ROSELAND, N.J., July 26 /PRNewswire-FirstCall/ -- Curtiss-Wright Corporation today reports financial results for the second quarter and six months ended June 30, 2007. The highlights are as follows:
Second Quarter 2007 Operating Highlights
-- Net sales for the second quarter of 2007 increased 18% to $365.6
million from $309.6 million in the second quarter of 2006.
-- Operating income in the second quarter of 2007 increased 16% to $38.4
million from $33.1 million in the second quarter of 2006.
-- Net earnings for the second quarter of 2007 increased 1% to $21.4
million, or $0.48 per diluted share, from $21.1 million, or $0.48 per
diluted share, in the second quarter of 2006. Net earnings for the
second quarter of 2006 were favorably impacted by a lower effective tax
rate resulting from one-time tax benefits of $3.6 million.
Six Months 2007 Operating Highlights
-- Net sales for the first six months of 2007 increased 18% to $698.2
million from $592.2 million in the first six months of 2006.
-- Operating income in the first six months of 2007 increased 27% to $73.6
million from $57.7 million in the first six months of 2006.
-- Net earnings for the first six months of 2007 increased 23% to $40.9
million, or $0.91 per diluted share, from $33.4 million, or $0.75 per
diluted share, in the first six months of 2006. Net earnings for the
first six months of 2006 were favorably impacted by a lower effective
tax rate resulting from one-time tax benefits of $3.6 million.
-- New orders received in the first six months of 2007 were $758.3
million, up 16% compared to the first six months of 2006. At June 30,
2007, our record high backlog was $1,042 million, up 19% from $875.5
million at December 31, 2006.
"We are pleased to report increased sales and operating income for the second quarter of 2007," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. Our solid operating income performance in the second quarter was led by our Motion Control and Metal Treatment segments, which experienced organic operating income growth of 19% and 11%, respectively, compared to the prior year period. From a market perspective, our commercial sales continue to be strong with 20% overall organic sales growth in the second quarter of 2007, driven primarily by organic growth of 53% in the oil and gas market and 21% in the commercial aerospace market. Our record backlog is a clear indication of the success of our products and programs and provides great momentum for the second half of the year. We continue to invest in a number of military and commercial development programs and we expect these investments to provide future growth opportunities and improved profitability. Additionally, during the second half of the year, the ramp up of our military and commercial programs will generate higher operating margins."
Sales
Sales growth in the second quarter of 2007 was driven by organic growth in some of our base businesses and contributions from our 2007 and 2006 acquisitions as compared to the prior year period. The base businesses generated overall organic sales growth of 12% for the second quarter 2007 as compared to the prior year period. The organic sales growth in the second quarter of 2007 was driven by our Flow Control and Motion Control segments, which experienced organic sales growth of 14% and 13%, respectively, compared to the prior year period. Our Metal treatment segment achieved organic sales growth of 9% in the second quarter of 2007 as compared to the prior year period. In the second quarter of 2007, acquisitions made since March 31, 2006 contributed $17.6 million in incremental sales over the comparable prior year period.
In our base businesses, higher sales from our Motion Control segment to the commercial aerospace and ground defense markets, higher sales from our Flow Control segment to the oil and gas and general industrial markets, and higher sales from our Metal Treatment segment of global shot peening and specialty coatings services all contributed to the quarterly organic sales growth. In addition, foreign currency translation positively impacted sales by $4.0 million for three months ended June 30, 2007, as compared to the prior year period.
Operating Income
Operating income for the second quarter of 2007 increased 16% over the comparable prior year period. The organic operating income growth for the second quarter of 2007 was 13%, led by our Motion Control and Metal Treatment segments, which experienced solid organic growth of 19% and 11%, respectively, compared to the prior year period. The organic operating income for our Flow Control segment decreased 25%, mainly due to cost overruns on a development contract for the U.S. Navy and business consolidation costs and related labor inefficiencies. In addition, the Flow Control segment continues to invest in development on certain commercial programs, which have an adverse impact on the margins in the short-term, but should provide good growth opportunities in the future. Non-segment operating income (expense) improved $3.4 million primarily due to lower unallocated medical costs under the Company's self- insured medical insurance plan and lower pension expense. In addition, foreign currency translation favorably impacted operating income by $0.4 million for the second quarter 2007, compared to the prior year period.
Net Earnings
Net earnings increased 1% for the second quarter of 2007 over the comparable prior year period. Operating income from our business segments increased $1.9 million for the second quarter of 2007 over the prior year period. Our effective tax rate for the second quarter of 2006 was favorably impacted by one-time tax benefits of $3.6 million. Interest expense for the second quarter of 2007 was down due to lower debt levels, partially offset by higher interest rates, as compared to the prior year period.
Cash Flow
Net cash provided by operating activities for the first six months of 2007 was $53.1 million, a significant improvement from $1.0 million in the first six months of 2006. Our 2007 free cash flow, defined as cash flow from operations less capital expenditures, was $29.1 million for the first six months of 2007, as compared to a loss of ($16.1) million in the first six months of 2006. All three operating segments experienced improved results. The improved cash flow resulted primarily from $36 million in advance payments received in the second quarter of 2007 for the AP1000 program. In addition, higher earnings and more efficient working capital management contributed to the improvement.
Segment Performance
Flow Control - Sales for the second quarter of 2007 were $163.2 million, up 26% over the comparable period last year due to solid organic growth and the contribution from the 2006 and 2007 acquisitions. Sales from the base businesses increased 14% in the second quarter of 2007 as compared to the prior year period. This organic sales growth was due to higher sales to the oil and gas market, led by increased demand for coker valve products, as well strong sales of other valves and field service work within the market as worldwide refineries continue to invest in increasing capacity, improving worker safety, and operational efficiencies. Sales of this segment were positively affected by foreign currency translation of $0.5 million in the second quarter of 2007 compared to the prior year period.
Operating income for this segment decreased 17% in the second quarter of 2007 compared to the prior year period. This segment's organic operating income decreased 25% in the second quarter of 2007 due to cost overruns on certain U.S. Navy development contracts. In addition, labor inefficiencies, business consolidation costs, and higher material costs experienced within our oil and gas market contributed to the operating income decline. This segment continues to invest in development on certain commercial programs, which have an adverse impact on the margins in the short-term, but should provide good opportunity in the future. These items were partially offset by the higher sales volume. Operating income of this segment was minimally affected by foreign currency translation in the second quarter of 2007 compared to the prior year period.
Motion Control - Sales for the second quarter of 2007 of $138.9 million increased 13%, all organic, over the comparable period last year. This growth was due primarily to higher sales of OEM actuator and sensor products and repair and overhaul services to the commercial aerospace market, and increased sales of embedded computing products to the ground defense market, partially offset by lower sales to other governmental agencies. Sales of this segment were favorably affected by foreign currency translation of $1.6 million in the second quarter of 2007 compared to the prior year period.
Operating income for this segment increased 19% for the second quarter of 2007 compared to the prior year period. The operating income increase was primarily driven by higher volume and lower operating costs. These improvements were partially offset by higher production start up costs relative to new programs, lower margins resulting from less favorable sales mix, increased material costs, and unfavorable foreign currency translation of $0.1 million in the second quarter of 2007 compared to the prior year period.
Metal Treatment - Sales for the second quarter of 2007 of $63.4 million were 11% higher than the comparable period last year. The improvement was mainly due to organic sales growth of 9% and the contribution from our 2006 acquisition. The organic sales growth was driven by higher global shot peening revenues in the commercial aerospace market along with strong demand in the specialty coatings business from the automotive and commercial aerospace markets. Sales of this segment were favorably affected by foreign currency translation of $1.8 million in the second quarter of 2007 compared to the prior year period.
Operating income increased 12% for the second quarter of 2007 as compared to the prior year period, primarily as a result of the higher sales volume. Operating income of this segment was favorably affected by foreign currency translation of $0.6 million in the second quarter of 2007 compared to the prior year period.
Mr. Benante concluded, "Primarily as a result of our two recent acquisitions, we are updating our guidance for the full year 2007. We expect our revenues to be in the range of $1.50 billion to $1.52 billion; operating income in the range of $174 million to $181 million; and fully diluted earnings per share in the range of $2.10 to $2.20. The revised 2007 guidance includes minimal impact on sales, operating income, and EPS resulting from the recently announced AP1000 contract award. In addition, we are also updating our free cash flow guidance to a range of $90 million to $100 million to reflect the anticipated impact of the AP1000 program."
"In 2007, we should once again demonstrate our ability to generate long- term shareholder value by growing our sales and earnings. Our historical performance demonstrates our ability to execute our strategy and achieve our financial targets. Our solid performance in the first half of 2007 continues this trend. We expect the second half of 2007 to be even stronger as many of our defense programs ramp up, our commercial markets continue to strengthen, and we realize additional benefits of our integration and cost control efforts. We continue to experience increased demand for our new technologies, many of which are only at the beginning of their life cycles, which should provide strong returns to our shareholders into the future. Our diversification strategy, the continued successful integration of our acquisitions, and ongoing emphasis on advanced technologies should continue to generate growth opportunities in each of our three business segments in 2007 and beyond."
The Company will host a conference call to discuss the second quarter 2007 results at 9:00 EDT Friday, July 27, 2007. A live webcast of the call can be heard on the Internet by visiting the company's website at http://www.curtisswright.com/ and clicking on the investor information page or by visiting other websites that provide links to corporate webcasts.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Net sales $365,576 $309,635 $698,185 $592,187
Cost of sales 247,553 204,082 468,775 394,573
Gross profit 118,023 105,553 229,410 197,614
Research & development expenses 11,487 11,333 22,826 21,304
Selling expenses 22,331 19,280 42,603 37,622
General and administrative
expenses 45,488 41,442 89,849 80,784
Environmental remediation and
administrative expenses, net 162 327 324 89
Loss on sale of fixed assets 146 94 257 119
Operating income 38,409 33,077 73,551 57,696
Other income, net 466 9 1,350 313
Interest expense (5,704) (5,948) (11,204) (11,382)
Earnings before income taxes 33,171 27,138 63,697 46,627
Provision for income taxes 11,781 6,046 22,804 13,257
Net earnings $21,390 $21,092 $40,893 $33,370
Basic earnings per share $0.48 $0.48 $0.93 $0.76
Diluted earnings per share $0.48 $0.48 $0.91 $0.75
Dividends per share $0.06 $0.06 $0.12 $0.12
Weighted average shares
outstanding:
Basic 44,256 43,807 44,200 43,714
Diluted 44,915 44,295 44,815 44,208
Three Months Six Months
Change Change
$ % $ %
Net sales $55,941 18.07% $105,998 17.90%
Cost of sales 43,471 21.30% 74,202 18.81%
Gross profit 12,470 11.81% 31,796 16.09%
Research & development expenses 154 1.36% 1,522 7.14%
Selling expenses 3,051 15.82% 4,981 13.24%
General and administrative expenses 4,046 9.76% 9,065 11.22%
Environmental remediation and
administrative expenses, net (165) -50.46% 235 264.04%
Loss on sale of fixed assets 52 55.32% 138 115.97%
Operating income 5,332 16.12% 15,855 27.48%
Other income, net 457 5077.78% 1,037 331.31%
Interest expense 244 -4.10% 178 -1.56%
Earnings before income taxes 6,033 22.23% 17,070 36.61%
Provision for income taxes 5,735 94.85% 9,547 72.01%
Net earnings $298 1.41% $7,523 22.55%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31, Change
2007 2006 $ %
Assets
Current Assets:
Cash and cash equivalents $66,777 $124,517 $(57,740) -46.4%
Receivables, net 332,107 284,774 47,333 16.6%
Inventories, net 207,584 161,528 46,056 28.5%
Deferred income taxes 24,834 32,485 (7,651) -23.6%
Other current assets 22,086 19,341 2,745 14.2%
Total current assets 653,388 622,645 30,743 4.9%
Property, plant, and
equipment, net 306,257 296,652 9,605 3.2%
Prepaid pension costs 56,646 92,262 (35,616) -38.6%
Goodwill, net 507,448 411,101 96,347 23.4%
Other intangible assets, net 194,937 158,080 36,857 23.3%
Other assets 14,033 11,416 2,617 22.9%
Total Assets $1,732,709 $1,592,156 $140,553 8.8%
Liabilities
Current Liabilities:
Short-term debt $846 $5,874 $(5,028) -85.6%
Accounts payable 111,453 96,023 15,430 16.1%
Accrued expenses 83,513 81,532 1,981 2.4%
Income taxes payable 8,141 23,003 (14,862) -64.6%
Deferred revenue 110,222 57,305 52,917 92.3%
Other current liabilities 41,547 28,388 13,159 46.4%
Total current liabilities 355,722 292,125 63,597 21.8%
Long-term debt 408,991 359,000 49,991 13.9%
Deferred income taxes 53,747 57,055 (3,308) -5.8%
Accrued pension & other
postretirement benefit costs 39,112 71,006 (31,894) -44.9%
Long-term portion of
environmental reserves 20,921 21,220 (299) -1.4%
Other liabilities 32,374 29,676 2,698 9.1%
Total Liabilities 910,867 830,082 80,785 9.7%
Stockholders' Equity
Common stock, $1 par value 47,626 47,533 93 0.2%
Additional paid in capital 74,152 69,887 4,265 6.1%
Retained earnings 751,099 716,030 35,069 4.9%
Accumulated other
comprehensive income 70,115 55,806 14,309 25.6%
942,992 889,256 53,736 6.0%
Less: cost of treasury stock 121,150 127,182 (6,032) -4.7%
Total Stockholders' Equity 821,842 762,074 59,768 7.8%
Total Liabilities and
Stockholders' Equity $1,732,709 $1,592,156 $140,553 8.8%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
Three Months Ended
June 30,
2007 2006 % Change
Sales:
Flow Control $163,198 $129,291 26.2%
Motion Control 138,949 123,111 12.9%
Metal Treatment 63,429 57,233 10.8%
Total Sales $365,576 $309,635 18.1%
Operating Income:
Flow Control $10,030 $12,021 -16.6%
Motion Control 15,585 13,071 19.2%
Metal Treatment 12,987 11,602 11.9%
Total Segments 38,602 36,694 5.2%
Corporate & Other (193) (3,617) -94.7%
Total Operating Income $38,409 $33,077 16.1%
Six Months Ended
June 30,
2007 2006 % Change
Sales:
Flow Control $300,891 $250,458 20.1%
Motion Control 270,206 230,857 17.0%
Metal Treatment 127,088 110,872 14.6%
Total Sales $698,185 $592,187 17.9%
Operating Income:
Flow Control $20,025 $22,887 -12.5%
Motion Control 28,870 18,126 59.3%
Metal Treatment 25,957 21,182 22.5%
Total Segments $74,852 $62,195 20.4%
Corporate & Other (1,301) (4,499) -71.1%
Total Operating Income $73,551 $57,696 27.5%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Net Cash Used by Operating
Activities $60,802 $35,257 $53,104 $1,022
Capital Expenditures (11,909) (9,451) (23,978) (17,137)
Free Cash Flow (1) $48,893 $25,806 $29,126 $(16,115)
Cash Conversion (1) 229% 122% 71% -48%
(1) The Corporation discloses free cash flow and cash conversion because
the Corporation believes that they are measurements of cash flow that
are available for investing and financing activities. Free cash flow
is defined as net cash flow provided by operating activities less
capital expenditures. Free cash flow represents cash generated after
paying for interest on borrowings, income taxes, capital expenditures,
and working capital requirements, but before repaying outstanding debt
and investing cash or utilizing debt credit lines to acquire
businesses and make other strategic investments. Cash conversion is
defined as free cash flow divided by net earnings. Free cash flow, as
we define it, may differ from similarly named measures used by
entities and, consequently, could be misleading unless all entities
calculate and define free cash flow in the same manner.
About Curtiss-Wright
Curtiss-Wright Corporation is a diversified company headquartered in Roseland, New Jersey. The Company designs, manufactures and overhauls products for motion control and flow control applications and provides a variety of metal treatment services. The firm employs approximately 6,300 people. More information on Curtiss-Wright can be found at http://www.curtisswright.com/.
Certain statements made in this release, including statements about future revenue, organic revenue growth, quarterly and annual revenue, net income, organic operating income growth, future business opportunities, cost saving initiatives, and future cash flow from operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward- looking and accordingly involve estimates, assumptions, judgments and uncertainties. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include, but are not limited to: a reduction in anticipated orders; an economic downturn; changes in competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information is available at http://www.curtisswright.com/.
