10-KPeriod: FY2015

CURTISS WRIGHT CORP Annual Report, Year Ended Dec 31, 2015

Filed February 25, 2016For Securities:CW

Summary

Curtiss-Wright Corporation's 2015 10-K filing reveals a company navigating a dynamic market landscape. While overall sales saw a slight dip of 2% to $2.21 billion, the company demonstrated resilience with a 10% increase in operating income to $311 million, driven by improved performance in the Defense and Power segments, and a favorable foreign currency impact. The company's strategic focus on highly engineered, critical function products across Commercial/Industrial, Defense, and Power segments appears to be paying off, particularly with a strong order backlog of $1.93 billion. Key drivers for growth include increased defense spending, a healthy commercial aerospace market, and a stable nuclear power generation sector, although the oil and gas market faced headwinds. Curtiss-Wright also actively managed its capital structure, repurchasing shares and maintaining a solid liquidity position. Investors should note the company's significant reliance on U.S. government defense spending (approximately 30% of sales), which is subject to budgetary fluctuations. The company is also exposed to risks related to long-term contracts, including potential liquidated damages, and is actively managing its pension obligations. Overall, the filing presents a diversified industrial company with a clear strategy, demonstrating operational improvements despite some market challenges.

Financial Highlights

57 data points
Beta

Revenue

$2.21B

35.5% Gross Margin

Net Income

$145.46M

6.6% Net Margin

EPS (Diluted)

$3.05

Total Assets

$2.99B

Cash & Equivalents

$288.70M

Free Cash Flow

$126.97M

Financial Statements
Beta
Revenue$2.21B
Cost of Revenue$1.42B
Gross Profit$783.25M
R&D Expenses$60.84M
Operating Income$310.62M
Interest Expense$36.04M
Net Income$145.46M
EPS (Basic)$3.12
EPS (Diluted)$3.05
Shares Outstanding (Basic)46.62M
Shares Outstanding (Diluted)47.62M

Key Highlights

  • 1Total sales decreased by 2% to $2.21 billion in 2015, but operating income increased by 10% to $311 million.
  • 2The company ended 2015 with a substantial backlog of $1.93 billion, indicating strong future revenue potential.
  • 3Defense sales represented 36% of consolidated sales, highlighting the segment's importance and potential sensitivity to government budget changes.
  • 4The Power segment saw a significant boost from a $468 million order for AP1000 reactor coolant pumps from China, including intellectual property rights.
  • 5Curtiss-Wright repurchased approximately $294 million of its common stock in 2015 and announced a new $200 million repurchase program.
  • 6The company made a voluntary pension contribution of $145 million in 2015, reducing future contribution expectations.
  • 7The Commercial/Industrial segment experienced a sales decline, primarily impacted by lower valve sales in energy markets due to declining oil prices.

Frequently Asked Questions

Curtiss-Wright operates across three main segments: Commercial/Industrial, Defense, and Power. Sales are driven by demand from the general industrial, commercial aerospace, defense, and power generation markets. Approximately 30% of its sales are derived from or related to defense programs, making it sensitive to U.S. government defense spending. The commercial aerospace market is driven by aircraft production rates, while the power generation segment is influenced by nuclear plant maintenance, upgrades, and new construction, particularly the AP1000 program.

In 2015, Curtiss-Wright reported a slight decrease in total sales to $2.21 billion, down 2% from the previous year. However, operating income grew by 10% to $311 million, demonstrating improved profitability. This growth was supported by strong performance in the Defense segment, a significant new order in the Power segment, and favorable foreign currency translation effects. The company also actively managed its capital, including substantial share repurchases and a large voluntary pension contribution.

Curtiss-Wright faces several risks, including a significant dependence on U.S. government defense spending, which can be cyclical and subject to budget cuts. The company also operates under long-term contracts with potential for liquidated damages, as seen with the AP1000 program. Additionally, risks include general economic downturns affecting industrial and aerospace markets, increased competition, integration risks from acquisitions, and foreign currency exchange rate fluctuations.

Curtiss-Wright's strategy is to be an integrated, global diversified industrial company focused on highly engineered, critical function products. Growth is pursued through consistent organic sales growth, operating margin expansion, and free cash flow generation. The company also maintains a disciplined capital deployment strategy, which includes pursuing acquisitions, returning capital to shareholders through dividends and share repurchases, and investing in research and development to drive innovation.