CW - Earnings call transcript Q3 2017 | Curtiss-Wright Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to Curtiss-Wright Third Quarter 2017 Financial Results Conference Call. [Operator Instructions].

As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Jim Ryan, senior Director, Investor Relations. begin. may you Sir,

James Ryan

good Conference Welcome Call. and Quarter Curtiss-Wright's XXXX Earnings morning, you, to everyone. Third Thank

Glenn President Joining Dave and and Adams, on our our me the Chairman Chief call Executive Officer. Chief Financial and today are Tynan, Vice Officer;

and can being financial at this are Our public today's section on press performance. filings today's associated those release risks copy XXXX. statements are These certain our of not found Investor www.curtisswright.com. current as with projections of Relations Securities We available of for be detail our our and based are as call webcast, also website. are that future the management's defined Private in of uncertainties website as A the the well in statements replay Act with and Please expectations call will today discussion looking the statements Reform the company is presentation SEC. forward-looking of Litigation on download the through note, and forward include guarantees

acquisitions to the would effects foreign organic references Dave? certain measures and Dave of started. A And over of growth earnings will to today. noted. divestitures, to like currency exclude on otherwise call in call the available translation, note, is reconciliation unless and financial addition, turn Please any presentation. at the release non-GAAP the this be end discussed I In to get the things

David Adams

everyone. morning, Good Jim. Thanks,

last Q&A. updates as provide XXXX, produced quarterly thorough begin we our wrap I experienced by lower up well improved which tax agenda expectations, the of Beginning as well review our the achieved $X.XX organic. move key by growth sales the solid of with ahead first the growth and for strong and will sales X return performance, in in sales, continued. segments. third our operating third as profitability to on produced prepared to was with our to results, the EPS X% we robust I'll was will higher today, remarks income the Then our was quarter, momentum XX%, half a along for in quarter led quarter, financial XXXX rate. Similar followed of year before For highlights Curtiss-Wright we the which to guidance. each primarily Glenn, of who with quarter of of

performance this our this a ramp-up sales strong to of turned on to fantastic the XXX execution few Overall, minutes. appeared growth. and seen profitability organization. the strong in strength recent market sales a Defense the detail our points been most We challenged positive improved led market, basis APXXXX operating performance particular ago overall the across from very the several growth All margin the General in will TTC, acquisition, once from and end in strong completed in income markets as and reflects positive areas were XX%. have that was results corner. our saw group margin-improvement volume, as up continues solid Industrial were has and to contributed by initiatives sales This the these year by contribution margin operational drive impacts also again greater earlier year. a Glenn program TTC. to discuss driving of Operating Defense

conversion margin operating we income, We increased operating profitability $XX and full and higher strong for guidance expectations to on EPS double-digit our between XXXX We the sales for APXXXX XX% outlook program, achieve and year-to-date now sales, expect have EPS. growth year XX%. free of the solid XXX%. improved million generated of performance, flow cash on a also flow Based free approximately produced cash and

finish million. We and free new another We million a also strong range of $XXX $XX performance to forward raised year flow to million annual a cash solid our in $XXX XXXX. full to by guidance look

I'd performance a provide our third updates more to review thorough XXXX Glenn to Now, of quarter turn our to to with the over financial like call outlook. Glenn?

Glenn Tynan

submarines, embedded benefited of and primarily In Thank stabilization markets where our I test on customers. growth and supporting our all programs. higher solid computing TTC. to finally, increase on and XX% program, where Columbian development Defense, contribution results and equipment, results both quarter lower submarine systems we flight in third higher production higher review Virginia-class of you, Naval to F-XX due timing. begin were reflect Aerospace/Defense, good submarines, X% more the on Defense markets. UAV Starting the Defense of sales experienced the to our all drive organic from will demand our international markets. TTC's XX% to we achieved reflect Defense And than higher end In Dave, from in Ground sales with carriers market sales, products a sales as in in commercial well our markets, morning, a X% growth Overall, for revenues everyone. on offset we as program aircraft sales increase Class an revenues turret

higher X the completion. business, across by medical I which strong the begin in than China mobility. actuation by and market primarily on-highway, the XX% sales finally, of is and APXXXX General Power on driven the And under in benefited product In aerospace will was Aftermarket lower and commercial more we that from improved to international domestic for partially groups, Generation, Vehicle growth sensors demand where sales lower the Industrial revenues Domestic Nuclear continued commercial solid APXXXX equipment, In sales. off-highway products approaching offset notably all order, sales Industrial most XXXX business on of jets. Moving offset higher our Direct results order, supporting narrow-body revenues markets, we experienced reflect regional

led and to gas, addition, In Industrial sales Valves up oil sales MRO slightly chemical year-over-year in were the domestic and markets. by higher

up the This operating basis will performance. segment. Starting points to of reflects XX% as third XX.X%. margin was initiatives. well XXX Operating XXXX growth to margin our the income up the discuss improvement solid basis drivers XXX increased margin on with XX.X%. operating key of Next, benefit as while I segment, X% was In our Defense XX%, decreased margin the operating quarter Commercial/Industrial points income and of performance incremental higher sales

expected, a contributor Defense As quarter CW accretive to and both first beyond our margin which as half overall profitability solid the moved related we purchase margins, TTC segment impacted results. third to accounting, was dilution to

prior segment to an we sales However, versus on mix operating was unfavorable as organic Defense experienced products. embedded higher shift year, margin within in a basis, an organic flat essentially on leading the computing income sales lower our

to and was XX.X%. sales operating as China while profitability XX%, Aftermarket segment, by initiatives. costs increased costs. CW in In lower Power income margin basis This increased summary, operating revenues the to increased quarter and XX%. in FX higher the driven strong APXXXX higher Corporate overall third benefit ongoing margin-improvement the primarily order profitability quarter which were and improved the improvement performance in a pension as margin business led operating XXX point in Direct third due of basis income to Nuclear points XX%, Next lower to from our due well to XXX

overall in prior now aerospace, an These where with ongoing sales submarine changes in Defense. solid to end to items reflect Industrial We General expectation the We've Curtiss-Wright slightly grow of grow to commercial prior now of our X%, Virginia-class expect we've for business. we in sales shown improvement increased and market full beginning as Next several due this expect to commercial XXXX now X% on our X%, slide. to markets performance sharp to prior year-over-year. In in Vehicles between the performance blue from sales updated guidance Industrial our revenues guidance, the market between improvement our to well outlook and solid following be guidance sales XX%, also the the quarter on raised X% or guidance year Naval for sales expected grow up our growth based range X% between outlook X% from market and X% up X% In improved strong Ground X%. X% as from Defense X%. our sales a performance overall to third third the of as an in are to Defense markets, quarter our the

between our Continuing we to are sales, the find total sales guidance As prior XXXX to improvement in operating segment, be our previous from on appendix the while our XX.X%. segment based of a sales to expected margin operating for X%, flat X% now end Commercial/Industrial year X%, to expect margin XX.X% result, X% finally, income increased guidance you at increases raising the now in reflect XXXX market the sales to remains by X% grow guidance market the chart. to sales this And and with up to presentation, this guidance, outlook, the EPS. operating from improvement million waterfall commercial an segment higher volume, with We've X%. in X%. our of to our we end and up guidance guidance operating an in $X.X will increase full addition to Starting aforementioned to income, are the also

in we expect Defense end and on below margin expect as previous declines XX% line guidance as remains within we to up based the X%, anticipated the sales. X% Power expect the the our prior year Aftermarket sales to from forward in market increases the to the now improvement And continue Power quarter we XX.X%. guidance, operating look unchanged, or up X%. quarter, be of sales to XX% segment we to in to Nuclear XX.X% flat to over an growth and be Next, to segment, of Virginia-class third guidance with fourth submarine In this segment sales segment, to both due

to operating on income XX.X% and China we've this XX based APXXXX the addition, reflecting our on direct guidance point improved over our profitability improvement our by a operating XX.X%, in range basis million segment margin $X.X quarter, previous increased In expectation guidance. to for guidance new the

to in basis XX As points basis operating point and expected improvement new million to total to This accepted to these XX.X%. margin operating income of guidance. to XX X% prior is of to $X a a while increase operating is Curtiss-Wright the of income guidance XX.X% margin reflects grow now grow compared in updates, XX X%, to a a result range all now

TTC, have operating XX% well improvement XX%. by driven tax of new $X.XX guidance growth all margin changes, effective increased range on double-digit as XXXX. earnings represents strong been for accounted to by of per CW overall point aforementioned which EPS a $X.XX, the increase XX This would a to a to organic Based over which on Excluding XX.X%, a the diluted was change share we've operational rate. $X.XX $X.XX performance, lower of as basis

tax prior free be $X.XX, XX.X%. And of XX.X% the the we compared benefit of flow. guidance next, now recognized third rate the in our tax expect full result the a year quarter As to of to cash

XXX%. approximately was Third quarter flow free cash $XX flow of cash generating free million, conversion

expectations lower ranging million our excepted of result higher free for year a cash and flow cash an range of conversion flow free guidance with net from are full we to capital, new raising As our to $XXX a XXX% XXX%. earnings working $XXX to million

Now prepared I'd to turn over Dave to the call back remarks. to Dave? conclude our like

David Adams

Glenn. Thanks,

provide Q&A, I to on up -- and the I program. on move wanted brief wrap APXXXX Before remarks we to brief few a

with status and the shipment expectations startup views the impact Our the X the the bankruptcy, status of the quarter. Westinghouse our RCPs last in in line of regard of China of with remained the plants to from domestic

should and successful APXXXX commercial China operation coolant expect Chinese X the plants additional of APXXXX to door continue Curtiss-Wright pumps. new for plants reactor that in the the interest We open

the still U.K. opportunities lie China, with future and India biggest Our

Now we're XXXX. performing deliver from results enterprise in solid perspective, an Curtiss-Wright to and well, positioned is

This EPS of Commercial heels our drive expected year organic quarter ongoing the outlook guidance, increased solid and Defense TTC solid sales and margin-improvement performance along are full initiatives and both year. to with and the margin double-digit expansion improved expect third markets growth the sales from contributions On operating this strong in we our growth.

long-term continuing our to to next Aftermarket stockholders. in This sales, anticipated in the optimism time, solid margin results to rebound the year, our on increased EPS steady up and from for I revenues. look At conference us growth call our Industrial benefit and to strategy questions. ahead expect provides deliver today's open along financial in and look operating businesses, We Nuclear this generating improvements and would we we solid like Defense for for XXXX. forward income, with with APXXXX As continued in

Operator

Instructions]. [Operator

Myles question first from Our Walton Deutsche with Bank. comes

Louis Raffetto

Guys, you've here. Louis again got

maybe or higher flow guidance year this year. benefit still million cash for the is $XX a at the just $XX you to capital So it being number Are looking million now? range million $XX working given next

Glenn Tynan

that different probably because It's gave operating $XX when you we were from million number. we a Yes. base

Louis Raffetto

Okay.

good. Sounds

sales, obviously, this another expect TTC anything that Just anomalous ramp-up. of see ramp year And ramp you for sure. big is wanted type or impressive guidance is and make future in XQ to sort years? then of Is to your implied pretty

Glenn Tynan

follow does as And first half which they're it relatively our and their fourth quarter. segment a same -- quarter loaded. being TTC to Well, Defense low very relatively definitely today, X similar highest the the -- HX quarter and exists is

is on, so path our them, but really the year we expect as go have our would I this to first Defense following so forward. much somewhat be to same history So with going segment, they are it similar don't

Louis Raffetto

All right. Great. you. Thank

quick last one Just one.

Just making this sure right. I have

overall were up correct? Is that were and in they revenues but down sub in Virginia-class down, So Power Commercial.

David Adams

in valves Power are different segment. products. two the the It's The pumps Yes. and in are segment Commercial/Industrial

So yes, right. it you got

Operator

next Michael Our comes question with SunTrust. from Ciarmoli

Michael Ciarmoli

mean, we be as and today, a momentum the only a higher your all I headwind year? feel little would markets like which time, probably you into all lot here down could I look can't in give But end of they're see the in market do as I here into as bit next quite wind model that happening maybe initial revenues. in think markets. next got more end year? the in APXXXX you've look is you going even incrementals. I mode direct Dave, end recall leverage you some certainly, of do to the confident And the probably mean, that, of I 'XX, in you sit look I mean, growth

David Adams

than oil a XX%. is call that my would symbol all are that Yes. I thing at only the paperwork, has positive. ones We've up the could like with side, have although right uptick is and things and down things is last we really we a and And been. in it, eventually. that I looks gas the it called that probably trough down we're hoping are It's been it say feel better not now, on to considerably, look when fairly -- nice been it, like looking

is in this So somewhat good trajectory it at and as that at point. anything with a side, trending positive seeing are we flat

So that very I positive. consider would

the markets just like the and now. history look period a wood sustain And don't we're end of but on good. so in light we in its for of because on it, to we'd other pretty time, see every we all knocking this can, recent right chance And see anything way,

So positive for looking yes, us. pretty it's

Michael Ciarmoli

other down? bit mean, is the Are one a out, only I there ramping still changes in the the any down I with mean, I domestic be any that little called whether see there other or or But of that headwinds? the kind But shifting nuclear, aware programs guys offset up. of? it's China which other that's just winding should model, trends are you any headwinds that we

David Adams

side No. it's again. Navy down, winding now The has but been picking up

with class down, wind 'XX a of picking got So in the Industrial We've up the across the see board end that we're there. up double-digit big one. that pick at and should gains

side, trucks and well. mentioned doing In midsize, The are our Power those it. you terms markets of large-class

that You domestic, coolant already existing ramping, called then and by China that's way down, but deal. the of on business the winding we is Direct it reactor offset sort have the pumps, direct China

So that would no, out I there any don't affect other see headwinds us.

Michael Ciarmoli

roll well, back But of just here. in TTC. I'll And the off that for a jump starting dilution, as from one last then Okay. in points basis point the queue and 'XX XX will

maybe, to mean, Is the next margin starting thinking year. think right technically we trajectory? or that, margin again, point about be I XX.X% so of So way should about, the a for

Glenn Tynan

points said XX.X%. Conservatively, 'XX, from yes, XX technically we right. basis it's so Well, you're like at be we'd

Operator

Godfrey with from George comes question King. CL next Our

George Godfrey

mentioned, you and time I then that China just up, plants each Dave, to activity countries please? And X pipeline plans on me go Can you those U.K., the going the of of on wanted follow just remind both live. could the the line qualitatively in India about talk when you of of live? the China, fully

David Adams

might Sanmen last of is Haiyang X given side regulatory administration the similar that loading was authorization. situation is And nuclear for NNSA, the go-live they a know on the has that it don't agency, as Sanmen given safety it heard, regulatory is, our first authorization The for we X the agency which given their know have Yes. Chinese fuel one, X. I fact. I on also. that do to

would So after commercial by that they on then latest advancing But that's on operation are full soon okay heels followed be Haiyang then then then after we of up along with presumably you operation to loading And passing -- it. we'll they to its to as their proceed. And X start Sanmen it and all. X. hear and as anything, the limited certainly

very So very for once and the safest we resumption as -- energy we been plus it's the generation world. believe III some that's nuclear in commences a us. see APXXXX, that the moving system and be will newest being We along, as that indicated to positive in directly the and that interest past, the with related strong energy we and fueling in anticipate, the produced, that

So of that We the accelerate orders pipeline a are booked. and think us. market some China/Asia, still that the construction And interest in and And, their energized relative pumps. discussion largest not remains to certain indigenously any design on And reactor and that India agent hopefully an past, reflective and turn own these course, some working do we already products is that. use that, of, reactor China construction of and XX the being Westinghouse obviously talked do the electricity, longer. pumps you XX maintenance they and side just gets that's to out ongoing the designated And understand first math so sites simple that India -- flow the that feeling technology, a as then been is of Westinghouse can will perspective you get we construct going indicated, coolant that we've with don't because we with terms by from for and will on where of it. into some have and then world in to We it orders is about APXXXX the in it heard be India of opportunities, start hopefully, of the production have that timeline -- they're I remain But the and companies. coolant would the side for they, pumps. like between the and need the again

So India remains there.

As that and type pumps would the as that the that being needed know. APXXXX they going APXXXX to it we're on. know, they lastly be we one. when of construction place on those the down. But put tremendous now reactor they're degree bankruptcy slowed who's in for side. it a expressed is don't And again, had coolant opportunity and they're, in that have us didn't It pumps of trying that. that to the takes still could don't in the Several site, on big reactor resolution have while Westinghouse to don't certainly, designated that's there occurs, be happen. that's the Mooreside, of it did, and the will been an We indeed, very the that That's worked interest still plants to positive we what help Westinghouse designated that matters, there. things know coolant do XX order U.K. it for Then be And construction. to with And kind figure plan X the out power country. in bankruptcy, XX to a with the

all that ongoing they this dialogue, at their point. reviewing know we so and in plans of And it's are

one that, happen optimistic got So side relative get of. term. But still you to again, near a that in that taken care construction we're could

George Godfrey

Understood. Thank you for that clarification.

that well? U.K., X India So those are China, Sanmen countries and Sanmen waiting as loading? not any independently they and X fuel of can those proceed watch in deals Or activity additional are fuel waiting that to for in

David Adams

those know, we There upon dependent tie That's dependent as far -- As that. to China, upon no and themselves. two no. China are is totally

Operator

[Operator Instructions].

Liwag Kristine Our next with question from of America. Bank comes

Kristine Liwag

to in incremental how If next year, Industrial grow we about business? think demand continues should your Commercial/Industrial margins

Glenn Tynan

margins the different don't guys determine multiple because the we really To business units level, down that, Well, and everybody X a Commercial/Industrial X to you really business in got go really level find Kristine. that below divisions, have segment, structures. we and divisions, cost at has have -- unit to they that incremental

but lot we So we've roll XX% we and level. a XX% -- haven't on we'll No, an get it really that down done it to haven't said but overall really done have work done Curtiss-Wright, we to of basis it's to up. for

So we basis. use XX% as

Kristine Liwag

there content I discuss business computing? are in helpful. one of UAV this how few seeing the on and shifts going in Defense That's gears, think your Defense may also maybe Great. was that from highlighted and industry? a your consolidating Can my recovery opportunities business, smaller you and in in more And be industry players. computing. switching wondering, challenges is Primes And a outsourcing I is from understanding, competitors much you your then you're embedded of embedded

David Adams

which talk the by than -- a it complementary in competitors. of that been TTC, the with and M&A which growth fits we and segments with that we And in I'll our are ours yes, forward discussions one strategy, we're niche doing. that's have see again, the we it path has needs they the what interesting, a continued so the And in years little different while likes macro and to of level continued and with their of see past. technologies consolidation we're in after like -- specific approaches are

and -- that's the with. they make factor perspective algorithms their the necessary than other the stand-alone primes primes those forth outsourcing much embedded seeing electronics that to beneficial They you competing focus it then then whereas, that otherwise we're than and differentiating are have they So and computing would on software from indicated, continues different It side, elements a don't and the have that and continues processing is our systems that so very to to and/or absolutely the it that boards really do. rigorous correct. develop those

there, we're towards the us solutions been eliminating as business So we sequestration seeing the going some point, that's real us. that's it, and And for that that's trending seeing pickup in many And defense very the I Defense to positively also we're for feel at years. move that opportunities mean continue. budget, lifeblood all with the of for

So is to generally looks positive huge to certainly speaking, for the notwithstanding it come Navy element that I towards. think, be it XXX-Ship of outlook a a years and the administration aiming is

Kristine Liwag

It's Great. color. for And lastly great maybe me.

You There's The Can ramp? Virginia-class also for meet even we that right? discussion you discussing possibly Navy per mentioned the investments opportunity of to think about the revenue? to procurement is the how and you? make Navy. class. U.S. an have the is of our Columbia you U.S. maintain higher per And Virginia-class X to as to much the X highly we there this And discussion year if increasing is timing submarines, these procure today, a year. lastly, of how discuss And of capacity should your build even

David Adams

we because mostly have so of have It And X. of Yes. We'd X what or lot would build area we be to a capacity. works things. these far I them looked that's whole a It when not and We've to customer content if probably test capital, be to because in it, the parallel. don't do. know, as to every know $XX loops, been to then the would our up certainly it in on asked tell going thrown X, test by some us. the But of beautiful we because buildup be probably don't at need you to times Virginia. they're in And recently to will timing, million would love as you'll going many as for

nicely amount be And So we the the build -- actually model so money. that very equipments. way from to it. actually do capacity from got the a perspective, then geography also it a and wouldn't manpower-loading footprint, fit that We've the plants would these in of huge

that's a that outlook if So something narrow carriers, content piece. current Ohio a then if from fantastic, it that that's on the we were X-year provide. to positive the turns $XXX on million million to build Class, they on is it the And of into $XX a X-year, down

on carrier. do you Virginias, math to So can it's a then Ohio It's whatever remains then just out you the for be the the and a determined. and to scenario year X-year the want play for so

So for love to it's happen. we'd pretty But yes, that straightforward us. see

Kristine Liwag

And just a for follow-up that Virgina content.

you're does X take that that year is years? up if take X period you So years, does providing full you program over that it multiyear time, you X year, the a or X divide per for RCPs -- build it to a of like

Glenn Tynan

primarily, will it basically, while never being but X bit over there year, X with probably go some tell multiyear a submarine, it's is The little hit XXX, XXX does rarely, second in likely, a one. or because we multiyear, we year in once namely, which most But hit year big really a year. you over this the usually hovers around

Operator

Michael follow-up And from question we Ciarmoli a have with SunTrust.

Michael Ciarmoli

I'm not or -- sure I for Dave, Glenn. if Dave think it's

sort think called APXXXX you orders were out, Direct China the updated Just you I think and Power Have about Order. the highly on profits priced seen the talking I margins, initially with with those guidance -- XX% the you margin that margins Or of sort putting range. operating versus actually up XX%? better expectation? upside seeing are initial the of you and in at Are still that guys

Glenn Tynan

in Day, clearly you Investor category. the back at starting with margin, we our as plus the XX% and If we came are remember plus out

cost, in included you XX%. we on -- as cost on risk can performing obviously, contract And we And estimates accounting, currently back above positive will margin is change, based Day, are your a the said if mitigate under margin also have your that margin. our the And risks, change. said obviously, again, the we as contingencies. impact POC I Investor So mean, estimated things all

contract. So nicely we we are And on progressing are XX%. that that performing above very

Operator

a And with Godfrey we follow-up have question from George CL King.

George Godfrey

Just Do any have by segments there, the Glenn, by you a orders bookkeeping chance? question.

David Adams

segment, by Yes. Orders

George Godfrey

Commercial.

Okay.

David Adams

is about XXX about Defense and Commercial/Industrial XXX. XXX, Power is about is

George Godfrey

it. Got

has the that softness X.XX. there makes the -- which quarter timing versus by issues stronger was X.XX revenue Okay. I'm book-to-bill part the And order detectable was book-to-bill, then my just prior any years? that, of or from the on sure, looking this challenging. Is fact at year this And of down math, flow the

David Adams

throughout the the out. increases. the highest, because for Not typically Defense at first -- our a when really that's this sales the us is by And mostly is just but pan were large quarter first generally, book-to-bill year orders then driven decreases orders, the works they X.XX, way typically quarter year, -- we on book-to-bill

in higher are sales in quarter. quarter the first lower fourth the Our and

And relationship of projecting at so this the we're the the be the inverse But it's like end by year. at an of X. between Xx to least day, end

Operator

At call back this Chairman Executive Mr. Adams, and to questions. no remarks. closing I like turn time, over Officer, further Chief for Dave to would I'm showing the

David Adams

joining with you Thanks for us everyone. look guys. today, day. again great Have And call. a speaking quarter our during thank Bye. you to fourth XXXX We earnings forward

Glenn Tynan

Bye-bye.

Operator

Ladies conclude your today's and for the gentlemen, program. Thank you participation This conference. in does

Everyone, You have may great now disconnect. day. a

Curtiss-Wright (CW) 27 Oct 172017 Q3 Earnings call transcript