10-KPeriod: FY2017

CURTISS WRIGHT CORP Annual Report, Year Ended Dec 31, 2017

Filed February 22, 2018For Securities:CW

Summary

Curtiss-Wright Corporation's 2017 10-K filing reveals a company with diversified revenue streams across Commercial/Industrial, Defense, and Power segments. The company demonstrated growth in sales and operating income, largely driven by strong performance in the Defense sector and the successful integration of acquisitions, notably Teletronics Technology Corporation (TTC). The Power segment also saw an increase in sales, primarily due to the AP1000 China Direct program. While the company navigates various market dynamics, including government spending on defense and the cyclical nature of commercial aerospace, it has shown resilience. Key financial metrics indicate a healthy operational performance, with a focus on margin improvement initiatives. The company also actively manages its capital structure, including share repurchases and debt management, and maintains a disciplined approach to acquisitions to drive long-term shareholder value. Investors should note the ongoing impact of government contracts, potential economic sensitivities in industrial markets, and strategic investments in technological advancements.

Financial Highlights

56 data points
Beta

Revenue

$2.27B

35.3% Gross Margin

Net Income

$214.89M

9.5% Net Margin

EPS (Diluted)

$4.80

Total Assets

$3.24B

Cash & Equivalents

$475.12M

Free Cash Flow

$336.01M

Financial Statements
Beta
Revenue$2.27B
Cost of Revenue$1.47B
Gross Profit$800.78M
R&D Expenses$61.39M
Operating Income$325.12M
Interest Expense$41.47M
Net Income$214.89M
EPS (Basic)$4.86
EPS (Diluted)$4.80
Shares Outstanding (Basic)44.18M
Shares Outstanding (Diluted)44.76M

Key Highlights

  • 1Total sales increased by 8% to $2.27 billion in 2017, driven by strong performance in the Defense segment (+19%) and growth in Commercial/Industrial (+4%) and Power (+6%) segments.
  • 2Operating income increased by 10% to $340 million, with operating margins improving by 40 basis points, reflecting successful margin improvement initiatives and higher production volumes.
  • 3The Defense segment saw significant growth, boosted by the acquisition of Teletronics Technology Corporation (TTC), contributing $65 million in sales and an overall 19% increase.
  • 4The Power segment's sales grew 6%, primarily due to increased production on the AP1000 China Direct program, while also benefiting from naval defense sector growth.
  • 5The company repurchased $52 million of its common stock in 2017 as part of its ongoing capital return strategy.
  • 6New orders increased by 7% to $2.29 billion, indicating continued customer demand, with acquisitions and industrial vehicle product demand being key drivers.
  • 7Despite a significant pending claim from Canadian Natural Resources Limited (CNRL), the company believes it has adequate legal defenses and intends to defend the matter vigorously.

Frequently Asked Questions

Curtiss-Wright's revenue growth in 2017 was primarily driven by a strong performance in its Defense segment, which saw a 19% increase in sales, notably boosted by the acquisition of Teletronics Technology Corporation (TTC). The Commercial/Industrial segment grew by 4%, supported by industrial vehicle products, and the Power segment increased by 6%, driven by higher production on the AP1000 China Direct program and growth in naval defense.

In 2017, Curtiss-Wright acquired two businesses for a total of $233 million. The acquisition of Teletronics Technology Corporation (TTC) contributed $65 million in sales and $7 million in operating income to the Defense segment. The acquisition of Para Tech Coating, Inc. contributed to the Commercial/Industrial segment. These acquisitions positively impacted the company's financial results.

Government defense spending is a significant factor for Curtiss-Wright, with approximately 38% of its revenues expected to come from defense-related markets in 2018. The company highlighted that the U.S. Defense budget is a leading indicator for its growth in this market. Despite historical cyclicality and sequestration impacts, recent legislation is expected to increase domestic defense spending, providing more stability for programs the company supports.

Key risks identified include cybersecurity threats, dependence on U.S. government defense spending, compliance with government procurement regulations, potential adverse effects from changes in international trade agreements, and general economic conditions. The company also faces risks related to competitive markets, product liability, environmental regulations, and the potential for asset impairment charges. A significant legal proceeding involving Canadian Natural Resources Limited (CNRL) is also mentioned, though the company believes it has strong legal defenses.