10-QPeriod: Q1 FY2001

CURTISS WRIGHT CORP Quarterly Report for Q1 Ended Mar 31, 2001

Filed May 15, 2001For Securities:CW

Summary

Curtiss-Wright Corporation's (CW) first quarter 2001 report indicates a period of stable net earnings compared to the prior year, with a slight decline in net sales. Net earnings remained at $9.2 million, although diluted earnings per share saw a minor decrease to $0.90 from $0.91 due to a slightly higher share count. The company experienced a 3% decrease in net sales, totaling $79.9 million, attributed to unfavorable foreign currency exchange rates and some market weakness. Despite this, operating income saw a significant increase of 12% to $11.3 million, reflecting improved operational efficiencies, particularly in the Motion Control segment, and favorable pension income. The company's liquidity remains strong, with working capital increasing and a healthy current ratio. Cash, cash equivalents, and short-term investments saw a modest increase. Curtiss-Wright also completed a small strategic acquisition of Solent & Pratt, a UK-based valve manufacturer, which is expected to strengthen its Flow Control segment and European presence. Management anticipates continued capital expenditures for the remainder of the year, funded by internal sources, and expects to meet environmental and other obligations.

Key Highlights

  • 1Net earnings for the first quarter of 2001 were $9.2 million, flat compared to the prior year.
  • 2Net sales decreased by 3% to $79.9 million, impacted by foreign currency headwinds and market softness.
  • 3Operating income increased by a significant 12% to $11.3 million, driven by improved operational efficiencies and higher pension income.
  • 4The company completed a strategic acquisition of Solent & Pratt, enhancing its Flow Control segment and European market reach.
  • 5Liquidity remains strong, with an increase in working capital and a healthy current ratio of 4.22 to 1.
  • 6Backlog decreased by 7% to $169.6 million from the prior year-end, indicating a potential slowdown in new orders.
  • 7Motion Control segment showed substantial operating income improvement due to lean manufacturing initiatives and increased shipments for defense programs.

Frequently Asked Questions

The acquisition of Solent & Pratt, completed in March 2001, was a relatively small, strategic purchase for approximately $1.5 million in cash plus the retirement of debt. It is accounted for as a purchase, with an estimated $1.8 million of goodwill being amortized over 30 years. While it is expected to strengthen the Flow Control segment and provide a European manufacturing presence, its immediate financial impact on the first quarter's results was not material, beyond the cash outlay and the initial recording of goodwill.

The increase in operating income was primarily driven by operational efficiencies, particularly in the Motion Control segment due to lean manufacturing initiatives, and higher pension income. The prior year's first quarter operating income also included some unusual items that benefited results, and when normalized, the current year's performance shows a significant improvement. Additionally, favorable foreign currency movements had a less adverse impact on operating income compared to sales.

The company's backlog stood at $169.6 million as of March 31, 2001, which is a 7% decrease from the end of the previous year. New orders also declined by 5% in the first quarter. While this suggests some caution, management expects sales to the Navy to exceed last year's levels by 15% and anticipates the Flow Control segment's Navy business to recover over the year. Management expects internally available funds to be adequate for planned capital expenditures and other obligations for the remainder of the year.

Curtiss-Wright maintains strong liquidity, evidenced by an increase in working capital and a healthy current ratio of 4.22:1. The company has access to significant credit facilities, with $33.3 million available under its Revolving Credit Agreement and the full $40.0 million available under its Short-Term Credit Agreement as of March 31, 2001. During the quarter, the company repaid $4.0 million of industrial revenue bonds and $1.0 million of Swiss debt, demonstrating active debt management alongside its acquisition activities.