News Details
CURTISS-WRIGHT REPORTS 2004 THIRD QUARTER AND NINE MONTH FINANCIAL RESULTS
October 28, 2004
Sales Increased 25% and 22% and Operating Income 19% & 21% in the Third Quarter and First Nine Months of 2004, Respectively
Backlog at Record Level
ROSELAND, N.J., Oct. 28 /PRNewswire-FirstCall/ -- Curtiss-Wright Corporation (NYSE: CW, CW.B) today reports financial results for the quarter and nine months ended September 30, 2004. The highlights are as follows:
THIRD QUARTER 2004 OPERATING HIGHLIGHTS
- Net sales for the third quarter of 2004 increased 25% to $236.6 million from $189.6 million in the third quarter of 2003. Acquisitions made in the second half of 2003 and in 2004 contributed $43.0 million in incremental sales in the third quarter of 2004.
- Operating income in the third quarter of 2004 increased 19% to $25.5 million from $21.4 million in the third quarter of 2003. Acquisitions made in the second half of 2003 and in 2004 contributed $2.8 million in incremental operating income in the third quarter of 2004. The increase in operating income was achieved despite a $0.8 million decrease in pension income from the third quarter of 2003 and approximately $1.3 million of costs related to compliance with Sarbanes-Oxley Section 404.
- Net earnings for the third quarter of 2004 increased 18% to $14.7 million, or $0.68 per diluted share, from $12.5 million, or $0.60 per diluted share, in the third quarter of 2003 (adjusted for the 2-for-1 stock split in December 2003). The net earnings for the third quarter of 2004 include a tax benefit of $0.6 million (approximately $0.03 per diluted share) resulting from the recognition of a previously unprovided for deferred tax asset. In addition, the increase in net earnings in the third quarter of 2004 was achieved despite a decrease in pension income (approximately $0.02 per diluted share) and Sarbanes-Oxley costs (approximately $0.04 per diluted share).
- New orders received in the third quarter of 2004 were $239.7 million, up 89% compared to the third quarter of 2003.
NINE MONTHS 2004 OPERATING HIGHLIGHTS
- Net sales for the first nine months of 2004 increased 22% to $673.9 million from $552.4 million in the first nine months of 2003. acquisitions made in 2003 and 2004 contributed $101.4 million in incremental sales in the first nine months of 2004.
- Operating income in the first nine months of 2004 increased 21% to $76.4 million from $63.2 million in the first nine months of 2003. acquisitions made in 2003 and 2004 contributed $7.5 million in incremental operating income in the first nine months of 2004. the increase in operating income was achieved despite a $2.0 million decrease in pension income from the first nine months of 2003 and approximately $1.7 million of costs related to compliance with sarbanes-oxley section 404.
- Net earnings for the first nine months of 2004 increased 19% to $44.7 million, or $2.08 per diluted share, from $37.5 million, or $1.80 per diluted share, in the first nine months of 2003 (adjusted for the 2-for-1 stock split in december 2003). in addition, the increase in 2004 net earnings was achieved despite a decrease in pension income (approximately $0.06 per diluted share) and sarbanes-oxley costs (approximately $0.05 per diluted share).
- New orders received in the first nine months of 2004 were $683.2 million, up 32% compared to the first nine months of 2003. backlog increased 13% to a new record high of $570.9 million from $505.5 million at december 31, 2003.
"we are pleased to again report higher sales and operating income for the third quarter and first nine months of 2004," commented martin r. benante, chairman and ceo of curtiss-wright corporation. "we experienced organic growth in some of our base businesses, as well as solid performance from our acquisitions. overall our acquisitions are meeting our expectations, however, they do generate lower operating margins than those of our base businesses during the early periods of ownership. our diversification strategy has provided growth in the first nine months of 2004 for both our core defense markets, which grew 21%, and commercial and industrial markets, which grew 23%, over the prior year period. we also experienced strong organic sales growth from our metal treatment segment, which grew 21% year-to-date, and strong organic operating income growth in our metal treatment and motion control segments, which grew 67% and 24%, respectively, for the first nine months of 2004."
SALES
Sales growth in 2004 for the three and nine months ended September 30th as compared to 2003, was driven by contributions from acquisitions and organic growth in some of our base businesses. Acquisitions made in 2003 and 2004 have contributed $43.0 million and $101.4 million in incremental sales for the quarter and nine months ended September 30, 2004, respectively, over the comparable periods in 2003. Excluding the overall sales from these acquisitions, we experienced organic growth of 2% and 4% for the three and nine months ended September 30, 2004, respectively, over the prior year periods. The organic sales growth was driven by our Metal Treatment and Motion Control segments, which experienced organic growth of 21% and 4%, respectively, for the first nine months of 2004.
In our base businesses, higher sales of global shot and laser peening from our Metal Treatment segment, higher sales from our Flow Control segment to the commercial power generation and oil and gas markets, and higher repair and overhaul sales from our Motion Control segment to the global commercial aerospace market, all contributed to the organic growth. In addition, foreign currency translation favorably impacted sales by $4.1 million and $11.8 million for the three and nine months ended September 30, 2004, respectively, compared to the prior year periods.
OPERATING INCOME
Operating income for the three and nine months ended September 30, 2004 increased 19% and 21%, respectively, over the 2003 prior year periods. The increases were due to higher sales volumes, favorable sales mix and previously implemented cost control initiatives. Overall, organic growth was 7% and 12% for the three and nine months ended September 30, 2004, respectively, compared to the prior year periods. The strong year-to-date performance was driven by our Metal Treatment and Motion Control segments, which produced organic growth of 67% and 24%, respectively. The solid segment operating income growth was achieved despite the absorption of consulting costs associated with Sarbanes- Oxley Rule 404 compliance which primarily occurred in the third quarter.
The higher segment operating income was partially offset by lower pension income of $0.8 million and $2.0 million for the three and nine months ended September 30, 2004, respectively, over the comparable prior year periods. In addition, foreign currency translation favorably impacted operating income by $0.7 million and $1.9 million for the three and nine months ended September 30, 2004, respectively, compared to the prior year periods.
On a consolidated basis, our operating margin was 10.8% in the third quarter of 2004 versus 11.3% in the prior year. Our year to date operating margin was 11.3% versus 11.4% last year. Our operating margins continue to be affected by higher amortization expense due to our robust acquisition activity over the past couple of years. Approximately 40% of the amortization expense for the first nine months of 2004, or $2.6 million, occurred in the third quarter and caused a drag on our earnings.
NET EARNINGS
Net earnings increased 18% and 19% for the three and nine months ended September 30, 2004, respectively, over the comparable prior year periods. This was achieved as a result of strong operating income from our business segments, which increased $6.1 million and $16.8 million for the three and nine months ended September 30, 2004, respectively, over the prior year periods.
Net earnings for the first nine months includes two one-time tax benefits totaling $2.1 million, a change in legal structure of one of our subsidiaries in the first quarter ($1.5 million) and the recognition of a previously unprovided for deferred tax asset in the third quarter ($0.6 million). These improvements were partially offset by higher interest expense associated with the debt incurred to fund our acquisition program and from higher interest rates.
SEGMENT PERFORMANCE
Flow Control - Sales for the third quarter of 2004 were $94.2 million, up 12% over the comparable period last year, principally due to the contributions from the 2004 acquisitions. Sales growth was achieved in the commercial power generation, oil and gas, and defense electronics markets. This growth was mostly offset by lower sales of flow control products to the US Navy primarily due to the timing of contractual revenues. Sales of this business segment also benefited from favorable foreign currency translation of $0.5 million in the third quarter of 2004 as compared to the prior year period.
Operating income for this segment increased 39% in the third quarter of 2004 compared to the prior year period. The improvement was due to strong organic growth of 47%, lead by favorable sales mix, implemented cost reduction initiatives, and higher sales volume of our commercial power generation, oil and gas, and defense electronic products. The improvement was partially offset by the profit impact related to lower sales of flow control product to the US Navy.
Motion Control - Sales for the third quarter of 2004 of $97.7 million increased 39% over last year, principally due to the contributions from the 2003 and 2004 acquisitions. Sales from the base businesses decreased 5% in the third quarter of 2004 as compared to the prior year period. This reduction was due to lower sales of F-16 spares and lower ground defense sales associated with the Bradley Fighting Vehicle. Higher sales associated with repair and overhaul services and our integrated sensor group partially offset the decrease in military sales. Sales of this business segment also benefited from favorable foreign currency translation of $2.0 million in the third quarter of 2004 as compared to the prior year period.
Operating income for this segment increased 9% for the third quarter of 2004 compared to the prior year period. The improvement was driven by higher sales volume previously mentioned, favorable sales mix, and implemented cost control initiatives. Additionally, the operating margins for the repair and overhaul business improved substantially over the comparable period last year, mainly as a result of higher volume and implemented cost control initiatives.
Metal Treatment - Sales for the third quarter of 2004 of $44.6 million were 26% higher than the comparable period last year. The improvement was mainly due to organic growth of 21% driven by higher overall laser and shot peening revenues, and the contributions from the 2004 acquisitions. This segment achieved exceptional sales growth from our new laser peening technology as well as strong growth in our global shot peening businesses. Favorable foreign currency translation positively impacted sales by $1.6 million in the third quarter of 2004 as compared to the prior year period.
Operating income increased 58% for the third quarter of 2004 as compared to the prior year period. Margins improved substantially in our shot peening businesses primarily as a result of higher sales volume, especially for our higher margin laser peening business. In addition, favorable sales mix, cost reduction programs, and favorable foreign currency translation also contributed to the higher operating income.
Mr. Benante concluded, "In 2004, we continue to demonstrate our ability to generate long-term shareholder value by growing our sales and earnings. Our strong performance in the first nine months of 2004 exemplifies our ability to execute our strategy and achieve our financial targets. We expect the fourth quarter of 2004 to be strong as it has been historically, and the full year results to be in line with our guidance. Our successful growth is the result of our diversification and ability to deliver the high performance, technologically advanced products for which Curtiss-Wright is world renowned. We continue to experience increasing demand for our new technologies, many of which are only at the beginning of their life cycle, which should continue to provide superior returns to our shareholders into the future."
The Company will host a conference call to discuss the third quarter 2004 results at 10:00 EDT Friday, October 29, 2004. A live webcast of the call can be heard on the Internet by visiting the company's website at http://curtisswright2014.q4web.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 Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Net sales $236,574 $189,618 $673,935 $552,408
Cost of sales 154,725 132,601 444,469 379,677
Gross profit 81,849 57,017 229,466 172,731
Research & development expenses 8,443 5,417 24,409 16,494
Selling expenses 17,413 9,612 44,760 28,887
General and administrative
expenses 30,033 20,740 83,071 65,320
Environmental remediation and
administrative expenses, net 200 380 491 380
Pension expense (income), net 295 (527) 377 (1,580)
Operating income 25,465 21,395 76,358 63,230
Other income (expenses), net 185 (91) (11) 182
Interest expense (3,135) (1,113) (8,418) (2,906)
Earnings before income taxes 22,515 20,191 67,929 60,506
Provision for income taxes 7,795 7,672 23,276 22,992
Net earnings $14,720 $12,519 $44,653 $37,514
Basic earnings per share $0.69 $0.61 $2.11 $1.82
Diluted earnings per share $0.68 $0.60 $2.08 $1.80
Dividends per share $0.09 $0.08 $0.27 $0.23
Weighted average shares outstanding:
Basic 21,359 20,656 21,122 20,608
Diluted 21,715 20,936 21,476 20,856
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Three Months Nine Months
Change Change
$ % $ %
Net sales $46,956 24.76% $121,527 22.00%
Cost of sales 22,124 16.68% 64,792 17.07%
Gross profit 24,832 43.55% 56,735 32.85%
Research & development expenses 3,026 55.86% 7,915 47.99%
Selling expenses 7,801 81.16% 15,873 54.95%
General and administrative expenses 9,293 44.81% 17,751 27.18%
Environmental remediation and
administrative expenses, net (180) N/A 111 N/A
Pension expense (income), net 822 -155.98% 1,957 -123.86%
Operating income 4,070 19.02% 13,128 20.76%
Other income (expenses), net 276 -303.30% (193) -106.04%
Interest expense (2,022) 181.67% (5,512) 189.68%
Earnings before income taxes 2,324 11.51% 7,423 12.27%
Provision for income taxes 123 1.61% 284 1.24%
Net earnings $2,201 17.58% $7,139 19.03%
Share and per share amounts have been restated to reflect the
Corporation's 2-for-1 stock split on December 17, 2003.
Certain prior year information has been reclassified to conform to
current presentation.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
September December
30, 31, Change
2004 2003 $ %
Assets
Current Assets:
Cash and cash equivalents $38,537 $98,672 $(60,135) -60.9%
Receivables, net 184,559 143,362 41,197 28.7%
Inventories, net 116,837 97,880 18,957 19.4%
Deferred income taxes 24,307 23,630 677 2.9%
Other current assets 13,697 10,979 2,718 24.8%
Total current assets 377,937 374,523 3,414 0.9%
Property, plant, and equipment, net 251,086 238,139 12,947 5.4%
Prepaid pension costs 77,821 77,877 (56) -0.1%
Goodwill, net 346,367 220,058 126,309 57.4%
Other intangible assets, net 110,063 48,268 61,795 128.0%
Other assets 18,846 14,800 4,046 27.3%
Total Assets $1,182,120 $973,665 $208,455 21.4%
Liabilities
Current Liabilities:
Short-term debt $957 $997 $(40) -4.0%
Accounts payable 55,716 43,776 11,940 27.3%
Accrued expenses 47,441 44,938 2,503 5.6%
Income taxes payable 4,975 6,748 (1,773) -26.3%
Other current liabilities 45,103 39,424 5,679 14.4%
Total current liabilities 154,192 135,883 18,309 13.5%
Long-term debt 348,226 224,151 124,075 55.4%
Deferred income taxes 20,618 21,798 (1,180) -5.4%
Accrued pension & other
postretirement benefit costs 79,427 75,633 3,794 5.0%
Long-term portion of
environmental reserves 19,364 21,083 (1,719) -8.2%
Other liabilities 21,183 16,236 4,947 30.5%
Total Liabilities 643,010 494,784 148,226 30.0%
Stockholders' Equity
Common stock, $1 par value 16,646 16,611 35 0.2%
Class B common stock, $1 par value 8,765 8,765 0 0.0%
Capital surplus 52,911 52,998 (87) -0.2%
Retained earnings 582,579 543,670 38,909 7.2%
Unearned portion of restricted
stock (39) (55) 16 -29.1%
Accumulated other comprehensive
income 23,037 22,634 403 1.8%
683,899 644,623 39,276 6.1%
Less: cost of treasury stock 144,789 165,742 (20,953) -12.6%
Total Stockholders' Equity 539,110 478,881 60,229 12.6%
Total Liabilities and
Stockholders' Equity $1,182,120 $973,665 $208,455 21.4%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
Three Months Ended
September 30,
%
2004 2003 Change
Sales:
Flow Control $94,204 $84,167 11.9%
Motion Control 97,727 70,157 39.3%
Metal Treatment 44,643 35,294 26.5%
Total Sales $236,574 $189,618 24.8%
Operating Income:
Flow Control $9,845 $7,110 38.5%
Motion Control 10,399 9,537 9.0%
Metal Treatment 6,817 4,321 57.8%
Total Segments 27,061 20,968 29.1%
Pension (Expense)/Income (295) 527 -156.0%
Corporate & Other (1,301) (100) 1201.0%
Total Operating Income $25,465 $21,395 19.0%
Operating Margins:
Flow Control 10.5% 8.4%
Motion Control 10.6% 13.6%
Metal Treatment 15.3% 12.2%
Total Curtiss-Wright 10.8% 11.3%
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
Nine Months Ended
September 30,
%
2004 2003 Change
Sales:
Flow Control $269,804 $263,125 2.5%
Motion Control 272,649 188,181 44.9%
Metal Treatment 131,482 101,102 30.0%
Total Sales $673,935 $552,408 22.0%
Operating Income:
Flow Control $29,122 $30,176 -3.5%
Motion Control 28,700 18,734 53.2%
Metal Treatment 20,971 13,102 60.1%
Total Segments 78,793 62,012 27.1%
Pension (Expense)/Income (377) 1,580 -123.9%
Corporate & Other (2,058) (362) 468.5%
Total Operating Income $76,358 $63,230 20.8%
Operating Margins:
Flow Control 10.8% 11.5%
Motion Control 10.5% 10.0%
Metal Treatment 15.9% 13.0%
Total Curtiss-Wright 11.3% 11.4%
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 5,500 people. More information on Curtiss-Wright can be found at http://curtisswright2014.q4web.com.
Forward-looking statements in this release are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. 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. Please refer to the Company's current SEC filings under the Securities and Exchange Act of 1934, as amended, for further information.
This press release and additional information is available at http://curtisswright2014.q4web.com.
SOURCE Curtiss-Wright Corporation
CONTACT: Alexandra M. Deignan of Curtiss-Wright Corporation,
+1-973-597-4734, or [email protected]
/Web site: http://curtisswright2014.q4web.com