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Curtiss-Wright Corp.$125.58($.16)(.13%)

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 Curtiss-Wright Reports Second Quarter 2019 Financial Results and Reaffirms Full-Year 2019 Guidance
   Wednesday, July 31, 2019 4:38:00 PM ET

DAVIDSON, N.C.--(BUSINESS WIRE)--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights:

  • Reported diluted earnings per share (EPS) of $1.86, with Adjusted diluted EPS of $1.90 (defined below), up 11% and 6%, respectively, compared with the prior year;
  • Net sales of $639 million, up 3%;
  • Reported operating income of $106 million, with Adjusted operating income of $108 million;
  • Reported operating margin of 16.5%, with Adjusted operating margin of 16.8%;
  • Reported free cash flow of $76 million, with Adjusted free cash flow of $80 million; and
  • Share repurchases of approximately $13 million.


Maintaining Full-Year Adjusted 2019 Business Outlook (compared with Adjusted full-year 2018):

  • Sales growth of 4 - 6%
  • Adjusted operating income growth of 6 - 9%
  • Adjusted operating margin range of 16.2% to 16.3%, up 40 - 50 basis points
  • Adjusted diluted EPS range of $7.00 to $7.15, up 10 - 12%; and
  • Adjusted free cash flow range of $330 to $340 million, representing a free cash flow conversion rate of approximately 110%.

“Our second quarter results were led by strong 11% sales growth in our defense markets, improved profitability in the Commercial/Industrial and Power segments, and the benefits of our ongoing margin improvement initiatives,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “Our results also included a $4 million planned ramp up in research and development investments to support our long-term organic growth.”

“Looking ahead to the remainder of 2019, we are reaffirming our full-year guidance for sales, operating income, operating margin, diluted EPS and free cash flow. We are projecting another solid operational performance including higher sales in all end markets, strong margin expansion and solid free cash flow generation, as we continue to deliver significant long-term value to our shareholders.”

(In millions)

2Q-2019

2Q-2018

Change

Sales

$ 639.0

$ 620.3

3%

Reported operating income

$ 105.7

$ 102.1

4%

Adjustments (1)

 

Adjusted operating income (1)

$ 107.7

$ 109.1

(1%)

Adjusted operating margin (1)

16.8%

17.6%

(80 bps)

(1) Adjusted results exclude one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions of TCG in 2019 (Defense segment) and DRG in 2018 (Power segment), respectively, and one-time transition and IT security costs associated with the relocation of our DRG business.

  • Sales of $639 million, up $19 million, or 3%, compared with the prior year (3% organic, 1% acquisitions, 1% unfavorable foreign currency translation);
  • From an end market perspective, total sales to the defense markets increased 11%, or 10% organically, led by strong growth in ground and naval defense, while total sales to the commercial markets decreased 3%, as higher commercial aerospace sales were more than offset by reduced power generation sales, compared with the prior year. Please refer to the accompanying tables for a breakdown of sales by end market;
  • Reported operating income was $106 million, up 4% compared with the prior year, while reported operating margin was flat at 16.5%;
  • Adjusted operating income of $108 million, nearly flat compared with the prior year, principally reflects higher defense revenues in the Commercial/Industrial and Power segments, offset by reduced operating income on flat sales in the Defense segment and higher non-segment expenses;
  • Adjusted operating margin of 16.8%, down 80 basis points compared with the prior year, primarily reflects reduced profitability and higher research and development expenses in the Defense segment, partially offset by favorable overhead absorption on higher naval defense revenues in the Power segment, as well as increased operating income and the benefits of our ongoing margin improvement initiatives in the Commercial/Industrial segment;
  • Operating results included a gain on the sale of a building that was originally expected in the third quarter of 2019 and provided a $4 million benefit to current quarter results; and
  • Non-segment expenses of $10 million increased by $3 million compared with the prior year, primarily due to higher corporate expenses.

Net Earnings and Diluted EPS

(In millions, except EPS)

2Q-2019

2Q-2018

Change

Reported net earnings

$ 80.1

$ 74.8

7%

Adjustments (1)

2.0

7.0

 

Tax impact on Adjustments (1)

 

Adjusted net earnings (1)

$ 81.6

$ 80.2

2%

Reported diluted EPS

$ 1.86

$ 1.68

11%

Adjustments (1)

0.05

0.16

 

Tax impact on Adjustments (1)

 

Adjusted diluted EPS (1)

$ 1.90

$ 1.80

6%

(1) Adjusted results exclude one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions, and one-time transition and IT security costs associated with the relocation of our DRG business.

  • Reported net earnings of $80 million, up $5 million, or 7%, reflecting higher segment operating income and lower interest expense, partially offset by higher corporate expenses;
  • Reported diluted EPS of $1.86, up $0.18, or 11%, compared with the prior year, reflecting higher segment operating income, lower interest expense and a lower share count, partially offset by higher corporate expenses;
  • Adjusted net earnings of $82 million, up $2 million, or 2%, and Adjusted diluted EPS of $1.90, up $0.10, or 6%, compared with the prior year; and
  • Effective tax rate (ETR) of 22.7% was essentially flat with the prior year quarter.

Free Cash Flow

(In millions)

2Q-2019

2Q-2018

Change

Net cash used for operating activities

$ 92.2

$ 97.9

(6%)

Capital expenditures

(51%)

Reported free cash flow

$ 75.8

$ 87.1

(13%)

Adjustment to capital expenditures (DRG facility investment) (1)

-

-

Adjusted free cash flow (1)

$ 79.8

$ 87.1

(8%)

(1) Adjusted free cash flow excludes second quarter 2019 capital spending in accordance with the Company’s planned $20 million capital investment related to the new, state-of-the-art naval facility principally for DRG.

  • Reported free cash flow of $76 million, defined as cash flow from operations less capital expenditures, decreased $11 million, or 13%, compared with the prior year, primarily driven by timing of supplier payments and higher capital expenditures;
  • Capital expenditures increased by approximately $6 million to $16 million compared with the prior year, primarily due to higher capital investments within the Power segment, including a $4 million investment related to the new, state-of-the-art naval facility for the DRG business; and
  • Adjusted free cash flow, which excludes the facility investment in the current period, decreased $7 million to $80 million, principally due to the timing of supplier payments.

New Orders and Backlog

  • Year-to-date, new orders of $1.3 billion increased 3% compared with the prior year period, led by strong organic growth in naval defense orders; and
  • Backlog of $2.2 billion increased 10% from December 31, 2018.

Other Items – Share Repurchase

  • During the second quarter, the Company repurchased 109,436 shares of its common stock for approximately $13 million; and
  • Year-to-date, the Company repurchased 216,708 shares for approximately $25 million.

Commercial/Industrial

(In millions)

2Q-2019

2Q-2018

Change

Sales

$ 318.3

$ 312.5

2%

Reported operating income

$ 56.2

$ 51.7

9%

Reported operating margin

17.7%

16.6%

110 bps

  • Sales of $318 million, up $6 million, or 2%, compared with the prior year (3% organic, 1% unfavorable foreign currency translation);
  • Strong sales growth in the aerospace and naval defense markets was led by higher sales of actuation systems on the F-35 program and higher sales of valves on the Virginia class submarine program, respectively;
  • Commercial aerospace market sales growth was led by higher OEM sales of sensors;
  • Lower power generation market sales reflect reduced international sales of surface technology services and valves;
  • General industrial market sales were essentially flat, as solid demand for industrial valves and industrial controls were offset by reduced sales of surface treatment services; and
  • Reported operating income was $56 million, up 9%compared with the prior year, while reported operating margin increased 110 basis points to 17.7%, principally driven by the benefits of our ongoing margin improvement initiatives and the aforementioned gain on the sale of a building, partially offset by increased research and development expenses and the impact from tariffs.

Defense

(In millions)

2Q-2019

2Q-2018

Change

Sales

$ 145.0

$ 146.2

(1%)

Reported operating income

$ 29.7

$ 38.6

(23%)

Adjustments (1)

-

-

Adjusted operating income (1)

$ 30.5

$ 38.6

(21%)

Adjusted operating margin (1)

21.0%

26.4%

(540 bps)

(1) Adjusted results exclude one-time backlog amortization and transaction costs for current year acquisition.

  • Sales of $145 million, down $1 million, or 1%, compared with the prior year ((3%) organic, 3% acquisition, 1% unfavorable foreign currency translation);
  • Aerospace defense market sales were essentially flat, as higher sales of tactical data link equipment (TCG acquisition) were offset by lower sales of embedded computing equipment on various programs;
  • Ground defense market revenues increased principally due to higher sales on the Abrams tank platform;
  • Lower naval defense market revenues were the result of reduced sales of embedded computing equipment on various programs;
  • Lower general industrial market revenues reflect reduced industrial controls sales due to the timing of an automotive contract completed last year;
  • Reported operating income was $30 million, with Reported operating margin of 20.5%; and
  • Adjusted operating income of $31 million, down $8 million, or 21%, compared with the prior year, while Adjusted operating margin decreased 540 basis points to 21.0%, reflecting unfavorable mix and higher research and development expenses in the current year, as well as favorable contract adjustments within our naval defense business in the prior year which did not recur.

Power

(In millions)

2Q-2019

2Q-2018

Change

Sales

$ 175.8

$ 161.7

9%

Reported operating income

$ 30.1

$ 19.2

57%

Adjustments (1)

 

Adjusted operating income (1)

$ 31.2

$ 26.2

19%

Adjusted operating margin (1)

17.8%

16.2%

160 bps

(1) Adjusted results exclude one-time Inventory Step-up, Backlog Amortization and Transaction costs for prior year acquisition, and one-time transition and IT security costs associated with the relocation of our DRG business.

  • Sales of $176 million, up $14 million, or 9%, compared with the prior year;
  • Strong naval defense market sales were driven by higher Virginia class submarine and CVN-80 aircraft carrier revenues, as well as solid spares and service center revenues;
  • Reduced power generation market sales reflect timing of production on the China Direct AP1000 program and lower domestic aftermarket revenues;
  • Reported operating income was $30 million, with Reported operating margin of 17.1%; and
  • Adjusted operating income was $31 million, up $5 million, or 19% compared with the prior year, while Adjusted operating margin increased 160 basis points to 17.8%, principally reflecting favorable overhead absorption on higher naval defense revenues.

The Company is reaffirming its full-year 2019 financial guidance as follows:

(In millions, except EPS)

2019E Adjusted Guidance

(Current) (1)

2019E Change vs 2018 Adjusted (1)

Total Sales

$2,510 - $2,550

Up 4 - 6%

Operating Income

$406 - $415

Up 6 - 9%

Operating Margin

16.2% - 16.3%

Up 40 - 50 bps

Effective Tax Rate

23.0%

 

Diluted EPS

$7.00 - $7.15

Up 10 - 12%

Diluted Shares Outstanding

43.3

 

Free Cash Flow (2)

$330 - $340

Up 0 - 2%

(1) 2019 Adjusted guidance excludes one-time backlog amortization and transaction costs associated with the acquisition of TCG in the Defense segment, and one-time transition and IT security costs associated with the relocation of our DRG business in the Power segment.

(2) 2019 Adjusted free cash flow guidance excludes a $20 million capital investment in the Power segment related to the new, state-of-the-art naval facility principally for DRG.

A more detailed breakdown of the Company’s 2019 guidance by segment and by market can be found in the accompanying schedules.

**********

The Company will host a conference call to discuss its second quarter financial results and business outlook at 9:00 a.m. EDT on Thursday, August 1, 2019. A live webcast of the call and the accompanying financial presentation, as well as a replay of the call, will be made available on the internet by visiting the Investor Relations section of the Company’s website at www.curtisswright.com .

(Tables to Follow)

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

($'s in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

Change

 

June 30,

 

Change

 

 

2019

 

2018

 

$

%

 

2019

 

2018

 

$

%

Product sales

 

$

532,253

 

 

$

511,676

 

 

$

20,577

 

4%

 

$

1,003,852

 

 

$

956,363

 

 

$

47,489

 

5%

Service sales

 

106,743

 

 

108,622

 

 

(1,879

)

(2%)

 

213,458

 

 

211,457

 

 

2,001

 

1%

Total net sales

 

638,996

 

 

620,298

 

 

18,698

 

3%

 

1,217,310

 

 

1,167,820

 

 

49,490

 

4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

342,726

 

 

324,184

 

 

18,542

 

6%

 

654,682

 

 

623,495

 

 

31,187

 

5%

Cost of service sales

 

66,226

 

 

69,614

 

 

(3,388

)

(5%)

 

135,711

 

 

136,634

 

 

(923

)

(1%)

Total cost of sales

 

408,952

 

 

393,798

 

 

15,154

 

4%

 

790,393

 

 

760,129

 

 

30,264

 

4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

230,044

 

 

226,500

 

 

3,544

 

2%

 

426,917

 

 

407,691

 

 

19,226

 

5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

18,900

 

 

15,054

 

 

3,846

 

26%

 

36,141

 

 

30,995

 

 

5,146

 

17%

Selling expenses

 

30,693

 

 

32,665

 

 

(1,972

)

(6%)

 

62,170

 

 

64,185

 

 

(2,015

)

(3%)

General and administrative expenses

 

74,766

 

 

76,705

 

 

(1,939

)

(3%)

 

150,876

 

 

145,937

 

 

4,939

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

105,685

 

 

102,076

 

 

3,609

 

4%

 

177,730

 

 

166,574

 

 

11,156

 

7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

7,960

 

 

9,566

 

 

(1,606

)

(17%)

 

15,232

 

 

17,770

 

 

(2,538

)

(14%)

Other income, net

 

5,871

 

 

3,971

 

 

1,900

 

48%

 

11,349

 

 

8,654

 

 

2,695

 

31%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

103,596

 

 

96,481

 

 

7,115

 

7%

 

173,847

 

 

157,458

 

 

16,389

 

10%

Provision for income taxes

 

(23,524

)

 

(21,693

)

 

(1,831

)

8%

 

(38,182

)

 

(39,027

)

 

845

 

(2%)

Net earnings

 

$

80,072

 

 

$

74,788

 

 

$

5,284

 

7%

 

$

135,665

 

 

$

118,431

 

 

$

17,234

 

15%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.87

 

 

$

1.69

 

 

 

 

 

$

3.17

 

 

$

2.68

 

 

 

 

Diluted earnings per share

 

$

1.86

 

 

$

1.68

 

 

 

 

 

$

3.15

 

 

$

2.66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share

 

$

0.17

 

 

$

0.15

 

 

 

 

 

$

0.32

 

 

$

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

42,758

 

 

44,124

 

 

 

 

 

42,776

 

 

44,144

 

 

 

 

Diluted

 

43,024

 

 

44,553

 

 

 

 

 

43,038

 

 

44,604

 

 

 

 

 
 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

($'s in thousands, except par value)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

Change

 

 

 

 

2019

 

2018

 

%

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

216,344

 

 

$

276,066

 

 

(22%)

 

 

Receivables, net

 

636,058

 

 

593,755

 

 

7%

 

 

Inventories, net

 

436,190

 

 

423,426

 

 

3%

 

 

Other current assets

 

48,060

 

 

50,719

 

 

(5%)

 

 

Total current assets

 

1,336,652

 

 

1,343,966

 

 

(1%)

 

Property, plant, and equipment, net

 

375,582

 

 

374,660

 

 

0%

 

Goodwill

 

1,112,781

 

 

1,088,032

 

 

2%

 

Other intangible assets, net

 

433,517

 

 

429,567

 

 

1%

 

Operating lease right-of-use assets, net

 

135,190

 

 

 

 

NM

 

Other assets

 

32,918

 

 

19,160

 

 

72%

 

 

Total assets

 

$

3,426,640

 

 

$

3,255,385

 

 

5%

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term and short-term debt

 

$

 

 

$

243

 

 

(100%)

 

 

Accounts payable

 

173,791

 

 

232,983

 

 

(25%)

 

 

Accrued expenses

 

138,278

 

 

166,954

 

 

(17%)

 

 

Income taxes payable

 

8,521

 

 

5,811

 

 

47%

 

 

Deferred revenue

 

243,053

 

 

236,508

 

 

3%

 

 

Other current liabilities

 

74,226

 

 

44,829

 

 

66%

 

 

Total current liabilities

 

637,869

 

 

687,328

 

 

(7%)

 

Long-term debt

 

761,476

 

 

762,313

 

 

0%

 

Deferred tax liabilities, net

 

49,929

 

 

47,121

 

 

6%

 

Accrued pension and other postretirement benefit costs

 

97,334

 

 

101,227

 

 

(4%)

 

Long-term operating lease liability

 

117,789

 

 

 

 

NM

 

Long-term portion of environmental reserves

 

16,411

 

 

15,777

 

 

4%

 

Other liabilities

 

93,536

 

 

110,838

 

 

(16%)

 

 

Total liabilities

 

1,774,344

 

 

1,724,604

 

 

3%

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Common stock, $1 par value

 

49,187

 

 

49,187

 

 

0%

 

Additional paid in capital

 

116,835

 

 

118,234

 

 

(1%)

 

Retained earnings

 

2,339,703

 

 

2,191,471

 

 

7%

 

Accumulated other comprehensive loss

 

(302,490

)

 

(288,447

)

 

(5%)

 

Less: cost of treasury stock

 

(550,939

)

 

(539,664

)

 

(2%)

 

 

Total stockholders' equity

 

1,652,296

 

 

1,530,781

 

 

8%

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

3,426,640

 

 

$

3,255,385

 

 

5%

 

 

 

 

 

 

 

 

 

 

NM - not meaningful

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

SEGMENT INFORMATION (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

 

 

 

 

Change

 

 

 

 

 

Change

 

 

2019

 

2018

 

%

 

2019

 

2018

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Commercial/Industrial

 

$

318,267

 

 

$

312,463

 

 

2%

 

$

611,774

 

 

$

609,104

 

 

0%

Defense

 

144,962

 

 

146,177

 

 

(1%)

 

265,984

 

 

265,078

 

 

0%

Power

 

175,767

 

 

161,658

 

 

9%

 

339,552

 

 

293,638

 

 

16%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

638,996

 

 

$

620,298

 

 

3%

 

$

1,217,310

 

 

$

1,167,820

 

 

4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial/Industrial

 

$

56,236

 

 

$

51,736

 

 

9%

 

$

95,682

 

 

$

90,961

 

 

5%

Defense

 

29,661

 

 

38,641

 

 

(23%)

 

47,314

 

 

58,369

 

 

(19%)

Power

 

30,069

 

 

19,201

 

 

57%

 

54,288

 

 

34,543

 

 

57%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segments

 

$

115,966

 

 

$

109,578

 

 

6%

 

$

197,284

 

 

$

183,873

 

 

7%

Corporate and other

 

(10,281

)

 

(7,502

)

 

(37%)

 

(19,554

)

 

(17,299

)

 

(13%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating income

 

$

105,685

 

 

$

102,076

 

 

4%

 

$

177,730

 

 

$

166,574

 

 

7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial/Industrial

 

17.7

%

 

16.6

%

 

110bps

 

15.6

%

 

14.9

%

 

70bps

Defense

 

20.5

%

 

26.4

%

 

(590bps)

 

17.8

%

 

22.0

%

 

(420bps)

Power

 

17.1

%

 

11.9

%

 

520bps

 

16.0

%

 

11.8

%

 

420bps

Total Curtiss-Wright

 

16.5

%

 

16.5

%

 

0bps

 

14.6

%

 

14.3

%

 

30bps

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment margins

 

18.1

%

 

17.7

%

 

40bps

 

16.2

%

 

15.7

%

 

50bps

 
 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

SALES BY END MARKET (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

 

 

 

 

Change

 

 

 

 

 

Change

 

 

2019

 

2018

 

%

 

2019

 

2018

 

%

Defense markets:

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

104,426

 

 

$

99,654

 

 

5%

 

$

183,213

 

 

$

178,808

 

 

2%

Ground

 

26,394

 

 

20,777

 

 

27%

 

47,151

 

 

43,296

 

 

9%

Naval

 

149,853

 

 

132,347

 

 

13%

 

280,941

 

 

235,835

 

 

19%

Total Defense

 

$

280,673

 

 

$

252,778

 

 

11%

 

$

511,305

 

 

$

457,939

 

 

12%

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial markets:

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

108,000

 

 

$

104,617

 

 

3%

 

$

211,222

 

 

$

204,021

 

 

4%

Power Generation

 

93,171

 

 

102,316

 

 

(9%)

 

189,652

 

 

200,635

 

 

(5%)

General Industrial

 

157,152

 

 

160,587

 

 

(2%)

 

305,131

 

 

305,225

 

 

0%

Total Commercial

 

$

358,323

 

 

$

367,520

 

 

(3%)

 

$

706,005

 

 

$

709,881

 

 

(1%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Curtiss-Wright

 

$

638,996

 

 

$

620,298

 

 

3%

 

$

1,217,310

 

 

$

1,167,820

 

 

4%

 

Use of Non-GAAP Financial Information (Unaudited)

The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these non-GAAP measures provide investors with additional insight into the Company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

The Company has elected to change the presentation of its financials and guidance to include an Adjusted (non-GAAP) view that excludes first year purchase accounting costs associated with its acquisitions, as well as one-time transition and IT security costs specifically associated with the relocation of the DRG business in the Power segment. Transition costs include relocation of employees and equipment as well as overlapping facility and labor costs associated with the relocation. We believe this Adjusted view will provide improved transparency to the investment community in order to better measure Curtiss-Wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within this release.

The following definitions are provided:

These Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding the impact of first year purchase accounting costs associated with acquisitions for current and prior year periods, specifically one-time inventory step-up, backlog amortization and transaction costs, as well as one-time transition and IT security costs associated with the relocation of a business in the current year period.

The Corporation discloses organic revenue and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic revenue and organic operating income are defined as revenue and operating income excluding the impact of foreign currency fluctuations and contributions from acquisitions made during the last twelve months.

 

 

Three Months Ended

 

June 30,

 

2019 vs. 2018

 

Commercial/Industrial

 

Defense

 

Power

 

Total Curtiss-Wright

 

Sales

 

Operating

income

 

Sales

 

Operating

income

 

Sales

 

Operating

income

 

Sales

 

Operating

income

Organic

3%

 

8%

 

(3%)

 

(25%)

 

9%

 

57%

 

3%

 

3%

Acquisitions

0%

 

0%

 

3%

 

0%

 

0%

 

0%

 

1%

 

0%

Foreign Currency

(1%)

 

1%

 

(1%)

 

2%

 

0%

 

0%

 

(1%)

 

1%

Total

2%

 

9%

 

(1%)

 

(23%)

 

9%

 

57%

3%

 

4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

June 30,

 

2019 vs. 2018

 

Commercial/Industrial

 

Defense

 

Power

 

Total Curtiss-Wright

 

Sales

 

Operating

income

 

Sales

 

Operating

income

 

Sales

 

Operating

income

 

Sales

 

Operating

income

Organic

2%

 

4%

 

0%

 

(21%)

 

8%

 

47%

 

3%

 

4%

Acquisitions

0%

 

0%

 

1%

 

(1%)

 

8%

 

10%

 

2%

 

2%

Foreign Currency

(2%)

 

1%

 

(1%)

 

3%

 

0%

 

0%

 

(1%)

 

1%

Total

0%

 

5%

 

0%

 

(19%)

 

16%

 

57%

4%

 

7%

 

The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as cash flow provided by operating activities less capital expenditures. Adjusted free cash flow excludes a capital investment in the Power segment related to the new, state-of-the-art naval facility principally for DRG, and a voluntary contribution to the Company’s corporate defined benefit pension plan made in the first quarter of 2018. The Corporation discloses free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as free cash flow divided by net earnings from continuing operations.

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NON-GAAP FINANCIAL DATA (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

92,244

 

 

$

97,947

 

 

$

40,386

 

 

$

26,685

 

Capital expenditures

(16,437

)

 

(10,881

)

 

(33,471

)

 

(19,852

)

Free cash flow

$

75,807

 

 

$

87,066

 

 

$

6,915

 

 

$

6,833

 

Adjustment to capital expenditures (DRG facility investment)

4,039

 

 

 

 

9,162

 

 

 

Voluntary pension payment

 

 

 

 

 

 

50,000

 

Adjusted free cash flow

$

79,846

 

 

$

87,066

 

 

$

16,077

 

 

$

56,833

 

Free Cash Flow Conversion

100%

 

116%

 

12%

 

48%

 
CURTISS-WRIGHT CORPORATION
2019 Guidance
As of July 31, 2019
($'s in millions, except per share data)
 
2018
Reported
(GAAP)
2018
Adjustments (1)
(Non-GAAP)
2018
Adjusted
(Non-GAAP)
2019 Reported Guidance (2)(3)(4)
(GAAP)
2019
Adjustments (1)
(Non-GAAP)
2019
Adjusted Guidance (2)(3)(4)
(Non-GAAP)
LowHighLowHigh2019 Chg vs
2018 Adjusted
Commercial/Industrial

$

1,209

 

$

-

 

$

1,209

 

$

1,255

 

$

1,275

 

$

-

 

$

1,255

 

$

1,275

 

Defense

 

554

 

 

-

 

 

554

 

 

575

 

 

585

 

 

-

 

 

575

 

 

585

 

Power

 

648

 

 

-

 

 

648

 

 

680

 

 

690

 

 

-

 

 

680

 

 

690

 

Total sales

$

2,412

 

$

-

 

$

2,412

 

$

2,510

 

$

2,550

 

$

-

 

$

2,510

 

$

2,550

 

4 to 6%
 
Commercial/Industrial

$

183

 

$

-

 

$

183

 

$

195

 

$

200

 

$

-

 

$

195

 

$

200

 

Defense

 

128

 

 

-

 

 

128

 

 

128

 

 

131

 

 

2

 

 

130

 

 

133

 

Power

 

99

 

 

9

 

 

108

 

 

109

 

 

111

 

 

6

 

 

115

 

 

117

 

Total segments

 

410

 

 

9

 

 

419

 

 

432

 

-

 

442

 

 

8

 

 

440

 

-

 

450

 

Corporate and other

 

(36

)

 

-

 

 

(36

)

 

(34

)

 

(36

)

 

-

 

 

(34

)

 

(36

)

Total operating income

$

374

 

$

9

 

$

382

 

$

398

 

$

407

 

$

8

 

$

406

 

$

415

 

6 to 9%
 
Interest expense

$

(34

)

$

-

 

$

(34

)

$

(33

)

$

(33

)

$

-

 

$

(33

)

$

(33

)

Other income, net

 

17

 

 

-

 

 

17

 

 

19

 

 

19

 

 

-

 

 

19

 

 

19

 

Earnings before income taxes

 

356

 

 

9

 

 

365

 

 

385

 

 

393

 

 

8

 

 

393

 

 

401

 

Provision for income taxes

 

(81

)

 

(2

)

 

(83

)

 

(88

)

 

(90

)

 

(2

)

 

(90

)

 

(92

)

Net earnings

$

276

 

$

7

 

$

282

 

$

297

 

$

303

 

$

6

 

$

303

 

$

309

 

 
Diluted earnings per share

$

6.22

 

$

0.15

 

$

6.37

 

$

6.86

 

$

7.01

 

$

0.14

 

$

7.00

 

$

7.15

 

10 to 12%
Diluted shares outstanding

 

44.3

 

 

44.3

 

 

43.3

 

 

43.3

 

 

43.3

 

 

43.3

 

Effective tax rate

 

22.6

%

 

22.6

%

 

23.0

%

 

23.0

%

 

23.0

%

 

23.0

%

 
Commercial/Industrial

 

15.1

%

 

-

 

 

15.1

%

 

15.6

%

 

15.7

%

 

-

 

 

15.6

%

 

15.7

%

50 to 60 bps
Defense

 

23.2

%

 

-

 

 

23.2

%

 

22.2

%

 

22.3

%

+40 bps

 

22.6

%

 

22.7

%

(50 to 60 bps)
Power

 

15.2

%

+140 bps

 

16.6

%

 

16.0

%

 

16.1

%

+90 bps

 

16.9

%

 

17.0

%

30 to 40 bps
Total operating margin

 

15.5

%

+30 bps

 

15.8

%

 

15.8

%

 

15.9

%

+40 bps

 

16.2

%

 

16.3

%

40 to 50 bps
 
Free cash flow (5)

$

283

 

$

50

 

$

333

 

$

310

 

$

320

 

$

20

 

$

330

 

$

340

 

Note: Full year amounts may not add due to rounding
(1) Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding the impact of first year purchase accounting costs associated with acquisitions for current and prior year periods, specifically one-time inventory step-up, backlog amortization and transaction costs, as well as one-time transition and IT security costs related to the relocation of the DRG business.
(2) Commercial/Industrial segment 2019 guidance reflects improved profitability due to higher sales and benefits of our ongoing margin improvement initiatives, partially offset by $4 million for tariffs and a $3 million increase in R&D investments.
(3) Defense segment 2019 Reported guidance reflects reduced profitability, despite higher sales, due to a $5 million increase in R&D investments. Adjusted guidance excludes $2 million in first year purchase accounting costs associated with the TCG acquisition.
(4) Power segment 2019 Reported guidance reflects improved profitability due to higher sales, partially offset by a $2 million increase in R&D investments. Adjusted guidance excludes $6 million in one-time transition and IT security costs related to the relocation of the DRG business.
(5) Free Cash Flow is defined as cash flow from operations less capital expenditures. 2018 Adjusted Free Cash Flow excludes a voluntary contribution to the Company’s corporate defined benefit pension plan of $50 million. 2019 Adjusted Free Cash Flow guidance excludes a $20 million capital investment in the Power segment related to construction of a new, state-of-the-art naval facility for the DRG business.
 
CURTISS-WRIGHT CORPORATION
2019 Sales Growth Guidance by End Market
As of July 31, 2019
 

2019 % Change vs 2018

(Prior)

 

(Current)

Aerospace8 - 10%9 - 11%
Ground5 - 7%1 - 2%
Navy8 - 10%8 - 10%
Total Defense 8 - 10%8 - 10%
 
Commercial Aerospace4 - 6%4 - 6%
Power Generation1 - 3%1 - 3%
General Industrial1 - 3%1 - 3%
Total Commercial1 - 3%1 - 3%
 
Total Curtiss-Wright Sales4 - 6%4 - 6%
 

About Curtiss-Wright Corporation

Curtiss-Wright Corporation (NYSE: CW) is a global innovative company that delivers highly engineered, critical function products and services to the commercial, industrial, defense and energy markets. Building on the heritage of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of providing reliable solutions through trusted customer relationships. The company employs approximately 9,000 people worldwide. For more information, visit www.curtisswright.com .

Certain statements made in this press release, including statements about future revenue, financial performance guidance, quarterly and annual revenue, net income, operating income growth, future business opportunities, cost saving initiatives, the successful integration of the Company’s acquisitions, 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 the 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, 2018, and subsequent reports filed with the Securities and Exchange Commission.

This press release and additional information are available at www.curtisswright.com .

Jim Ryan
(704) 869-4621
Jim.Ryan@curtisswright.com

Source: Curtiss-Wright Corporation



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