10-QPeriod: Q1 FY2005

CURTISS WRIGHT CORP Quarterly Report for Q1 Ended Mar 31, 2005

Filed May 10, 2005For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported solid revenue growth of 20.3% for the first quarter of 2005, reaching $258.5 million, up from $214.9 million in the prior year. This growth was significantly driven by acquisitions, which contributed 82% of the increase. While organic growth was modest at 4%, it was led by the Metal Treatment and Motion Control segments. The company also saw a healthy increase in new orders (38%) and backlog (19%), indicating strong future demand, with approximately 70% of the backlog originating from military business. Despite revenue growth, net earnings decreased by 7% to $14.5 million ($0.67 per diluted share) from $15.6 million ($0.74 per diluted share) in the prior year. This decline was primarily due to higher interest expenses stemming from increased debt levels for acquisitions and unfavorable sales mix in operating segments, partially offset by a gain on the sale of property. The company is managing its debt structure effectively, with ample borrowing capacity under its credit agreement, and anticipates margin improvements in the second half of 2005.

Key Highlights

  • 1Total sales increased by 20.3% to $258.5 million in Q1 2005, largely driven by acquisitions.
  • 2New orders grew significantly by 38% to $325.8 million, and backlog increased by 19% to $748.2 million.
  • 3Net earnings decreased by 7% to $14.5 million, impacted by higher interest expenses and unfavorable sales mix.
  • 4Acquisitions, particularly the March 2005 acquisition of Indal Technologies, Inc. for $62.8 million, significantly contributed to revenue growth.
  • 5The Metal Treatment segment showed strong organic growth of 13% in sales, while Motion Control grew 5% organically.
  • 6Operating income saw a gain of $2.8 million from the sale of the Fairfield, New Jersey property.
  • 7The company maintained compliance with debt covenants and had $172.0 million in unused credit available under its revolving credit facility.

Frequently Asked Questions

The primary driver of Curtiss-Wright's revenue growth in the first quarter of 2005 was acquisitions. Acquisitions completed in 2004 and in the first quarter of 2005 contributed $35.8 million, representing 82% of the total sales increase.

Net earnings decreased by 7% primarily due to higher interest expenses, which increased by $2.0 million, as a result of higher debt levels and interest rates associated with funding acquisitions. Additionally, an unfavorable sales mix in certain operating segments negatively impacted profitability. These factors were partially offset by a $1.5 million after-tax gain from the sale of non-operating property.

The acquisition of Indal Technologies, Inc. on March 1, 2005, for $62.8 million, added $38.2 million in revenue for 2004 and contributed $21.4 million in incremental new orders and $57.4 million to the backlog in the first quarter of 2005. Indal provides shipboard helicopter handling systems for naval applications, strengthening Curtiss-Wright's Motion Control segment.

Curtiss-Wright has a $400 million revolving credit agreement with significant unused capacity ($172.0 million at March 31, 2005) and also has senior notes outstanding. The company is in compliance with its debt covenants and has flexibility for additional debt. Acquisitions are funded through cash resources, existing credit facilities, or new financing alternatives. The company expects to maintain capital structure balance and meet covenants.