10-QPeriod: Q3 FY2002

CURTISS WRIGHT CORP Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 14, 2002For Securities:CW

Summary

This 10-Q filing for Curtiss-Wright Corporation (CW) for the period ending September 30, 2002, reveals a strong quarter characterized by significant sales growth driven by strategic acquisitions. Net sales increased by 51% year-over-year, largely attributable to contributions from newly acquired businesses. The company also saw a robust increase in new orders, indicating positive future revenue potential. Despite some margin pressures in specific segments, overall operating income and net earnings showed healthy increases, demonstrating effective integration of acquisitions and continued operational improvements. Key financial highlights include a substantial rise in cash from operations, a strengthened balance sheet with increased goodwill and intangible assets reflecting recent M&A activity, and a significant increase in long-term debt, primarily to finance these acquisitions. The company also introduced a new, larger credit facility to support its growth strategy. Investors should note the company's continued focus on strategic acquisitions as a primary growth driver, alongside organic growth in its core segments, particularly Flow Control and Motion Control, while managing challenges in the Metal Treatment segment.

Key Highlights

  • 1Net sales for the third quarter of 2002 surged by 51% to $119.6 million, compared to $79.4 million in the prior year, primarily driven by contributions from recent acquisitions.
  • 2New orders received also saw substantial growth, increasing by 97% to $130.6 million in the third quarter, signaling strong future revenue potential.
  • 3Operating income grew by 13% to $12.6 million, with contributions from acquisitions and organic growth in the Flow Control segment offsetting some margin pressures.
  • 4Net earnings increased by 30% to $11.3 million ($1.08 per diluted share) from $8.7 million ($0.85 per diluted share) in the same quarter last year, reflecting improved profitability and the impact of SFAS 141/142 eliminating goodwill amortization.
  • 5The company significantly expanded its borrowing capacity by entering into new credit agreements totaling $225 million, with $135 million available under a Revolving Credit Agreement and $90 million under a Short-Term Credit Agreement.
  • 6Goodwill and other intangible assets increased substantially to $136.5 million from $92.6 million, reflecting the accounting impact of significant acquisitions made during the period.
  • 7The company announced the subsequent acquisition of the Electro-Mechanical Division of Westinghouse Government Services Company LLC for $80 million, further bolstering its Flow Control segment.
  • 8Cash provided by operating activities for the nine months ended September 30, 2002, was $64.7 million, a significant increase from $39.5 million in the prior year, providing strong operational cash generation.

Frequently Asked Questions

The primary driver of sales growth was the contribution from recent acquisitions, which added $40.1 million to sales in the third quarter. Organic growth in the Flow Control segment and favorable foreign currency translation also contributed to the increase.

The acquisitions significantly increased the company's asset base, particularly in goodwill and intangible assets, which rose to $136.5 million. This growth was financed through a combination of cash resources and new credit facilities, leading to an increase in long-term debt to $47.0 million from $21.4 million at the end of the prior year.

Curtiss-Wright continues to pursue a strategy of growth through acquisitions, as evidenced by the recent acquisitions and the planned acquisition of the EMD division of Westinghouse. These growth initiatives are being funded through a combination of internally generated cash flow, existing credit facilities, and new debt arrangements, including a recently established $225 million credit facility.

The Motion Control and Flow Control segments showed strong performance, driven by acquisitions and organic growth, particularly in defense, commercial nuclear, and oil & gas markets. The Metal Treatment segment experienced a slight sales increase but faced margin pressures due to unfavorable sales mix and lower volumes in certain areas, although performance showed sequential improvement from prior quarters.