CW - Earnings call transcript Q4 2018 | Curtiss-Wright Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Curtiss-Wright Fourth Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, today's conference is being recorded. to of call Investor like Ryan, to now Director Senior Relations. would turn over the Jim I Sir, please begin.

Jim Ryan

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

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

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

translation, presentation and the at company's are results to As currency Reconciliations the with current end effects divestitures, on release acquisition. references that earnings Also unless noted. year accounting of and acquisitions note costs the XXXX website. foreign of any year the reminder, including associated this this view adjusted for otherwise please prior and excludes available a in first our periods non-GAAP organic excluding purchase growth,

Now, to to get Dave I'd things call Dave? to over like started. the turn

David C. Adams

our a it Glenn Then guidance financials. year top with and China agenda XXXX APXXXX everyone. I journey to performance. of full achieving and updated XXXX to detailed and good will recap morning fourth our our Jim begin Thanks review a to turn of will highlights Direct provide over followed by quartile quarter I

Starting DRG business targets three up strategy. the profitable the margin, plans revenues. per led growth free share, generation The of return capital our capital and was with our in will earnings drive quarterly organic our allocation to we performance wrap cash of fourth to we our APXXXX topics higher for including update a And delivered that domestic prepared with quarter year Q&A. net market move for new operating sales several investment supporting on with will yet long-term diluted power strategic flow on solid double-digit nuclear to and adjusted by another ahead highlights, in I After after the market remarks lastly due Finally expectations. and discussion growth. establishment strong increase

generated increase our was results margin profitability in the of reflect line was This year's in adjusted Our XX% principally quarter. power $X.XX, the in performance while income from segment. adjusted adjusted also diluted the repayment driven very EPS tax We million the by of quarter cash the free increase conversion nearly a expense effective continued and interest $XXX strong by the lower of in of free -- flow a benefits XXX%. over year in lower repurchase share The in last essentially resulted strong acquisition and $XX debt million segment with contribution rate includes fourth operating prior resulting strong cash DRG power operating made driven flow activity. a in fourth

point by X% tax X% were sales driving repurchases EPS by XXX highest increases full and we were and XXbX-X our in organically. a XXXX. a than improvement diluted our defense continued Total acquisition. million performance up a opportunistic DRG lower the general up which throughout all XX% solid the sales year-over-year share experienced in growth the sales generated of markets $XXX XXXX profitability led overall sales drove up industrial Total highlights, commercial invested activity. overall including XX% X% of nearly level market. through effective Curtiss-Wright solid to Turning plans XX.X%, of in increase more We produced year to in basis adjusted We repurchase and The in XX combination rate included end margin operating a adjusted years.

principally orders New by led strong were demand up X% defense. enabled

full addition free reflects the next at flow of cash was drove XXXX our which upon In strong transformational adjusted under results a in conversion XXX%. embarked free cash This Curtiss-Wright of we $XXX solid adjusted one journey year chart million flow vision. the

we in an top Curtiss-Wright achieve five with aggressive familiar goal performance group. us of December quartile versus XXXX to year established those peer For of our

considering very years on exceeded to sales metric were slide. unwavering have of from top focus performance peer were Illustrated. of we five as we key I'm the Further and of for that to upon in original time pleased that group it's quartile Our indicators achieved report the growth. Due teams bottom any our to over the or benefit most execution the these metrics without mix past quartile At our all a reached metrics. listed every for were that targets note these set targets important of

line operational on metrics expansion. margin even and of years the stronger It critical quartile has enterprise expansion returns. accomplishments. growth our operating position and our with structure been an on performance of the the flow entire and starting driving past team's leaner We I'm combined the remain of margin has journey proud driven margin operating are one include we top solid top with the free very and of Two group. cash peer across exciting Over particularly two focused generation and operating leveraging maintaining that mass enhanced improvement, Curtiss-Wright our our proud

initiatives areas. these led pursue expansion each years For of we reach basis and and segment the upon across a strong over every shared cost points low focus past continued rationalization, portfolio one margin all than will to services, margin we consolidations, those of these focus. plan economies, to more has in out operational a XXX our five improvement relentlessly of who via ongoing team's and excellence, laid successes of expansion The recall, you

generation results tremendous. moving our been flow have free where Next cash to

five of free conversion XXX%. the free billion an more years generated Over past than flow with average adjusted cash flow in we've $X.X cash adjusted

generation by our strong sheet business, Our operational and cash of shareholders, as to us with free sales, efforts order, a focus has spending. the drive strong APXXXX allocation were capital returns balance combined percentage to here back a acquisitions. enabled healthy with significant on of Robust into flow working reduction our efficient the with ahead strategy, capital performance, XXXX led and strategic capital reinvestments

like Now turn to the Glenn over review outlook XXXX. provide for a call Glenn. I to financial of our would to

Glenn E. Tynan

and Dave good you everyone. morning Thank

the benefit higher sales an our growth of with including quarter overall we from growth markets. beginning sales tank in to on on defense driven Bradley XXXX and And to expect defense the is programs. expected trends where some end reflects sales our as X% to Apache This class previously come vehicle F-XX long In the defense our higher growth defense computing awaited markets X% all fighting overall defense led expect to the as be spending the from we guidance the revenues. Moving with for growth to naval be we aerospace in our Hawk, in system sales the favorable gains end products these CVN-XX mentioned year ownership. expect to ramp expect in sales submarine from of program expected market of monetization DRG on In benefit the sales from as by we and of supporting up programs. ramp aircraft sales higher Virginia that ground carrier additional we continued helicopter sales our better as XXXX third recognize our includes to and the the first sales quarter demand well Abrams full up In by call. also program growth on platforms Black growth on higher

demand and treatment supply a projected expect revenue to from core for on APXXXX with of commercial in previous aerospace be a modest FAA on OEM X%. Moving the agreement equipment, in from in the growth revenues directives we program. $XX a In platforms. to is guidance Otherwise growth benefit and Boeing. [indiscernible] is growth of that reduced generation services sales the Included continue from the signing a expected to offset down delay the increase commercial power combination new wind to actuation, supporting is surface primarily sensors million this markets, improved

solid finally of more presentation are in are few control be As international better a by from expected of represent expected single-digit end market. category principally the uncertainty. sales still to our well those market of you controls that the pumps peak revenues sales discussed partially expected Meanwhile are industrial market our downstream and end And a named off particularly will in And be slightly industrial will in to low following service which automotive XXXX in market by completed Industrial sales the sales. valves as tends see offset continue -- in XXXX sales to and year. waterfall appendix industrial to sales have XXXX be in to expecting industrial [ph] led mid to finally you down the of year demand sales our the sales be of higher market sales gas In growth minutes, the aftermarket higher shifted and in to are global market. updated find our and growth essentially in markets. the by we XXXX projection nuclear to sensitive, contracts sequential our tech are mid in as sales that for timing waterfall nuclear Please during expected improve into throughout general revenue this by charts sales aftermarket higher the in XXXX valves of single-digit pump detailed led full will program. economically for pumps category the breakdowns newly due subsea XXXX, market, to And sales oil pumps domestic lower to modestly energy chart. demonstrate services we we in valves our highway improvement the note within business expect flat industrial year economic be subsea agricultural last sales in vehicle

X%. financial to R&D increased to total increase and outlook solid our noted across for segment. by range to all includes from on results while starting and point with the expected a Curtiss-Wright adjusted XXXX is XX.X% Continue to expected is the other three growth industrial basis X% XX to and Our margin reflecting Operating segments guidance grow with with XX% slide. income as reflects XX operating segment investments growth XXXX commercial compared sales

our expect be aerospace growth general We end by markets. led and sales commercial both to industrial

expected range a will of operating to basis We XX.X% to to to margin improvement taken R&D. driven projecting in offsetting points XX.X%. including XXXX. by ongoing increase be that income of XX operating sales margin is while increase Partially a and higher X% grow benefit initiatives to restructuring segment income are is X% to XX Higher volume quarter of tariffs the $X and improvement $X the in fourth actions for million million operating

two to guidance these a segment point XXX XXXX increase results. Excluding basis XXX items would have margin reflected operating to compared

expect led aerospace defense growth partially sales offset to lower defense we defense ground to general Next segment, in be markets naval in and the improvements markets. the growth the by and industrial by

computing percentage higher operating to outlook X% better grow XX.X%. in products mix R&D is growth. well primarily continue tech XX.X% projecting sales income to to as to systems This support a while organic basis operating our segment expected are We higher margin XX million to a margin unfavorable increase drive range a will decrease to which X% of due to points $X and as reflects XX to of to lower

results. XX to the in naval next the led point power segment to defense XX reflected increased And segment by guidance compared revenues Excluding higher have sales the we to margin expect XXXX growth R&D basis to increase operating market. would a investments, be

X% increase higher segment to in XX% to relocation as basis IT DRG primarily is a range decline grow the XX.X%. of volume operating points Partially as margin sales the million XX cost We business offsetting that security income R&D. to in our $X are related $X to while for well transition projecting to of XX a improvement will to million X% expected to by operating driven be

adjusted these diluted X% guidance to results. reflected XXXX a Excluding adjusted margin range full from over would up XX financial $X.XX with year segment $X.XX XX basis we investments point our expect to XXXX operating results. XXXX X% to increase to with XXXX EPS guidance Continuing outlook, have compared

quarter have very year's first a earnings our where expect by to to quarter XXXX quarterly diluted We being followed should our sequential XXXX we per follow fourth done share as similar strongest first slightly improvement be the quarter our EPS historically. quarterly above performance with cadence last

to investment Next, flow range year of $XX of the our and the will fourth North million which The in capital to in includes to for rise we of $XX free cash flow DRG are few guidance new machinery expect CAPEX a Dave business more for capital $XX to a cash expected for million while expenditures million consecutive million. generate discuss XXXX detail free $XXX a for equipment minutes.

Excluding this adjusted cash from investment is be million we cash while free expect free $XXX to capital flow XXXX million XXX%. flow approximately $XXX range to expected adjusted to conversion

current some Next on were in the you updated from program Beginning APXXXX updates with segment. initial more reported revenue the October flow projections power the cash which in forecast revenue free and in the product the can and blue. forecast projections gray see XXXX

million production XX $XX a revenue a we to coolant reminder at generate As piece. total million in pumps reactor covering expect $XXX

profitability $XX revenue experience slightly APXXXX over to increased only is forecast to a a million operating will through XXXX to the XXXX. still margin. XX% generating this of in period healthy it from XXXX on production up and cost continue on also strong our reduces not lead and in original year-to-year Based program volatility but of compared We This expected projection. higher performance plus some pace revenue the current to XXXX peak profit favorable

to million As our investor been approximately we concerns, in compared of with now APXXXX revenue to in peak. higher by expected original $XXX manageable XXXX expect forefront ahead XX%. reduced projection much been million production We significantly $XX a from drop of has XXXX which look generate at revenue has only more we to drop the the XXXX of initially

of for much in the can over manageable few revenue next slide see As expectations you Based we're years. be more we in confident this increased this to will defense next APXXXX aircraft generate on that gap In cover revenues the with over remaining able higher revenues fighter compared expect the to we jet, revenue CVN-XX summary few. submarine, peaks carrier projections. higher years a and income contract name to original our operating both to and this

cash forecast in the Next in flow free the and again projections where initial new turning to our once forecast APXXXX updated blue. see can you gray

past years execution has expected with of better Our benefit led and by strong along than corporate a rate. performance over the the a been few tax profitability lower higher

above total cash $XX a now $XXX flow the this As also we free from of much cash much a and result off million expectations a expect prior levels flow of drop higher cumulative peak new in for well million the less forecast.

on up well So contract. execute to very wrap my to remarks the APXXXX we this continue on

be with to more and in XXXX We much becoming XXXX expect of and cash generation an of year strong less flow free gap manageable issue. revenue profitability another the

future the that from orders. reiterate Looking of the despite to and countries demand specific timing we India, solid not are I China, ahead speculate on other APXXXX going RCP

Now remarks. over our I to would the like back prepared to continue with call Dave. turn to Dave

David C. Adams

Thanks Glenn.

going Next integration an business well. which our update is on DRG the of quite

on finance and H.R. our into DRG ERP integrate track and systems planned. to continue as We and are

structure year This XXXX. in cost us conclusion state operational capabilities more agreement The naval new facility we the and To IP which and critical necessary this deliver have are position processes. supply our margin will expect to efficient grow investing of Accordingly Curtiss-Wright's property optimize and and our establishing nature production the continue we ground security long-term in of to we expansion. Siemens. to and broken timing $X investing intellectual are we support new in DRG's be infrastructure. growth us to a capital by the with sophisticated to Charleston, XXXX facility resources South improve million Given the technology on art and of Carolina with aligns enable two business

business. a are and and overdue provide very service naval million deepwater provide centers in we that South with addition a for steam turbine future defense capability proximity budgets our its naval critical for long to also along formidable will increasing bright to equipment on signal opportunities Carolina. our outlook capital Combining will enhancement naval This for defense based investing Curtiss-Wright's Curtiss-Wright's with end customers to new equipment force customer. mission upgrades In defense critical ports yields DRGs location saving $XX machinery equipment. existing new cost This capabilities

and proud by dividends, an been X.X we for million $XXX has debt strategy. and significant $XXX million following, voluntary reduced including that repurchases completed acquisitions million count investments shares, returned I'm on Since update XXXX CAPEX, contributions, we've pension to Next share we've on allocation million two nearly to share the $XXX shareholders spent through capital nearly our operational accomplished say and prepayments.

stated balanced felt on implemented to my to order operating Based when improve hiatus operational in recall you to earned self-imposed discussed we that acquisitions. in we If strong the we strategy, opening metrics the our we allocation to capital We earn as performance we in right again. again. remarks, upon revealed our needed our right a XXXX back acquire acquire

door a reopened the led us we DRG So additions. path TTC acquire excellent acquisitions and both to to down which

see capital are you slightly. our allocation this on amending can we strategy slide now As

We will internal We increase in line accelerating investments long-term CAPEX as increase acquisitions. it is our growth growth organic growth. critical top our that focus critical and remain now to prudent on and driving two to both areas investments believe via R&D moderately

Regarding and of is to business in a example long-term the million investments, operating DRG our the aforementioned perfect capital efficiencies investment margin driving commitment $XX expansion. improved

had leading sustainable I have with spending to included in success R&D investments in R&D projecting expansion XXXX. growth margin years Curtiss-Wright. a for awards still we're in considerable you operating growth significant million these our and We investments internal long-term despite that XXXX. $XX remind increase We've recent in will

acquisitions that not as looking profitable back and when We criteria. acquirer. often were indicated meet a serial revert also And to intend days of the to I've we to capital are allocation to our increase financial quality we high strategic our

a strong untapped We accordion $XXX credit sheet, to balance with billion up meaningful a in acquisitions. agreement $XXX capacity ample million have spend million revolving and a $X.X

topic on to a materialize share activity we we've focus shares dividends. shareholders as minimum the to will cover few we completed done are to discuss and final acquisitions year through the Having those changes consider ready Should XXXX. In returns phase cycle annual past drive continue years The stock five discuss the taking next as today to of targets to our repurchase expected addition to not At three from is covering compensation. dilution I'd period evolution we we will our additional that repurchased in place ending previous efforts. in steady buybacks and new the the are year sufficient then like

As you've deliver to heard top throughout our our prepared we're more remarks shifting growth. line focus

this accomplish and our our through balance organically to investments aided sheet. expect We growth by utilizing by acquisitions strong

include As to long-term our X% range is does growth of a sales sales not APXXXX an to acceleration the which of CAGR orders. target are targeting X% Of we any result prior note X%. total X%

We the be a efficient also more by end expect and to XXXX. business leaner of much

of Curtiss-Wright remain our of targeting the the committed driving are and top profitability for to XX% group. We We an to in focused remaining peer long-term. quartile grow operating margin are and long-term on continuing

of In reach XXXX by addition and the EPS we diluted are we $X.XX adjusted end are $X.XX can concluded targeting that double-digit XXXX. diluted growth. We in confident EPS adjusted with

generate to free in flow Regarding cash than expect free $X over cash billion three cumulative years. the next flow we more

cash financial organic least we will benefit growth In million. free our forward performance with from this us and annual continuing stockholders. would long-term Improved I our this goal. strategy structure, further efficient our on time acquisitive for and per Curtiss-Wright's will results $XXX million open target for at cash We more our flow summary leaner to constituents operational solid today's from much generating growth and and earnings our help operating $XXX are based raising solid years free call questions. Combining to minimal like deliver and come. At look to for to conference up to flow share reach

Operator

Instructions]. [Operator

from Peter of a Arment Baird. of question first Our of line comes from lot the

now is Your open. line

Peter Arment

we talk and Glenn. initially. guess I the I Dave wanted the to the Thanks, about target, kind give targets new information that I to and out segments? for how there updated about color in you the thanks just of When morning just think your Direct. China the I targets good margin sales the plays outlook little Hey, XX% long-term think adjusted guess with any on way is all guess us the a individual

David C. Adams

to we prepared to we've -- Well targets. with get not talk broken and I assumptions by scenarios segment know these to models prepared. several them We Peter down but I'll models to XX the that have specifically say several million EBITDA we axis years $XXX you done X.X billion is and we total if over have year in one each the the Or XXX,XXX next scenario three between on did three acquisitions and in period. to million we probably spend $XXX didn’t that year.

broken down do need sorry do. -- have cash over we improvement does don't margin three and to would XX% I it flow We what feel expect by revolver down our help room us Getting by from go but XX% to our margin also XX% XX% have year I'm that in cap we plenty our pay to margin to a of to to utilize initiatives the it I our that segment. from continued segment. that use again that a down. would debt strong scenario to again we get have leverage don't From we really standpoint to by so period include But

Peter Arment

as was and and defense segment. again guess I was I another then and I'm organic up, in of expecting talking specifically QX think down about on down in the just specifically again Okay, kind growth it -- you're quarter follow defense

do that You additional we associated this just working know you're with -- projects on is view just the business color naval the some it or there? as with maybe timing just

David C. Adams

the person up them who any predict you the try programs. going mean you're portion a to that division. orders we to mean get when you businesses lost controls and look good think -- customer can heads to is I It at that. but their haven't I I the talked of

up the in defense by is you XXXX XXXX are some seeing in XX%. and our aero ships So

issue. there into that seeing but you're So XXXX timing is flow

Peter Arment

gap China a that through then one revenue programs you do one, Thanks. defense to increased do what of just record? or line last you from to the at revenues those on that mentioned the you're sight and just in filling or have of based it you on Okay, have Direct, going related the backlog just projects least on just revenues,

David C. Adams

of we the term it mean agreement line planning. that our AD aligned line we to we I I CD peaks sight programs of on. long mean going have mean comes from sight. No, the strategic it JSS is XXXX, for defense I continue. and have have a good

Peter Arment

Okay, appreciate Glenn. the Thanks Dave. color. Thanks

Operator

SunTrust. And the next from comes of question line of our Ciarmoli Michael

Your line is now open.

Michael Ciarmoli

guys. the to M&A taking I much new clarity, X% morning accomplish to and just seeing did would you heard in just follow good the billion. needed question Hey, love for maybe Thanks there. up, I first the don't out to that how Glenn say you I $X comment, a target you did X% think be say the CAGR,

Glenn E. Tynan

year over $XXX,XXX billion and period. I three the said $X.X between

Michael Ciarmoli

you a little have you but that of to presumably those of gap -- presumably that it, it, I more on And bit not orders said okay. down take have there, APXXXX you XX% getting have some just to got any up you've higher got a mean, only you're guys margin Got revenues. you target margin do which managed going have the of in don't revenue

in a that margin more profile expansion the segments it. us XX% of on the other know in some see you might I you look So that rolls that little sort maybe kind can just APXXXX fair of the by color is And way off here, at bit profitability to two a at power pressure have segment that. given assume we but you didn't sort know any maybe of give

Glenn E. Tynan

fair way That is a that. at look absolutely to

Michael Ciarmoli

any a just Okay, what that prepared pressure as suppliers, Boeing us to with color and margin might trying maybe give remarks the see you items, maybe couple there? of housekeeping a think delay more little of Boeing. Can in on in we just is mentioned there's if you its know elaborate your you potential to and then I agreement just do sort a

David C. Adams

negotiations we negotiations for feel, it. -- we the at know we're same And go Mike five this mean a anything been that several of every forward. point on And You delay going contract on to through in years. this a uptick day and if years two little a bit in the basically we've it it's would margins been the

about a and of business the proprietary know that with business is high Curtiss-Wright mainstay have, we products we've You the forth. and past oriented the type niche talked lot IP in so

And of parts do look print jaundice a of so let's say at might we forth. some a so eye like and somewhat we with the build that common more

I anything that like part I of see going kind So of this a that's the negotiations it. and with said of think associated might that a and result uptick forward as you'd an be delay else

Michael Ciarmoli

potential can with you us the that's lot any Okay, to there revenues able but gap you in And then thinking Dave the through include give to Well didn't you potential queue guys? excess future of be sort flow two orders we think helpful. just back about back you Cheswick and maybe just to APXXXX those have maybe capacity items. I how know the utilize the talked should about capacity like know that and it back I'm should that spending launched on you be Arabia defense about has filling I the here I'll sounds of gap, but of a where overhead able side. facility plan? And looks that just but jump then union marketplace some on pretty the state the infrastructure the like. Glenn Saudi what just broad

Glenn E. Tynan

from the modeling right. Cheswick for have know you chunk mean on been that and several is a obviously gap chunk come manageable No, Navy it good become we the and as well. come years a But well. parts through will that fighter the and you're of side, going business as Cheswick. jets lot things flow you're through I it But also now other obviously of as a it's the have to to of going good more yeah,

David C. Adams

from we said going half of get relative let Union in India remarks it's still me one to Everything's and if going very we've years and want and get what going still the next certainly is just the world's to the at India of they of those several is, them It and the at this quoting believe on strong that we're sites the say prepared and got there you will of looking for of Mike's and then all commercial the I'm good, I beyond still come a And State working so declared iteration least. where other that's China take is is power remains operation countries and far stuff they've out to basically they've APXXXX and Arabia largest. their very different lot over is couple is that we a got while that a Saudi big, a it in indemnification market that XXXX but interest. to

we're under Curtiss-Wright plan not here it is come in billion for are we're it here I've promise doesn't then intending that We staple grown to being know our if looking $X the it just it's order being is at that. year eventually, a are much orders for happy it okay at in that if and total as and comes it gave in I guess to next that the those over conservative half in said of we It's are planning not only just deliver. of still And our forecasting the for on and And statement wonderful, on putting us bold this in we're one. approach diet period, didn’t on not not you've we're And not that the we're the reactors pretty very would then we but you three we went past conservative. that of pumps. it, that got we not that's in market if the be and coolant with

still the remains So the outlook commercial really for side in especially nuclear strong side. the

Michael Ciarmoli

Got I'll jump it, guys, the back thanks queue. a lot in

Operator

Instructions]. [Operator

UBS. question line Myles next Our the comes Walton of of from

Your now line open. is

Myles Walton

Good morning.

David C. Adams

Myles. morning Good

Myles Walton

you've on had similar pivot kind the Dave you or the any different and M&A? the over relates I to pivot rates ROIC you're last to of bit on a it hurdle that you as the and was those how back spigot can what for since on hoping that about constraints turn deployment are years or few putting talk capital

David C. Adams

haven't it we those we And bought actually million be. them No, up about with investment, accretive multiple. been hurdle one tool the the to has until new them rates We good three, we changes feel we targets exactly expected to go, XX% the ROI five. this the exceptionally the still and that's looking last $XX get from of that we're other on them year we're up XX% year to implementing bring what where one going from changed that by liked

So if find. look then the we the for ones love you two like next should and you last that hope to

right same earn. And We it's so just the earn it. of that's really that we're we us proving our do right is staple diet, the the away going more and to throw it, we of do it to again that that can not right

water we opportunities like with interest but chemical gas, up industrial those, on avoid We're and past. again customers. once highway in like example interested into lot ramp guys terms guess a that's sensors It's look So side it going. some a focus of customer interested to just out military we And there. from market we to continues diversification the And that as perspective. in that what will going the continue in know We've to on that for you of we're it great. high and of to more more issues got to just of a figure industrial for on oil gives on proprietary, a and our to this that very industrial we've stated problematic oriented see in little being I balance, got pure barriers so I although lot have grow of in so dilutive. keep this and sort us computing our but areas not solid Same the to is then operating stuff, it's like the lot of a margins some then the a anti diversification We cyclical project you've ISR, side a we a continue recessions play trying and headaches gives I And then niche expect embedded some there love specifically be targeting is play. to are got in to entry. from we little we -- -- not

and out will lot come of able but that got we've to we we that. on opportunities a there be our feelers So of expect more do kind to achieve

Myles Walton

maybe missed implied that X% is so, the about it, And half what's… I is or organic to sales X% total that the CAGR, it

David C. Adams

maybe is say let's X to in Xish. range some roughly acquisitive then it and the of X know You

Myles Walton

obviously didn't you at got maybe sales one, on Okay, when last okay, then and back target up mark, turned was and a the for XXXX, since R&D. that the you it hit one just that dial look

and think or X% Here is been point back I dial up invest, would that growth XX to a have from be of for the you guess or on R&D, organic going you organic headwind you helped then XXXX, X% growth? looking you where turning move what it's to basis know X% do is X% to what's you to kind think so did that a to

David C. Adams

Yeah, turn ago would on because I think it move is I years one side. the a R&D really that the will probably that say several three of point. of A) turning organic is dial

on we're to margins as -- indicated work for going pursue money worked I a are approach We that spent when aerospace side is permanent doesn't when them $XX and meaning the fit next really cab, it's focus And flight the of that if very long-term test flight that million not an platforms there's that these plane But between and then in for R&D information, and because a of all on stuff. but so for for example, then permanent a it just some will criteria $X a some on. things now -- really fit a vehicles. organic for sensors we tilt last we up meet big planes TTC growing meat anywhere but And kind relative it out started go side certainly rates planes. have that we primarily and three that. and with in couple associated then test million bunch stuff, but test on then of acquired we for that's also years -- example we the specific us built aircraft a it a on in flight we values with commercial have the on significant more far a have so doesn't something bone that drove the classic been a off of And the after of the more developed the to the highway that's the somewhat demand now our it found and to on throw we I you have data generation get growing goes up flight and or test

a with with go now fit gen in the up next plane. well, every would So permanent that

--that's our automated. investment ramp So incremental there's that and an the sharp nice years technology some again would of some one few preening sales up more generate for our ramping to bump minimal by going that's on or a us. our equal stuff we but some services of X a cyber carts, trusted Leap started of plus The example laser some engine doing then of anti-tamper X one security, activity a something businesses ago. R&D was that

of last what see preening other that for looking with also portion recorder floor one the and the of X looking greater time we out Honeywell over they're those can there been for of in coming really And was these So a look The right X cycle we and for then an just kinds longer you real growth. other large saw we they announced the information will opportunities Europeans first to are in teaming R&D haven’t leap crash and either play data. all of of exponential areas where a technology. are on the day and of bandwidth we

there. market leaders R&D it teamed we're so in that we not that had arena Here that's and has dollars with and Honeywell spending we're why

see all So got going to the pages it from of a to is got I've some of but and whole Myles things kinds with you're going them I worth things am here. those not two are continue us. like that list, that I

Myles Walton

for thanks guys. well the Okay, color. Thanks

Operator

of And our of Stifel. from next question comes Nathan the line Jones

line is now open. Your

Unidentified Analyst

if good general solid on think also of was Hey pickup XXXX is so there industrial market be driven growth demand for great? need projects Adam morning, would you by valves any you this color guidance any MRO that, in your Nathan. industrial wondering sales shifting can following give for subjects, strength there there, color a Kind some are is spending, on any called I seeing and that downstream so

David C. Adams

pumping bit well. projects is industrial category in particular both both higher and A little is than mostly pumps it subsea projects and also category. but pump domestic it Yeah, than MRO. But domestic that includes new valves as in again internationally in international higher it's subsea up being includes MRO

Unidentified Analyst

there, they're supply that there some to helpful. also coming about, just Yeah, are chain electronic like then source not have bit, harder tariffs, cost you and well we're down it And or is a just out raw managed really components items pretty that? and price if something materials on talk then thinking any maybe cost, maybe about price, discrete guys there's maybe

David C. Adams

including addressing issues chain have the cost Yeah, I power global supply with alternative monitor raising if prices mean we continue our our whole or necessary. situation any to been and sourcing

based $X debate the tariffs and had segment. what we primarily So net on in in million industrial fourth active XXXX quarter the impact have commercial on the done we of

we've the it are segment. the $X and amount a said mostly thing we costs hearing cost the to impacted of the before CNI Most experienced, a For components million not going also are motorized the commercial only we From valves standpoint industrial think input expecting segment. following $X I really we industrial we've preponderance and the up million are demand. just than of defense, these where waves greater in shortages -- way things are capacitors some but than seen of impacted originally in that mostly electronic third supplies commercial the our greater XXXX motor impact. essentially have is components industrial of we're our of so was impact able incremental X XX% and The mitigate to the wave gross been vehicles electronic on segment the and accessories tariffs again for X the

than little we of increased some that a and that's heard things cost expedite products increase haven't But in widespread to and really disruption So that. a like caused other bit it. cost

Unidentified Analyst

you great, is thank it Oh guys.

Operator

[Operator Instructions].

Kristine of from Our of of the Bank Merrill Liwag Lynch. next America question comes line

line Your is now open.

Kristine Liwag

morning Good guys.

X% in For the for by APXXXX sales in you assuming what and the what that XXXX? that deals diluted to you to EPS XXXX your are that are assuming number And of X% XXXX end CAGR? of terms adjusted total target XXX in

David C. Adams

order the our Yeah, orders we over inorganic to we the XXX,XXX new now right goals. three got so APXXXX no just on APXXXX billion to achieve to growth the We our period year are target. assuming between X.X spend for the said in

Kristine Liwag

risks approved Navy, content the upsides which the carrier how funded, experienced your there In two with for in the growth to on and with labor in some the Navy and to think see like these serial Virginia your class tubes XXXX? even in With seems issues months is missile operational some we're about issues. and submarine helpful to few chain. starting Navy you a end, issues pretty business? has That's supply production some is risk we've seen of contributing Navy been also that buy past and tight your there's Navy now in do if time. maybe And on your operating higher just managing It is

David C. Adams

From in seeing Cheswick to sites. different the any real operationally Wellsville Navy and terms not manpower the across side operational in of and Kristine hurdles we're Bethlehem

efficient. that York anything to Island a found becoming a probably haven't if because terms labor Long as fact capacity were and New excess be we we of we've so and problem got of matter in

that hurdle us. So a been has not for

forward. Glenn what that a going one building basically to it absolutely gives X handle from you demonstrated and cycle it carrier. long-term given the want than additional does add the X to more are might they've then of relative that tenth this block it nothing to XXXX, sites and and perspective, we XXXX. it year does with certainly for of the is my to benefit in build wouldn't each and What on us by what to occasion have capable And it do the basically Navy visibility in We but

I And happen. have delighted be that would to so

there up I same case down a any time and profile for think that some which which certainly -- get not cements we longerXterm at visibility the that you'll PVB but some PBM, love. are side orders purchase for delivered in all but probably on us purchase parts yet assumes pick they're

Glenn E. Tynan

these order I should it's be characters, going [indiscernible] Huntington enable back But see mean the positive January built a definitely a to them which build is years. Ingalls four in to to us. start. did every sign, We good three good to

So, the anything of going us plan as positive POC years. used we but that with either our guidance layer for our we're procurement We Obviously don't to top until on content know be if now in for well. what pattern can't over tell. have we or give the we be and it's to of million move $XXX it doing it that up really

to whenever information. we upside be would that get So us the

Kristine Liwag

missing? million the anything would $XX thought there I the of timing for giving of you that closed only higher that's with the since midyear been is have rest I That's I'm should helpful guess APXXXX revenue reported Dresser-Rand XXX But segment. for growth your XXXX XXX your the your revenue of of look a million on take difference million. million I of revenue at when midpoint power I million X at XXXX XX outlook if and out of I look and switching expected year, growth have that that that last gears that's

David C. Adams

the not there of in sales and DRG well. quarter probably up. No, are another have there do is but in as no, Subs think There's of thinking I -- on so. obviously that CVN-XX here too is you Virginia some It incremental don't offsets

I a got you little pieces. So think

Kristine Liwag

guys. thanks Great,

Operator

next is And of Arment up Baird. our the question Peter a of from line follow

open. is line Your now

Peter Arment

Yeah, thanks.

on Just Thanks. in us when Glenn. give Any you're may you exciting the any commentary a XXXX to kind subject you quick make can of of that about thinking contributions your one targets? updates and that XXXX here or have to pension on pension

Glenn E. Tynan

years pension then but further since year, assumptions the first. five next in probably contributions No, in the years, we first and any for contribution year quarter our million changes contribution voluntary last $XX four that did last project make of no major we including don't

of the horizon So on today. no contributions as

Peter Arment

thanks Great, Glenn.

Operator

not turn And now further would the call like any Chief to Chairman Officer. to showing Adams, this time. David I'm at I back questions and Executive

David C. Adams

We a speaking XXXX first our to everyone you us for call. have quarter you Thank earnings today. Bye-bye. forward day. look during great joining again with

Operator

and Ladies a for and you participating you thank today's conclude in does the have Everyone great gentlemen, all may program day. conference. disconnect. This

Curtiss-Wright (CW) 27 Feb 192018 Q4 Earnings call transcript