ROSELAND, N.J., Oct. 25 /PRNewswire-FirstCall/ -- Curtiss-Wright Corporation today reports financial results for the third quarter and nine months ended September 30, 2007. The highlights are as follows:
Third Quarter 2007 Operating Highlights -- Net sales for the third quarter of 2007 increased 27% to $396.3 million from $311.8 million in the third quarter of 2006. -- Operating income in the third quarter of 2007 increased 19% to $44.5 million from $37.3 million in the third quarter of 2006. -- Net earnings for the third quarter of 2007 increased 24% to $25.2 million, or $0.56 per diluted share, from $20.4 million, or $0.46 per diluted share, in the third quarter of 2006. Nine Months 2007 Operating Highlights -- Net sales for the first nine months of 2007 increased 21% to $1,094.5 million from $904.0 million in the first nine months of 2006. -- Operating income in the first nine months of 2007 increased 24% to $118.0 million from $94.9 million in the first nine months of 2006. -- Net earnings for the first nine months of 2007 increased 23% to $66.1 million, or $1.47 per diluted share, from $53.7 million, or $1.21 per diluted share, in the first nine months of 2006. Net earnings for the first nine 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 nine months of 2007 were $1,433.9 million, up 47% compared to the first nine months of 2006. At September 30, 2007, our record high backlog was $1,376.8 million, up 57% from $875.5 million at December 31, 2006.
"We are pleased to report increased sales and operating income for the third quarter of 2007," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. Our solid operating income performance in the third quarter was led by our Metal Treatment and Flow Control segments, which experienced organic operating income growth of 21% and 3%, respectively, over the prior year period. From a market perspective, our commercial sales continue to be strong with 20% overall organic sales growth in the third quarter of 2007, driven primarily by organic growth of 51% in the oil and gas market and 14% 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 remainder of 2007 and heading into 2008. We are excited about our recently signed contract with Westinghouse for the AP1000 nuclear reactors in China, where we will be supplying our advanced reactor coolant pumps. This effort solidifies our leadership in this new advanced nuclear plant design. 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, we anticipate higher operating margins in the fourth quarter of 2007 as a result of higher sales volume in both of our military and commercial businesses."
Sales
Sales growth for the Corporation in the third quarter of 2007 was primarily driven by solid organic growth and contributions from our 2007 and 2006 acquisitions as compared to the prior year period. Overall organic sales growth was 12% for the third quarter 2007 over the prior year period. All of our operating segments contributed to the organic sales growth in the third quarter of 2007, primarily due to strengths in the commercial markets. In the third quarter of 2007, acquisitions made since June 30, 2006 contributed $48.1 million in incremental sales over the prior year period.
In our base businesses, higher sales from our Flow Control segment to the oil and gas and power generation markets, higher sales from our Motion Control segment to defense markets and the commercial aerospace market, and higher sales from our Metal Treatment segment to the commercial aerospace and automotive markets all contributed to the quarterly organic sales growth. In addition, foreign currency translation positively impacted sales by $4.1 million for the third quarter of 2007, as compared to the prior year period.
Operating Income
Operating income for the Corporation for the third quarter of 2007 increased 19% over the prior year period. The organic operating income growth for the third quarter of 2007 was 8%, led by our Metal Treatment and Flow Control segments, which experienced solid organic growth of 21% and 3%, respectively, over the prior year period. The organic operating income for our Motion Control segment decreased 4%, mainly due to less favorable sales mix resulting from reduced spares sales and increased development work. Our consolidated operating margin in the third quarter of 2007 decreased as compared to the prior year period mainly due to sales mix, increased research and development expenses, and our acquisitions which typically have lower margins initially than our base businesses. Non-segment operating expense improved $1.0 million primarily due to lower unallocated medical costs under the Company's self-insured medical insurance plan. In addition, foreign currency translation unfavorably impacted operating income by $0.2 million for the third quarter 2007, compared to the prior year period.
Net Earnings
Net earnings increased 24% for the third quarter of 2007 over the comparable prior year period. Operating income from our business segments increased $6.3 million for the third quarter of 2007 over the prior year period. Our effective tax rate for the third quarter of 2007 was 32.0% versus 35.4% for the third quarter of 2006. The lower tax rate was mainly due to final return to provision adjustments. Interest expense for the third quarter of 2007 increased due to higher debt levels resulting from our recent acquisitions and slightly higher interest rates, as compared to the prior year period.
Cash Flow
Net cash provided by operating activities for the first nine months of 2007 was $47 million, an improvement from the $25 million in the first nine months of 2006. Our 2007 free cash flow, defined as cash flow from operations less capital expenditures, was $11 million for the first nine months of 2007, as compared to a loss of ($3) million in the first nine months of 2006. Our Flow Control and Metal Treatment segments drove the improved results. The improved cash flow resulted primarily from higher advance payments received in 2007 for the AP1000 program. Higher earnings were offset by higher inventory and receivables year-over-year.
Segment Performance
Flow Control -- Sales for the third quarter of 2007 were $190.8 million, up 47% over the comparable period last year due to solid organic growth and the contribution from the 2006 and 2007 acquisitions. Organic sales growth was 12% in the third quarter of 2007 over the comparable 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 as strong sales of other products and services within the market. In addition, higher commercial nuclear power sales were driven by the timing of customer maintenance and replacement schedules and the addition of new teaming partners. In the third quarter of 2007, acquisitions made since June 30, 2006 contributed $45.7 million in incremental sales over the comparable prior year period. Sales of this segment were positively affected by foreign currency translation of $0.3 million in the third quarter of 2007 compared to the prior year period.
Operating income for this segment increased 34% in the third quarter of 2007 over the comparable prior year period. This segment's organic operating income increased 3% in the third quarter of 2007 mainly due to higher sales volume and improved operating performance resulting from our businesses that were consolidated in 2006. These items were partially offset by higher research and development costs, mainly within our commercial nuclear power market. This segment continues to invest in development programs, which have an adverse impact on the margins in the short-term, but should provide good growth opportunities in the future. In the third quarter of 2007, acquisitions made since June 30, 2006 contributed $4.3 million in incremental operating income over the comparable prior year period. Operating income of this segment was unfavorably affected by foreign currency translation of $0.1 million in the third quarter of 2007 compared to the prior year period.
Motion Control -- Sales for the third quarter of 2007 of $142.5 million increased 13% over the comparable period last year. This improvement was due primarily to organic sales growth of 12% and the contribution from our 2007 acquisition of $2.4 million in the third quarter of 2007. The organic sales growth was driven by higher sales of actuator and sensor products to the commercial aerospace market and increased sales of embedded computing and marine defense products to the defense markets. Sales of this segment were favorably affected by foreign currency translation of $1.9 million in the third quarter of 2007 compared to the prior year period.
Operating income for this segment decreased 4% for the third quarter of 2007 over the comparable prior year period. The reduction in operating income was primarily due to higher sales of lower margin new business, lower sales of higher margin military spares, increased research and development costs within our embedded computing business, and the negative impact of foreign currency translation, which unfavorably affected operating income by $0.8 million in the third quarter of 2007 compared to the prior year period.
Metal Treatment -- Sales for the third quarter of 2007 of $62.9 million were 12% higher than the comparable period last year, all growth being organic. The organic sales growth was driven by higher global shot peening revenues primarily in the commercial aerospace market along with strong demand in the specialty coatings business from the commercial aerospace and automotive markets. Sales of this segment were favorably affected by foreign currency translation of $1.9 million in the third quarter of 2007 compared to the prior year period.
Operating income increased 21% for the third 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 $0.7 million in the third quarter of 2007 compared to the prior year period.
Mr. Benante concluded, "We are updating our guidance for the full year 2007. We expect our revenues to be in the range of $1.56 billion to $1.58 billion; operating income in the range of $176 million to $183 million; and fully diluted earnings per share in the range of $2.14 to $2.24. In addition, we are also updating our free cash flow guidance to a range of $75 million to $85 million to reflect the commencement 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 nine months of 2007 continues this trend. We expect the fourth quarter of 2007 to be strong 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."
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The Company will host a conference call to discuss the third quarter 2007 results at 10:00 A.M. EST Friday, October 26, 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.
(Tables to Follow) CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) Three Months Ended Nine Months Ended September 30, Change September 30, Change 2007 2006 % 2007 2006 % Net sales $396,268 $311,801 27.1% $1,094,453 $903,988 21.1% Cost of sales 266,448 205,783 29.5% 735,223 600,356 22.5% Gross profit 129,820 106,018 22.5% 359,230 303,632 18.3% Research & development expenses 12,655 7,227 75.1% 35,481 28,531 24.4% Selling expenses 23,789 19,382 22.7% 66,392 57,004 16.5% General and administrative expenses 48,727 41,885 16.3% 138,833 122,788 13.1% Environmental remediation & administrative expenses, net 161 273 (41.0%) 485 362 34.0% Operating income 44,488 37,251 19.4% 118,039 94,947 24.3% Other income, net 231 (18)(1383.3%) 1,581 295 435.9% Interest expense (7,712) (5,721) 34.8% (18,916) (17,103) 10.6% Earnings before income taxes 37,007 31,512 17.4% 100,704 78,139 28.9% Provision for income taxes 11,832 11,156 6.1% 34,635 24,413 41.9% Net earnings $25,175 $20,356 23.7% $66,069 $53,726 23.0% Basic earnings per share $0.57 $0.46 $1.49 $1.23 Diluted earnings per share $0.56 $0.46 $1.47 $1.21 Dividends per share $0.06 $0.06 $0.18 $0.18 Weighted average shares outstanding: Basic 44,413 43,903 44,285 43,779 Diluted 45,102 44,338 44,925 44,254 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) September December 30, 31, Change 2007 2006 $ % Assets Current Assets: Cash and cash equivalents $59,347 $124,517 $(65,170) (52.3%) Receivables, net 369,838 284,774 85,064 29.9% Inventories, net 251,005 161,528 89,477 55.4% Deferred income taxes 26,863 32,485 (5,622) (17.3%) Other current assets 20,112 19,341 771 4.0% Total current assets 727,165 622,645 104,520 16.8% Property, plant, & equipment, net 320,818 296,652 24,166 8.1% Prepaid pension costs 56,113 92,262 (36,149) (39.2%) Goodwill, net 587,238 411,101 176,137 42.8% Other intangible assets, net 226,317 158,080 68,237 43.2% Other assets 15,184 11,416 3,768 33.0% Total Assets $1,932,835 $1,592,156 $340,679 21.4% Liabilities Current Liabilities: Short-term debt $902 $5,874 $(4,972) (84.6%) Accounts payable 108,650 96,023 12,627 13.1% Accrued expenses 89,584 81,532 8,052 9.9% Income taxes payable 4,016 23,003 (18,987) (82.5%) Deferred revenue 104,392 57,305 47,087 82.2% Other current liabilities 35,830 28,388 7,442 26.2% Total current liabilities 343,374 292,125 51,249 17.5% Long-term debt 571,986 359,000 212,986 59.3% Deferred income taxes 58,808 57,055 1,753 3.1% Accrued pension & other postretirement benefit costs 38,765 71,006 (32,241) (45.4%) Long-term portion of environmental reserves 18,777 21,220 (2,443) (11.5%) Other liabilities 37,468 29,676 7,792 26.3% Total Liabilities 1,069,178 830,082 239,096 28.8% Stockholders' Equity Common stock, $1 par value 47,715 47,533 182 0.4% Additional paid in capital 78,604 69,887 8,717 12.5% Retained earnings 772,710 716,030 56,680 7.9% Accumulated other comprehensive income 83,985 55,806 28,179 50.5% 983,014 889,256 93,758 10.5% Less: cost of treasury stock 119,357 127,182 (7,825) (6.2%) Total Stockholders' Equity 863,657 762,074 101,583 13.3% Total Liabilities and Stockholders' Equity $1,932,835 $1,592,156 $340,679 21.4% CURTISS-WRIGHT CORPORATION and SUBSIDIARIES SEGMENT INFORMATION (In thousands) Three Months Ended Nine Months Ended September 30, September 30, % % 2007 2006 Change 2007 2006 Change Sales: Flow Control $190,811 $129,819 47.0% $491,702 $380,277 29.3% Motion Control 142,524 125,639 13.4% 412,730 356,496 15.8% Metal Treatment 62,933 56,343 11.7% 190,021 167,215 13.6% Total Sales $396,268 $311,801 27.1% $1,094,453 $903,988 21.1% Operating Income: Flow Control $18,733 $14,014 33.7% $38,758 $36,901 5.0% Motion Control 14,756 15,310 (3.6%) 43,626 33,436 30.5% Metal Treatment 12,597 10,448 20.6% 38,554 31,630 21.9% Total Segments 46,086 39,772 15.9% $120,938 $101,967 18.6% Corporate & Other (1,598) (2,521) (36.6%) (2,899) (7,020) (58.7%) Total Operating Income $44,488 $37,251 19.4% $118,039 $94,947 24.3% CURTISS-WRIGHT CORPORATION and SUBSIDIARIES NON-GAAP FINANCIAL DATA (UNAUDITED) (In thousands) Three Months Ended Nine Months Ended September 30, September 30 2007 2006 2007 2006 Net Cash Provided by Operating Activities $(6,365) $24,241 $46,739 $25,263 Capital Expenditures (11,518) (10,789) (35,496) (27,926) Free Cash Flow(1) $(17,883) $ 13,452 $11,243 $(2,663) Cash Conversion(1) (71%) 66% 17% (5%) (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 7,300 people. More information on Curtiss-Wright can be found at http://www.curtisswright.com/.
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Certain statements made in this release, including statements about future revenue, organic revenue growth, quarterly and annual revenue, net income, organic operating income growth, future business opportunities, cost saving initiatives, and future cash flow from operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward- looking and accordingly involve estimates, assumptions, judgments and uncertainties. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include, but are not limited to: a reduction in anticipated orders; an economic downturn; changes in competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information is available at http://www.curtisswright.com/.
