CW - Earnings call transcript Q4 2019 | Curtiss-Wright Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Curtiss-Wright Fourth Quarter 2019 Financial Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jim Ryan, Senior Director, Investor Relations. Please go ahead, sir.

Jim Ryan

Thank you, Sydney and good morning everyone. quarter conference fourth Curtiss-Wright’s to XXXX call. earnings Welcome

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

website. webcast, being copy webcast www.curtisswright.com. through A website a financial the is today Relations today’s on can call and press be of well of for release, available is this at section replay also the found presentation Investor of as as download the company Our our

today’s include in uncertainties that Private with statements forward-looking of will note, and are guarantees future forward-looking based public Securities the our Act are SEC. in statements Please projections and expectations of are performance. discussion certain Reform management’s with statements as the XXXX. filings and We associated our current not risks on detail defined These Litigation those

foreign company’s growth in the with include prior excludes with on a website. and Reconciliations available of organic associated periods costs references are first this As of costs and in purchase XXXX. restructuring adjusted that acquisitions, accounting year results the costs associated the DRG release the translation, currency non-GAAP transition view our business, divestitures, reminder, guidance earnings relocation and unless current and onetime otherwise to the for presentation at of year and effects acquisitions the Any end exclude noted. an

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

Dave Adams

full it guidance. acquisitions. Glenn overview a I begin XXXX provide recently highlights over turn XXXX our quarter will Thanks, our morning, of detailed and full review to with few results of I Jim. to Then our a brief everyone. Good year announced will year and of a fourth

before on up Finally, our Q&A. wrap prepared to I we will move remarks to return

on ahead fourth the ahead for our expectations EPS, cash slightly margin of performance, Starting flow. a was and we and quarterly well diluted free quarter operating delivered which solid with highlights,

margin our improvement reflect particularly industrial produced than points more markets, initiatives. a the some flow well EPS up offset exceeded defense expecting as advanced strong of our in benefits cash a $X.XX. and in note guidance These XXX generated softer quarter and very in million, a rate. ongoing that We Free from as sales of and quarterly as Our million nearly cash commercial adjusted that of XXXX. record and profitability, demand in diluted XXX% free was year-over-year gains margin on strong results of our XX.X%, basis Please and also $XX of operating an approximately we fourth XXXX we resulting in were flow benefited conversion $XXX payments record off-highway.

X% board. increase highlights rose in these operating commercial/industrial XX% to These by double-digit a Turning income achieved strong of experienced XX.X%. naval defense results all adjusted our markets. in sales year a R&D our tariffs. accomplished basis in increases reflect to Adjusted full results segments, across strong operating sales. EPS results three principally in year-over-year, the margin improvement $X.XX generating sales, segments, strong by We despite operational performance. and we and profitability power defense in diluted increased XXXX led investments where increased a growth X% XX sales led reflecting We on Adjusted improved the point

This cash in than achieving efforts continued flow, XXX%, conversion year, reduce consecutive more our our solid also cash We to free conversion. flow produced growth free represents resulting of from XXX% adjusted capital. primarily with rate seventh a working

X.XX ensures positioned driving were up demand times, New book-to-bill naval in in XXXX. solid well of we’re strong overall for orders continued that by which sales led X%, defense, growth

for systems subsystems. XX. which ruggedized XXXD on supplier trusted its shipboard technologies, solutions, and dedicated electronic on and acquisition December our best-in-class protect like ships. closed with protecting other and is weapon in months XXXD, to EBITDA, I design mission-critical from Their what in of integrated to enclosure applications approximately XXx aircraft environments. known we’ve are especially to thermal and line systems paid. would overview carriers, We utilized Next, and paid a XX provide engineering vibration submarines shock, hardware is an systems of surface and onboard next servers, solutions proven XXXD harsh electronic U.S. Navy historically

expect to $XX adjusted operating produce Similar XXXX, a long-term to and revenues, expansion XXXD generation. million XXX% to adjusted of overall is we and market, rate long-term accretive to the support Further, conversion naval will principally contribute cash that this our we defense our flow expect that business be growth, our criteria. objectives margin previous XXXD generating acquisitions, to In above free cash to margin we expect free and EPS. our financial to accretive organic nearly be acquisition accretive an meet overall Curtiss-Wright flow, in

earlier addition, an Ltd., entered commercial/industrial Services Valve Dyna-Flo operate announced which our In to acquire today, that segment. we we into agreement within will

and gas their of complementary petrochemical and systems and the valves strong is to control be oil Dyna-Flo relief chemical, expected markets Its critical environments. $XX severe Dyna-Flo these our accretive to of pressure specializes approximately actuators and service valves, products markets. manufacture for and existing share. performance has earnings million the serving reputation for in in are have adjusted similarly to a per control annual sales

therefore transaction time. not our guidance at including this in this close and expect Dyna-Flo to We March within

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

Glenn Tynan

on This everyone. we I’ll sales you, end growth overall our defense In Dave with every X%, expect higher ramp-up Bradley the defense, equipment, guidance, CVN-XX market expect and end activity the test X% organic the and to to with morning markets, begin led naval XX increases program. expect in nearly Stryker XXXX platforms. of good and we we by programs, to our market. carrier on where revenues Thank organically. the the the and aircraft modernization submarine orders the the expected from defense, from for defense, XXXD. following backlog defense, Virginia X class in XXXX expect supporting and reflects In In in demand acquisition. is overall contribution solid from we trends to be planned higher from aerospace sales ramp-up growth favorable very F-XX X%, and growth the sales inorganic X continued strong In growth growth sales XXXD come outlook actuation of principally to on XX% flight ground and growth

Moving to to commercial expect sales to X% the up markets, where be we overall. flat

to be treatment be are We to expected surface sales commercial flat. are while projecting sensors to Boeing aerospace and higher sales to by slightly, of up sales services Airbus, led

Partially market-specific power are the sales, expected as anticipate and this years general following anticipate activity. Next, be this the down be CAPXXXX we over domestic it revenues we offsetting on overall winds increase in in two production are on generation, sales contract. before increased while XXXX, views aftermarket flat. program international aftermarket our to lower In economic of both sales to reflecting global industrial, drivers flat, we complete

off-highway are be surface sales valves be to demand most expected are business, in in modest to as essentially to market are as demand down expected partially are Industrial expected control to our is linked tech on-highway the the higher market expected to automation offset Industrial slightly to to overall, the be industrial flat up and for which be by slightly reduced And oil due sales valves, to sales for industrial gas are pumps lower sales growth XXXX. by and In higher flat to sales sales vehicle is GDP of the expected in the market. products. growth, closely market. offset chemical be our global

market, And presentation, end year sales well as the you breakdowns XXXX XXXX full our sales of by finally, appendix our end market chart. for in our detailed will find as waterfall

the I guidance, to in which to how units better to business defense This turn we’re review the reflects movement and defense segment power revenue while we financial to change our impacting some our managing of alignment changes wanted segments. naval the three segments. Before most also all of provides shifting businesses XXXX, the two structure, into

comparability guidance XXXX New compared is Structure. column For all XXXX and titled, to purposes, the

have and sales three We will operating revised pie be of charts website. we appendix the on years to included posting data structure the segment income historical our and in reflect

operating XXXX to for sales led on, of XX solid basis reflects segments, X% growth by to and growth income growth X compared Moving our financial operating X margin to and defense adjusted our XXXX. power points guidance of

restructuring adjusted areas, million, though costs three activity the of in we most is commercial/industrial business excludes and total market are in aligning worsen. $XX the segments, spread of and economic current XXXX with in commercial/industrial, global In across other all conditions the proactive guidance conditions Our segments. power being case

so business for of in that years, In power, future better XXXX. power align R&D, our annualized from these approximately achieve defense any initiatives taking savings advantage the improve to expect $XX efficiencies please million our in growth. opportunities efforts a increase $XX significant also we recent We restructuring conducted in would are we and segments. in haven’t And guidance includes note XXXX beginning million primarily and in restructuring to

operating have would Curtiss-Wright’s reflected range. investments, point XX end growth margin these a the to at our improvement XX% of high Excluding basis

with by commercial segment, the sales Continuing to outlook aerospace commercial/industrial we segment, growth be X%, principally the our due with to starting up to outlook expect flat in our modest market.

range as margin to projecting X%, slightly income a segment gains similarly of our be results of initiatives. operating building XX.X XX.X%. are included margin improvement that million line XXXX sale up a is to $X ongoing of operating to onetime note We increase and Please product on while expected of to to flat part

reflected have XX basis Excluding margin these guidance XXXX would from point an XXXX. gains, segment’s improvement

in defense segment, In including led markets, the we the contribution expect acquisition. sales from to be by all defense growth improvements XXXD

is in to We XX support on a are income This outlook increase basis segment to XX XX.X%. includes X R&D decrease and range while to sales, grow million to absorption projecting favorable reflects to operating XX to margin organic of future $X a higher points, XX%, growth. to operating expected

Excluding margin from basis guidance have investments, to operating segment XX R&D reflected XXXX. a would point XX the increased improvement

by growth In naval led generation markets. the we defense and the in expect sales to be segment, power revenues power both higher

while XX.X%. sales, well We on range in of organic This a outlook margin XX operating million are to to segment growth. expected a income absorption to to primarily operating as XX.X R&D support points, growth basis decline increase X reflects to is X%, of XX future to projecting $X higher as favorable

segment Excluding have with R&D investment, our the adjusted operating outlook. improvement from basis increased point Continuing XXXX. to XX guidance would a reflected margin financial XXXX XX

to X to up guidance expect to We year EPS full $X.XX diluted X%. from range $X.XX, XXXX

achieve to expect these per despite strategic investments share. of to equates R&D million, in $XX increase aforementioned which the $X.XX We results

guidance X our to X%. Excluding of would the an have R&D reflected increase investment, XXXX EPS

EPS prior the the be expect lightest in quarter. first XXXX to and cadence We we half. defense first XXX to approximately MAX. earnings line ramp well gradual Further, typically year share expect year follow expected to the reflects quarterly in half prior first full our a and with of our as quarter the XX% impacts our up from per as This our similar years, with the in coronavirus first revenues,

of remainder the quarterly our sequential For quarter with XXXX, improvement, the we fourth expect strongest. being

update January contributions lowest level XX to on over voluntary anticipate our rates, pension million in In our which At the contribution made plan, need reached we the continued decline Next, XXX the X of XXXX, a that defined an plans. have eliminate will rates, due contribution benefit this current discounts’ for we cash pension years. to in next years. the voluntary further

contribution, this Excluding expected $XXX expenditures flow rate from XXXX XXX%. cash to conversion range with of million, to capital to cash relocation of restructuring pension business, at the from related impact is least an adjusted our expected $XXX million the free DRG and

lastly, our free cash advanced strong continue XXXX. we pipeline, and the million received solid a level, have were acquisition XXXX we roughly a flow We to sheet to X.X expected with our XXXX but bolster results, balance in that very to top of available $XX in strong fourth billion line despite in similar support seek late quarter growth. acquisitions profitable are payments approximately as to healthy And maintaining our

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

Dave Adams

Thanks, Glenn.

a closing Similar investments continuation I we of XXXX. to years, initiatives. companywide other a past our to to to planned expect improvement ongoing Before initiatives remarks to you margin the shift should Q&A, broadly make restructuring and want see several for the few address

road, to restructuring, and remaining a in group. these we years and chain facility profitability, for ensure top dedicated quartile supply and expect the our that which tomorrow peer focus, include Curtiss-Wright’s savings to consolidations, improving actions down both on segment businesses. enhance the to is lower-margin These can focus keen of proactive initiatives We with Lean are

activities high restructuring are the to Given the relate going we nature facilities sensitive keep employees, of customers, as to level. discussions those at they and a

for We in are with another XXXX. efforts incremental investment investments growth, future increase million research balancing development those continued planned $XX and with in organic

we state-of-the-art expect Carolina, complete first the in our Charleston, transition addition, of new by the quarter. In all to to facility the business DRG end South and production of relocation our

we to confident prudent for initiatives are profitable various shareholders. today the As required morning, deliver these we look discussed investments growth long-term are the across that this our to continue

well, In positioned summary, to year. we’re Curtiss-Wright is deliver this and performing results solid

to in continuing future increased our funding and are invest restructuring endeavors. We R&D with

We’re growth commercial of the our favorable supports offset defense to the benefiting which challenges markets. defense helps our in for markets from some environment, of in our all forecast and

are We on deliver and track leveraging ongoing our execution Overall, shareholders. initiatives. we margin our driving long-term for benefits of value the remain to to solid continue improvement

questions. At to call this conference like I’d for open time, today’s up

Operator

with question question. Myles [Operator And your comes our first Instructions] Please UBS. with proceed from Walton

Myles Walton

morning. Good Thanks.

Glenn Tynan

morning, Good Myles.

Myles Walton

put good obviously, a flow target, billion you was performance And if cash a you’ll can X-year, couple cash you easily on there. XXXX, of which like to as second, a eclipse. we one, I wondering out looks $X questions free look start for

any If you going to there. on pension XXX cover of that a will ago years, Glenn, cover you five think for update then or you in for was of you did five And had million XX million, thinking a now and years thought the you the contribution, years. XXXX, I terms couple

Are your just I rate you want for funding discount XX-year rates understand, the sure And using you requirements so harbor to to average? I make what in define spot the are? using are safe

Glenn Tynan

about hit discount lowest pretty it’s years, back nose headwind is, been and dive. sure contribution, we has said of now in what using in we that’s are And XX couple to it That – a XXXX. was script, we looking has at the a share. a that’s – I but rate, not started. a XX a XX $X.XX We made it’s where the rate spot years, if equated been changed in I’m go can I in as it were and had think $X.XX, it’s the

mitigate cash comes discount. to back, rate that the it’s we will the So that change in of But future. wanted will things honestly. contribution discount on dramatically, avoid and all based things kind If –

Myles Walton

point funding position is And the what at status the implied plan? the that’s for of this

Glenn Tynan

it’s I it’s think fully believe I yes. – funded,

Myles Walton

that sales the and Okay on had then maybe the on you CAPXXXX.

you implied delay think in there. And I I then out what’s recovery called obviously, XXXX. is, timing-related guess,

what’s the of the what’s kind the of on cause that delay of Glenn, or the Dave confidence and recovery Just sales?

Glenn Tynan

quarter, about from delay, had if of am diverted replaced go Well, we resolved the That’s – in some that and to to these million the – most remaining – so resources we of issue, out the shifted now, XX quarter, the XX moved issue back that sales cause the on we – of to sales XXXX. those the sorry, it higher some Sanmen you those Sanmen been revenues third had in with beyond I XXXX, from the XX the Sanmen defense. third and – time the is higher

in confident now. those very numbers So we’re

Myles Walton

Okay. aero overall sales you’re of the business, Boeing And the guess, then, be looking Dave, as for side flat. it where, I to relates to

that of kind are within to more coronavirus require sensitivities XXX? underlying the assumptions the not of are China you what exposure ask be your and relative of MAX question it And the business of Just then and for what to how would the also guidance? gauging kind than and to sensitive me pieces your might that your

Glenn Tynan

if not some contract to he maintaining so recap, I’ll wants. Dave so we’re XX-month I rate for to with, Well, equipment it, that actuation changed our could we’re just add that. and our we’ve comment mean under

minor guidance, impact half $XX have the about year, to we are expect a in estimate half overall, the immaterial services, million sales we included sales in in tech that and our expect we which of And disruption to we our experienced have recover in in that sensors We year. and the products, that this in non-actuation we and first be second XXXX. of flat Boeing expect surface

issue, manufacturing part we some half MAX just five in the is, perspective half our facilities. locations Coronavirus timing China, have nine give two. to of that’s So again, one, including

the to work. XXX our little XX%. estimating, employees could second current facility location, range with knock has to We situation, from the impact facility in affected expect at the no XXX%, half a financial capacity the year. segment depending largest we approval it’s and The although the be, still commercial/industrial have so virus, And in about been in to fluid are to Each XX million $XX sales received half recover wood, thus of have on we upon a again, first return employees. over far, levels is the that

mention, the on our our but cadence receipt seeing it now, the In it. eye have tell, could of to So on power, we’re from approvals CAPXXXX effect way will we’re a keeping half. in of the early it’s potential part too based it’s I of that to just China, half on not revenues of and possibly but just slowing delays any right

Myles Walton

Okay. Thank guys. you,

Operator

your Thank Peter next Baird. question Arment Please with proceed you. question. with comes from And our

Eric Ruden

Hi, good morning.

actually line Peter this Ruden morning. Eric You’ve got on for the

Glenn Tynan

Good morning.

Eric Ruden

the Morning. Quick your opportunities just recent give there? going the see XXXD acquisitions, level, now Dyna-Flo on about of where kind thinking M&A you me, you seeing and you’re puts takes and market given your forward, where one recent volatility, environment M&A for high two just

Dave Adams

when and others remains Yes. fairly pursuit. We in then been pipeline decent us. Overall, XXXD we’ve and year the we coming were up that for encouraged really saw last Dyna-Flo

acquire. we announce point of but ramped of have just could take we’ve two, that And years, the talked today that’s some past, was opportunistic we specialized announcement. to these particular, we’re the we were to in that Dyna-Flo, where as these And in in what pretty able

chase know we’ve not line that this followed in sand says, below we for gotten very projects. and us, drawn to a point us will the some you If you’ve long,

through. overpaying. that go I’d like decent are scrutinized So say, we now, we very very I before, said a it’s a on for heavily it’s careful right And pipeline watching process

And the it those you much area some last in get area aerospace there. several commercial much saw that because has said change over or I want too that into over pretty last several acquisitive haven’t years, of pricey. it an to that, and seen really we I’ve in grow been from years, perspective

and two you’ve On but something can right some examples think we so particular, subsystem or I on control bargains XXX don’t been do. of valves, you to things side, channels a But what you’ve isolation time. now, with long the into wrap-up market, supply and want that these both chase absent. probably then say, really and example have to been valve for we and let’s linear now we perspective, of the for reasons, fit these or obvious complete get all I it, industrial And and just seen we level for with and that with markets being address niche of about that what the and where Dyna-Flo that their Dyna-Flo, newest, a a actuators. and can rotary These The are this little areas complement the relief pressure product great mention system heard as subsystems, currently the systems least down. we’ve a looking

those, with We’ve court business. got eventually, And over that we other products It little then pocket a And them long is a to and in so for make others happen. great like the find leader works time in us. today. it’s it their of a we period tend when

haven’t And of power. these Glenn and said, of large. maybe last got up we’ve lot range that. several scrutiny, while very to do you’ll in like five years, got, seen, And see to a smaller apply but will or we dry so, ones So from lot we’ve the size four you continue a the now,

Eric Ruden

leave it one at Appreciate me. I’ll color. Thanks. for the

Dave Adams

Thanks.

Operator

Godfrey next Instructions] And your question comes with CL question. George you. King. Thank with [Operator from Please proceed our

George Godfrey

you. questions. Two Thank

bookings was the First quarter on the is, saw there, do you happen for I curious X.X, to but quarter? I have the the just

Dave Adams

a The quarter XXX was under million. about little

George Godfrey

of of lowering contribution to million, that’s XXX pension correct? related the the when strictly the then rate, discount And

Dave Adams

Correct.

George Godfrey

related XXXX, XXX% XX to Was million the… in the

Dave Adams

Yes.

George Godfrey

Okay.

Dave Adams

years it now, declining Yes, discount rate that has the a so… situation number same of was for the been

George Godfrey

recover Yes, going question, Yes, from contributions, are okay. the well to any government? the pension of My expenses, you aware. those able forward,

Dave Adams

but We a are. yes, calculation have There have. we our as that for we number we will is businesses, but exact mentioned well, don’t all – I and right cash now, yes, defense well –

George Godfrey

you that some of Okay. level From the is reimbursement, years time time contribution it is get how make one the that the many or to year? you

Dave Adams

X-year a usually process. It’s

I submit pricing think pricing the government. to we our our yes, –

George Godfrey

Got it.

Dave Adams

submit will it, we So, obviously, in XXXX.

George Godfrey

for taking you my Great, Understood. questions. thank

Dave Adams

Thank you, George.

Operator

questions Officer, now back And for you. and Executive not time. any further Chairman Adams, call Dave remarks. this I’m any Chief to further Thank turn will I the showing at

Dave Adams

thank during and call. Sydney, We for with us XXXX earnings our you to speaking a Thanks, all again great quarter you today. joining forward first look Have day.

long. So

Operator

participating. you gentleman, conference this and Ladies Thank concludes for today’s call.

You may now disconnect.

Curtiss-Wright (CW) 29 Feb 202019 Q4 Earnings call transcript