01—Abstract
Summary
Summary of the 10-K filed February 21, 2017. Cited figures are marked; the original filing is the authoritative source.
Curtiss-Wright Corporation (CW) reported a slight decrease in net sales for 2016 to $2.11 billiona from $2.21 billion in 2015, and a minor decrease in operating income to $308 million.
Despite lower sales in the Commercial/Industrial and Power segments, the Defense segment showed resilience. The company's strategy remains focused on diversification across aerospace, defense, power generation, and general industrial markets to mitigate business cycle volatility. Financially, CW maintained a solid position with $554 millionb in cash and cash equivalents at year-end 2016, and its debt-to-capitalization ratio remained well within its covenant limits.
The company returned value to shareholders through $105 millionc in share repurchases and $23 million in dividends during 2016. Management expressed optimism for 2017, anticipating modest growth, particularly in the defense sector and continued strength in commercial aerospace, while navigating challenges in the oil and gas market. The company also highlighted its ongoing investment in technology and operational efficiencies.
02—Key points
Key Highlights
- Net sales for 2016 were $2.11 billion, a 4% decrease from $2.21 billion in 2015, primarily driven by lower sales in the Commercial/Industrial and Power segments.
- Operating income slightly decreased to $308 million in 2016 from $311 million in 2015, with operating margin improving slightly due to cost containment initiatives.
- The company's diversified business model spans Commercial/Industrial, Defense, and Power segments, with Defense sales remaining relatively stable and showing potential for future growth.
- Curtiss-Wright ended 2016 with $554 million in cash and cash equivalents, demonstrating a strong liquidity position.
- Shareholder returns included $105 million in share repurchases and $23 million in dividends paid during 2016.
- The company anticipates moderate annual growth in defense spending and continued strength in the commercial aerospace market for 2017.
- The company's debt-to-capitalization ratio was well within its covenant limits, indicating a healthy balance sheet.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Curtiss Wright Corp kept $0.09.
- Revenue$2.11B100.0%
- Cost of revenue−$1.37B65.2%
- Gross profit$734.7M34.8%
- Operating costs−$438.2M20.8%
- Operating income$296.5M14.1%
- Interest, other & tax−$109.2M5.2%
- Net income$187.3M8.9%
Where FY2016 revenue went
$2.11B- Cost of revenue: $1.37B, 65% of revenue
- Other operating costs: $378.7M, 18% of revenue
- Net income: $187.3M, 8.9% of revenue
- R&D: $59.4M, 2.8% of revenue
- Interest, other & tax: $109.2M, 5.2% of revenue
Kept 8.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 21, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.11B$2.21B | −4.4% |
| Cost of Revenue | $1.37B$1.42B | −3.4% |
| Gross Profit | $734.69M$783.25M | −6.2% |
| R&D Expenses | $59.42M$60.84M | −2.3% |
| Operating Income | $296.52M$310.62M | −4.5% |
| Interest Expense | $41.25M$36.04M | +14.5% |
| Net Income | $187.33M$145.46M | +28.8% |
| EPS (Basic) | $4.22$3.12 | +35.3% |
| EPS (Diluted) | $4.15$3.05 | +36.1% |
| Shares Outstanding (Basic) | 44.39M46.62M | −4.8% |
| Shares Outstanding (Diluted) | 45.05M47.62M | −5.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of Curtiss-Wright's financial performance in 2016?
In 2016, Curtiss-Wright experienced a slight decrease in net sales, mainly due to lower performance in its Commercial/Industrial and Power segments, particularly in industrial valves and surface treatment services for the oil and gas industry. However, the Defense segment remained stable, supported by government spending. The company's focus on cost containment and margin improvement initiatives helped to largely offset the impact of lower sales on operating income.
How is Curtiss-Wright positioned to handle economic downturns or shifts in government spending?
Curtiss-Wright's strategy of diversification across multiple markets (aerospace, defense, power generation, and general industrial) is designed to mitigate the impact of volatility in any single sector. While defense spending is subject to government budgets, the company's position on high-performance platforms and critical applications provides a degree of stability. The commercial aerospace segment benefits from steady airline travel growth and aircraft replacement cycles.
What is Curtiss-Wright's approach to capital allocation and shareholder returns?
Curtiss-Wright maintains a balanced capital allocation strategy. In 2016, the company returned $105 million to shareholders through share repurchases and paid $23 million in dividends. The company also noted its ability to fund future growth through acquisitions using its cash reserves and credit facilities.
What are the key risks identified in the 10-K filing for Curtiss-Wright?
Key risks highlighted include the significant reliance on U.S. government defense spending, potential contract terminations or penalties, stringent government procurement regulations, competition in its markets, downturns in the aerospace industry, and risks associated with international operations and currency fluctuations. Additionally, the company noted the potential impact of asset impairments, environmental liabilities, and changes in tax laws.
06—Continue