | | | 10,582 | | | | 30.86 | % | | | 27,641 | | | | 25.05 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other income (expenses), net | | | | 720 | | | | 143 | | | | 299 | | | | 443 | | | | 577 | | | | 403.50 | % | | | (144 | ) | | | -32.51 | % | |
| Interest expense | | | | (5,990 | ) | | | (3,613 | ) | | | (19,983 | ) | | | (12,031 | ) | | | (2,377 | ) | | | 65.79 | % | | | (7,952 | ) | | | 66.10 | % | |
|
| Earnings before income taxes | | | | 39,606 | | | | 30,824 | | | | 118,298 | | | | 98,753 | | | | 8,782 | | | | 28.49 | % | | | 19,545 | | | | 19.79 | % | |
| Provision for income taxes | | | | 14,302 | | | | 10,411 | | | | 43,018 | | | | 33,687 | | | | 3,891 | | | | 37.37 | % | | | 9,331 | | | | 27.70 | % | |
|
| Net earnings | | | $ | 25,304 | | | $ | 20,413 | | | $ | 75,280 | | | $ | 65,066 | | | $ | 4,891 | | | | 23.96 | % | | $ | 10,214 | | | | 15.70 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | | $ | 1.16 | | | $ | 0.95 | | | $ | 3.48 | | | $ | 3.07 | | | | | | | | | | | | | | | | | | |
| Diluted earnings per share | | | $ | 1.15 | | | $ | 0.94 | | | $ | 3.44 | | | $ | 3.02 | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends per share | | | $ | 0.12 | | | $ | 0.09 | | | $ | 0.39 | | | $ | 0.36 | | | | | | | | | | | | | | | | | | |
|
| | | |
| Weighted average shares outstanding: | | |
| Basic | | | | 21,740 | | | | 21,418 | | | | 21,635 | | | | 21,196 | | | | | | | | | | | | | | | | | | |
| Diluted | | | | 21,996 | | | | 21,762 | | | | 21,914 | | | | 21,547 | | | | | | | | | | | | | | | | | | |
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)
| | | | December 31, | | | December 31, | | | Change |
| | 2005 | | | 2004 | | | $ | | % |
Assets | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 59,021 | | | | $ | 41,038 | | | | $ | 17,983 | | | | 43.8 | % |
Receivables, net | | | 244,689 | | | | | 214,084 | | | | | 30,605 | | | | 14.3 | % |
Inventories, net | | | 146,297 | | | | | 115,979 | | | | | 30,318 | | | | 26.1 | % |
Deferred income taxes | | | 28,844 | | | | | 25,693 | | | | | 3,151 | | | | 12.3 | % |
Other current assets | | | 11,615 | | | | | 12,460 | | | | | (845 | ) | | | -6.8 | % |
| | | | | | | | | | | | | | | | | | |
Total current assets | | | 490,466 | | | | | 409,254 | | | | | 81,212 | | | | 19.8 | % |
Property, plant, and equipment, net | | | 274,821 | | | | | 265,243 | | | | | 9,578 | | | | 3.6 | % |
Prepaid pension costs | | | 76,002 | | | | | 77,802 | | | | | (1,800 | ) | | | -2.3 | % |
Goodwill, net | | | 388,158 | | | | | 364,313 | | | | | 23,845 | | | | 6.5 | % |
Other intangible assets, net | | | 158,267 | | | | | 140,369 | | | | | 17,898 | | | | 12.8 | % |
Other assets | | | 12,571 | | | | | 21,459 | | | | | (8,888 | ) | | | -41.4 | % |
| | | | | | | | | | | | | | | | | | |
Total Assets | | $ | 1,400,285 | | | | $ | 1,278,440 | | | | $ | 121,845 | | | | 9.5 | % |
| | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | |
Short-term debt | | $ | 885 | | | | $ | 1,630 | | | | $ | (745 | ) | | | -45.7 | % |
Accounts payable | | | 80,460 | | | | | 65,364 | | | | | 15,096 | | | | 23.1 | % |
Accrued expenses | | | 74,252 | | | | | 63,413 | | | | | 10,839 | | | | 17.1 | % |
Income taxes payable | | | 22,855 | | | | | 13,895 | | | | | 8,960 | | | | 64.5 | % |
Other current liabilities | | | 43,051 | | | | | 52,793 | | | | | (9,742 | ) | | | -18.5 | % |
| | | | | | | | | | | | | | | | | | |
Total current liabilities | | | 221,503 | | | | | 197,095 | | | | | 24,408 | | | | 12.4 | % |
| | | | | | | | | | | | | | | | | | |
Long-term debt | | | 364,017 | | | | | 340,860 | | | | | 23,157 | | | | 6.8 | % |
Deferred income taxes | | | 53,570 | | | | | 40,043 | | | | | 13,527 | | | | 33.8 | % |
Accrued pension & other postretirement benefit costs | | | 74,999 | | | | | 80,612 | | | | | (5,613 | ) | | | -7.0 | % |
Long-term portion of environmental reserves | | | 22,645 | | | | | 23,356 | | | | | (711 | ) | | | -3.0 | % |
Other liabilities | | | 25,331 | | | | | 20,860 | | | | | 4,471 | | | | 21.4 | % |
| | | | | | | | | | | | | | | | | | |
Total Liabilities | | | 762,065 | | | | | 702,826 | | | | | 59,239 | | | | 8.4 | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Stockholders’ Equity | | | | | | | | | | | | | | | | | | |
Common stock, $1 par value | | | 25,493 | | | | | 16,646 | | | | | 8,847 | | | | 53.1 | % |
Class B common stock, $1 par value | | | — | | | | | 8,765 | | | | | (8,765 | ) | | | -100.0 | % |
Additional paid in capital | | | 59,806 | | | | | 55,885 | | | | | 3,921 | | | | 7.0 | % |
Retained earnings | | | 667,892 | | | | | 601,070 | | | | | 66,822 | | | | 11.1 | % |
Unearned portion of restricted stock | | | (12 | ) | | | | (34 | ) | | | | 22 | | | | -64.7 | % |
Accumulated other comprehensive income | | | 20,655 | | | | | 36,797 | | | | | (16,142 | ) | | | -43.9 | % |
| | | 773,834 | | | | | 719,129 | | | | | 54,705 | | | | 7.6 | % |
Less: cost of treasury stock | | | 135,614 | | | | | 143,515 | | | | | (7,901 | ) | | | -5.5 | % |
| | | | | | | | | | | | | | | | | | |
Total Stockholders’ Equity | | | 638,220 | | | | | 575,614 | | | | | 62,606 | | | | 10.9 | % |
| | | | | | | | | | | | | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 1,400,285 | | | | $ | 1,278,440 | | | | $ | 121,845 | | | | 9.5 | % |
Curtiss-Wright Corporation, Page 8
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
| | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, |
| | 2005 | | | | 2004 | | | | %
Change | | | 2005 | | | | 2004 | | | | %
Change |
Sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow Control | | $ | 130,683 | | | | $ | 118,335 | | | | 10.4 | % | | | $ | 466,546 | | | | $ | 388,139 | | | | 20.2 | % |
Motion Control | | | 137,271 | | | | | 115,927 | | | | 18.4 | % | | | | 465,451 | | | | | 388,576 | | | | 19.8 | % |
Metal Treatment | | | 49,939 | | | | | 46,842 | | | | 6.6 | % | | | | 198,931 | | | | | 178,324 | | | | 11.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Sales | | $ | 317,893 | | | | $ | 281,104 | | | | 13.1 | % | | | $ | 1,130,928 | | | | $ | 955,039 | | | | 18.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Income: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow Control | | $ | 17,604 | | | | $ | 15,521 | | | | 13.4 | % | | | $ | 54,509 | | | | $ | 44,451 | | | | 22.6 | % |
Motion Control | | | 20,154 | | | | | 16,162 | | | | 24.7 | % | | | | 50,485 | | | | | 44,893 | | | | 12.5 | % |
Metal Treatment | | | 8,923 | | | | | 7,290 | | | | 22.4 | % | | | | 34,470 | | | | | 28,111 | | | | 22.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segments | | | 46,681 | | | | | 38,973 | | | | 19.8 | % | | | | 139,464 | | | | | 117,455 | | | | 18.7 | % |
Corporate & Other | | | (1,805 | ) | | | | (4,679 | ) | | | -61.4 | % | | | | (1,482 | ) | | | | (7,114 | ) | | | -79.2 | % |
| | | | | | | | | | | | | | | | | | | | | |
Total Operating Income | | $ | 44,876 | | | | $ | 34,294 | | | | 30.9 | % | | | $ | 137,982 | | | | $ | 110,341 | | | | 25.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Margins: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow Control | | | 13.5 | % | | | | 13.1 | % | | | | | | | | 11.7 | % | | | | 11.5 | % | | | | |
Motion Control | | | 14.7 | % | | | | 13.9 | % | | | | | | | | 10.8 | % | | | | 11.6 | % | | | | |
Metal Treatment | | | 17.9 | % | | | | 15.6 | % | | | | | | | | 17.3 | % | | | | 15.8 | % | | | | |
Total Curtiss-Wright | | | 14.1 | % | | | | 12.2 | % | | | | | | | | 12.2 | % | | | | 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 6,000 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, annual revenue, net income, organic operating income growth, future business opportunities, and 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, 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 |
| | | |
