10-QPeriod: Q3 FY2004

CURTISS WRIGHT CORP Quarterly Report for Q3 Ended Sep 30, 2004

Filed November 9, 2004For Securities:CW

Summary

Curtiss-Wright Corporation reported strong financial performance for the nine months ended September 30, 2004, with a significant increase in net sales and net earnings compared to the same period in 2003. This growth was largely driven by a strategic acquisition strategy, which added substantial revenue and backlog across its various segments, particularly Motion Control and Metal Treatment. The company demonstrated robust operational execution, with notable organic growth in the Metal Treatment segment and improved operating income across most segments, despite increased interest expenses related to its acquisition financing. Despite the positive top-line and bottom-line growth, investors should note the increased debt levels resulting from the acquisition spree. While the company has successfully integrated numerous businesses, the financial statements reflect a higher debt-to-equity ratio. Management highlights favorable foreign currency translation and strong demand in key markets like aerospace, defense, and oil & gas as tailwinds. The company also proactively addressed market risks by amending its credit facility, increasing its borrowing capacity and flexibility. Overall, Curtiss-Wright presented a compelling growth story in the third quarter of 2004, fueled by strategic acquisitions and solid operational performance.

Key Highlights

  • 1Net sales increased by 25% to $236.6 million for the third quarter and by 22% to $673.9 million for the first nine months of 2004, driven by acquisitions and organic growth.
  • 2Net earnings grew by 18% to $14.7 million ($0.68 per diluted share) for the third quarter and by 19% to $44.7 million ($2.08 per diluted share) for the first nine months of 2004.
  • 3The company completed ten acquisitions in the first nine months of 2004, significantly expanding its footprint and revenue base, with a total of $232.0 million invested.
  • 4Operating income increased by 19% to $25.5 million for the third quarter and by 21% to $76.4 million for the first nine months of 2004.
  • 5The company amended its credit facility, increasing its available line of credit from $225 million to $400 million, enhancing liquidity and financial flexibility.
  • 6Goodwill increased significantly from $220.1 million at year-end 2003 to $346.4 million at September 30, 2004, reflecting the impact of recent acquisitions.
  • 7Interest expense increased due to higher debt levels incurred to finance the acquisition program and from increased borrowing rates.

Frequently Asked Questions

The primary driver of Curtiss-Wright's revenue growth is its active acquisition strategy. The company completed ten acquisitions in the first nine months of 2004, which contributed significantly to the increase in net sales and backlog across its segments.

The company's debt situation has changed due to its acquisition strategy. Long-term debt increased significantly, and interest expense rose due to higher debt levels and increased borrowing rates. However, the company also amended its credit facility to increase its borrowing capacity to $400 million, which provides greater financial flexibility.

Curtiss-Wright operates in three reportable segments: Flow Control, Motion Control, and Metal Treatment. All segments showed sales growth compared to the prior year, driven by acquisitions and, in some cases, organic growth. The Metal Treatment segment, in particular, demonstrated strong organic growth. The Motion Control segment saw the largest increase in sales due to recent acquisitions. The Flow Control segment's operating income was impacted by the absence of large, high-margin projects from the prior year.

Management believes that cash generated from operations is adequate to meet the company's cash requirements for the upcoming periods, including debt repayments, capital expenditures, dividends, environmental obligations, and working capital needs. The increased credit facility also supports liquidity.