Curtiss-Wright Corporation, Page 3
“We are pleased to report higher sales, operating income, and net earnings for the third quarter of 2006,” commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. “In the third quarter 2006 we experienced solid organic growth in sales of 12% and operating income of 14%. Our year-to-date results continue to be strong despite some unanticipated obstacles, such as unfavorable foreign currency translation and increased material costs. In addition, we incurred significant business integration costs related to our 2006 acquisition in our Flow Control segment. Our commercial markets continue to be strong in the third quarter of 2006 with 12% organic sales growth, driven primarily by the oil and gas market at 28% and the commercial aerospace market at 17%. Our new orders continue to be strong which will provide momentum for our fourth quarter and heading into 2007. In addition, we have a number of military and commercial development contracts and have recently introduced many new products that should provide significant future opportunities.”
Sales
Sales growth in the three months ended September 30, 2006 was driven by organic growth in our commercial businesses and contributions from our 2006 acquisitions. The base businesses generated overall organic growth of 12% for third quarter of 2006 as compared to the prior year period. Organic sales growth was strong in all three of our operating segments, with Motion Control at 14%, Flow Control at 11%, and Metal Treatment at 9%, as compared to the same period in the prior year. Acquisitions made since June 30, 2005 contributed $7.8 million in incremental sales for the third quarter of 2006, over the comparable prior year period.
In our base businesses, higher ground defense and commercial aerospace revenues from our Motion Control segment, higher sales to the oil and gas and commercial power markets from our Flow Control segment, and higher sales of global shot peening and heat treating services from our Metal Treatment segment, all contributed to the quarterly organic sales growth. In addition, foreign currency translation positively impacted sales by $3.1 million for three months ended September 30, 2006, as compared to the prior year period.
Operating Income
Operating income for the third quarter of 2006 increased 15% over the prior year period. Higher operating income in the third quarter of 2006 resulted from higher sales volume, a favorable sales mix, and cost control initiatives. Our consolidated operating margin for the third quarter of 2006 was essentially flat compared to the prior year period as improvements in the Motion Control and Metal Treatment segments were offset by lower operating margins in the Flow Control segment. The lower margins in our Flow Control segment were due to unfavorable sales mix, business integration costs, and higher material costs.
Overall organic operating income growth was 14% for the third quarter of 2006, led by our Motion Control segment at 37% and Metal Treatment segment at 20%. Operating income in the third quarter of 2006 was negatively impacted by $1.1 million of costs associated with the January 1, 2006 adoption of FAS 123R and higher pension expense of $0.8 million from the Curtiss-Wright pension plans. In addition, foreign currency translation adversely impacted operating income by $0.1 million in the third quarter 2006, as compared to the prior year period.
Curtiss-Wright Corporation, Page 4
Net Earnings
Net earnings increased 16% for the third quarter of 2006 over the comparable prior year period. Operating income from our business segments increased $6.2 million for the three months ended September 30, 2006, over the prior year period. Higher interest expense due to higher interest rates, partially offset by lower average outstanding debt levels, lowered net earnings in the third quarter of 2006 by $0.5 million over the prior year period.
Segment Performance
Flow Control – Sales for the third quarter of 2006 were $129.8 million, up 16% over the comparable period last year due to solid organic growth and the contribution from the 2006 acquisition of Enpro Systems. Sales from the base businesses increased 11% in the third quarter of 2006 as compared to the prior year period. This organic sales growth was due to higher sales to the oil and gas market, led by increased demand for the coker valve products, as well as higher sales to the commercial power market due mainly to the timing of plant outages. Sales of this segment were favorably affected by foreign currency translation of $0.4 million in the third quarter of 2006 compared to the prior year period.
Operating income for this segment increased 2% in the third quarter of 2006 compared to the prior year period. The benefit of the higher sales volume was mostly offset by less favorable commercial power sales mix and higher material costs. In addition, this segment incurred business integration costs relative to our 2006 acquisition which should generate improved profitability beginning in 2007. Operating income of this segment was favorably affected by foreign currency translation of $0.1 million in the third quarter of 2006 compared to the prior year period.
Motion Control – Sales for the third quarter of 2006 of $125.6 million increased 14%, all organic, over the comparable period last year. This growth was due primarily to higher sales of embedded computing products to the ground defense market and increased sales of OEM and spares products and repair and overhaul services to the commercial aerospace market. This growth was partially offset by lower sales to the general industrial and defense aerospace markets. Sales of this segment were favorably affected by foreign currency translation of $1.7 million in the third quarter of 2006 compared to the prior year period.
Operating income for this segment increased 37% for the third quarter of 2006 compared to the prior year period. The operating income increase was primarily driven by higher sales volume, favorable sales mix within our embedded computing group, and increased efficiencies as a result of our business integration initiatives. In addition this segment experienced cost overruns on certain military contract work in the third quarter of 2005 that did not repeat in 2006. These improvements were partially offset by unfavorable foreign currency translation of $0.4 million and higher production start up costs relative to new programs.
Curtiss-Wright Corporation, Page 5
Metal Treatment – Sales for the third quarter of 2006 of $56.3 million were 15% higher than the comparable period last year. The improvement was mainly due to organic sales growth of 9% and the contribution from our 2006 acquisition of Allegheny Coatings. The organic sales growth was driven by higher global shot peening revenues in the aerospace and automotive markets along with strong demand in the heat treating business from the general industrial and automotive markets. Sales of this segment were favorably affected by foreign currency translation of $1.0 million in the third quarter of 2006 compared to the prior year period.
Operating income increased 21% for the third quarter of 2006 as compared to the prior year period, primarily as a result of the higher sales volume. Operating income of this segment was favorably affected by foreign currency translation of $0.2 million in the third quarter of 2006 compared to the prior year period.
Mr. Benante concluded, “In 2006, we continue to demonstrate our ability to generate long-term shareholder value by growing our sales and earnings. Our strong performance demonstrates our ability to execute our growth strategy while continuing to achieve our financial targets. We expect the fourth quarter of 2006 to benefit from the ramp up of our defense programs and the continued strength in our commercial markets, as well as additional benefits achieved from our integration and cost control efforts. Our diversification strategy, the successful integration of our acquisitions, and our continued emphasis on providing advanced new products and technologies 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 third quarter 2006 results at 11:00 EST Friday, October 27, 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
September 30, | | Nine Months Ended
September 30, | | Three Months
Change | | Nine Months
Change | |
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| 2006 | | 2005 | | 2006 | | 2005 | | | $ | | | % | | | $ | | | % | |
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| Net sales | | | $ | 311,801 | | $ | 271,355 | | $ | 903,988 | | $ | 813,035 | | $ | 40,446 | | | 14.91 | % | $ | 90,953 | | | 11.19 | % |
| Cost of sales | | | | 205,783 | | | 177,840 | | | 600,356 | | | 533,452 | | | 27,943 | | | 15.71 | % | | 66,904 | | | 12.54 | % |
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| Gross profit | | | | 106,018 | | | 93,515 | | | 303,632 | | | 279,583 | | | 12,503 | | | 13.37 | % | | 24,049 | | | 8.60 | % |
| Research & development expenses | | | | 7,227 | | | 8,504 | | | 28,531 | | | 30,312 | | | (1,277 | ) | | -15.02 | % | | (1,781 | ) | | -5.88 | % |
| Selling expenses | | | | 19,382 | | | 16,738 | | | 57,004 | | | 51,633 | | | 2,644 | | | 15.80 | % | | 5,371 | | | 10.40 | % |
| General and administrative expenses | | | | 41,936 | | | 35,546 | | | 122,720 | | | 106,515 | | | 6,390 | | | 17.98 | % | | 16,205 | | | 15.21 | % |
| Environmental remediation and administrative | | |
| expenses, net | | | | 273 | | | 188 | | | 362 | | | 844 | | | 85 | | | 45.21 | % | | (482 | ) | | -57.11 | % |
| (Gain) Loss on sale of real estate and fixed assets | | | | (51 | ) | | 98 | | | 68 | | | (2,827 | ) | | (149 | ) | | -152.04 | % | | 2,895 | | | 102.41 | % |
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| Operating income | | | | 37,251 | | | 32,441 | | | 94,947 | | | 93,106 | | | 4,810 | | | 14.83 | % | | 1,841 | | | 1.98 | % |
| Other (expensess) income, net | | | | (18 | ) | | 279 | | | 295 | | | (421 | ) | | (297 | ) | | -106.45 | % | | 716 | | | -170.07 | % |
| Interest expense | | | | (5,721 | ) | | (4,912 | ) | | (17,103 | ) | | (13,993 | ) | | (809 | ) | | 16.47 | % | | (3,110 | ) | | 22.23 | % |
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| Earnings before income taxes | | | | 31,512 | | | 27,808 | | | 78,139 | | | 78,692 | | | 3,704 | | | 13.32 | % | | (553 | ) | | -0.70 | % |
| Provision for income taxes | | | | 11,156 | | | 10,289 | | | 24,413 | | | 28,716 | | | 867 | | | 8.43 | % | | (4,303 | ) | | -14.98 | % |
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| Net earnings | | | $ | 20,356 | | $ | 17,519 | | $ | 53,726 | | $ | 49,976 | | $ | 2,837 | | | 16.19 | % | $ | 3,750 | | | 7.50 | % |
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| Basic earnings per share | | | $ | 0.46 | | $ | 0.40 | | $ | 1.23 | | $ | 1.16 | | | | | | | | | | | | | |
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| Diluted earnings per share | | | $ | 0.46 | | $ | 0.40 | | $ | 1.21 | | $ | 1.14 | | | | | | | | | | | | | |
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| Dividends per share | | | $ | 0.06 | | $ | 0.05 | | $ | 0.18 | | $ | 0.14 | | | | | | | | | | | | | |
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| Weighted average shares outstanding: | | |
| Basic | | | | 43,903 | | | 43,376 | | | 43,779 | | | 43,206 | | | | | | | | | | | | | |
| Diluted | | | | 44,338 | | | 43,946 | | | 44,254 | | | 43,780 | | | | | | | | | | | | | |
Certain prior year information has been reclassified to conform to current presentation.
Shares and per share amounts have been adjusted on a pro forma basis for the April 21, 2006 2-for-1 stock split.
Curtiss-Wright Corporation, Page 7
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
| September 30, | | December 31, | | | Change | |
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| | 2006 | | | 2005 | | | $ | | | % | |
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| Assets | | | | | | | | | | | | | | |
| Current Assets: | | |
| Cash and cash equivalents | | | $ | 47,377 | | $ | 59,021 | | $ | (11,644 | ) | | -19.7 | % |
| Receivables, net | | | | 280,705 | | | 244,689 | | | 36,016 | | | 14.7 | % |
| Inventories, net | | | | 178,983 | | | 146,297 | | | 32,686 | | | 22.3 | % |
| Deferred income taxes | | | | 21,268 | | | 28,844 | | | (7,576 | ) | | -26.3 | % |
| Other current assets | | | | 13,076 | | | 11,615 | | | 1,461 | | | 12.6 | % |
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| Total current assets | | | | 541,409 | | | 490,466 | | | 50,943 | | | 10.4 | % |
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| Property, plant, and equipment, net | | | | 290,080 | | | 274,821 | | | 15,259 | | | 5.6 | % |
| Prepaid pension costs | | | | 72,121 | | | 76,002 | | | (3,881 | ) | | -5.1 | % |
| Goodwill, net | | | | 414,286 | | | 388,158 | | | 26,128 | | | 6.7 | % |
| Other intangible assets, net | | | | 157,194 | | | 158,267 | | | (1,073 | ) | | -0.7 | % |
| Other assets | | | | 12,110 | | | 12,571 | | | (461 | ) | | -3.7 | % |
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| Total Assets | | | $ | 1,487,200 | | $ | 1,400,285 | | $ | 86,915 | | | 6.2 | % |
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| Liabilities | | | | | | | | | | | | | | |
| Current Liabilities: | | | | | | | | | | | | | | |
| Short-term debt | | | $ | 5,941 | | $ | 885 | | $ | 5,056 | | | 571.3 | % |
| Accounts payable | | | | 79,779 | | | 80,460 | | | (681 | ) | | -0.8 | % |
| Accrued expenses | | | | 68,800 | | | 74,252 | | | (5,452 | ) | | -7.3 | % |
| Income taxes payable | | | | 2,946 | | | 22,855 | | | (19,909 | ) | | -87.1 | % |
| Other current liabilities | | | | 55,758 | | | 43,051 | | | 12,707 | | | 29.5 | % |
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| Total current liabilities | | | | 213,224 | | | 221,503 | | | (8,279 | ) | | -3.7 | % |
| Long-term debt | | | | 385,004 | | | 364,017 | | | 20,987 | | | 5.8 | % |
| Deferred income taxes | | | | 51,512 | | | 53,570 | | | (2,058 | ) | | -3.8 | % |
| Accrued pension & other postretirement benefit costs | | | | 72,686 | | | 74,999 | | | (2,313 | ) | | -3.1 | % |
| Long-term portion of environmental reserves | | | | 21,477 | | | 22,645 | | | (1,168 | ) | | -5.2 | % |
| Other liabilities | | | | 28,294 | | | 25,331 | | | 2,963 | | | 11.7 | % |
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| Total Liabilities | | | | 772,197 | | | 762,065 | | | 10,132 | | | 1.3 | % |
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| Stockholders' Equity | | |
| Common stock, $1 par value | | | | 47,533 | | | 25,493 | | | 22,040 | | | 86.5 | % |
| Additional paid in capital | | | | 68,813 | | | 59,806 | | | 9,007 | | | 15.1 | % |
| Retained earnings | | | | 691,823 | | | 667,892 | | | 23,931 | | | 3.6 | % |
| Unearned portion of restricted stock | | | | (66 | ) | | (12 | ) | | (54 | ) | | 450.0 | % |
| Accumulated other comprehensive income | | | | 37,322 | | | 20,655 | | | 16,667 | | | 80.7 | % |
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| | | | | 845,425 | | | 773,834 | | | 71,591 | | | 9.3 | % |
| Less: cost of treasury stock | | | | 130,422 | | | 135,614 | | | (5,192 | ) | | -3.8 | % |
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| Total Stockholders' Equity | | | | 715,003 | | | 638,220 | | | 76,783 | | | 12.0 | % |
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| Total Liabilities and Stockholders' Equity | | | $ | 1,487,200 | | $ | 1,400,285 | | $ | 86,915 | | | 6.2 | % |
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Curtiss-Wright Corporation, Page 8
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
| Three Months Ended
September 30, | | Nine Months Ended
September 30, |
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| | | | 2006 | | 2005 | | %
Change | | 2006 | | 2005 | | %
Change | |
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| Sales: | | | | | | | | | | | | | | | | | | | | |
| Flow Control | | | $ | 129,819 | | $ | 112,126 | | 15.8 | % | $ | 380,277 | | $ | 335,863 | | | 13.2 | % |
| Motion Control | | | | 125,639 | | | 110,242 | | | 14.0 | % | | 356,496 | | | 328,180 | | | 8.6 | % |
| Metal Treatment | | | | 56,343 | | | 48,987 | | | 15.0 | % | | 167,215 | | | 148,992 | | | 12.2 | % |
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| Total Sales | | | $ | 311,801 | | $ | 271,355 | | | 14.9 | % | $ | 903,988 | | $ | 813,035 | | | 11.2 | % |
| Operating Income: | | | | | | | | | | | | | | | | | | | | |
| Flow Control | | | $ | 14,014 | | $ | 13,800 | | | 1.6 | % | $ | 36,901 | | $ | 36,905 | | | 0.0 | % |
| Motion Control | | | | 15,310 | | | 11,203 | | | 36.7 | % | | 33,436 | | | 30,331 | | | 10.2 | % |
| Metal Treatment | | | | 10,448 | | | 8,618 | | | 21.2 | % | | 31,630 | | | 25,547 | | | 23.8 | % |
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| Total Segments | | | | 39,772 | | | 33,621 | | | 18.3 | % | | 101,967 | | | 92,783 | | | 9.9 | % |
| Corporate & Other | | | | (2,521 | ) | | (1,180 | ) | | 113.6 | % | | (7,020 | ) | | 323 | | | -2273.4 | % |
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| Total Operating Income | | | $ | 37,251 | | $ | 32,441 | | | 14.8 | % | $ | 94,947 | | $ | 93,106 | | | 2.0 | % |
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| Operating Margins: | | | | | | | | | | | | | | | | | | | | |
| Flow Control | | | | 10.8 | % | | 12.3 | % | | | | | 9.7 | % | | 11.0 | % | | | |
| Motion Control | | | | 12.2 | % | | 10.2 | % | | | | | 9.4 | % | | 9.2 | % | | | |
| Metal Treatment | | | | 18.5 | % | | 17.6 | % | | | | | 18.9 | % | | 17.1 | % | | | |
| Total Curtiss-Wright | | | | 11.9 | % | | 12.0 | % | | | | | 10.5 | % | | 11.5 | % | | | |
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 at www.curtisswright.com.
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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, 2005 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 |
