10-QPeriod: Q2 FY2006

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2006

Filed August 9, 2006For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported solid top-line growth for the second quarter and first six months of 2006, with net sales increasing by 9.3% year-over-year for both periods. This growth was driven by organic increases across its Flow Control and Metal Treatment segments, supported by acquisitions made during the period. The company also saw improvements in earnings per diluted share for the quarter and year-to-date. Despite increased general and administrative costs related to the adoption of FAS 123(R) and higher pension expenses, operating income remained relatively stable for the quarter, with a slight decrease year-to-date. Acquisitions, particularly Enpro Systems and Allegheny Coatings, contributed to revenue and backlog expansion, though they also incurred initial operating losses. The company maintains a strong liquidity position, with a healthy working capital and significant availability under its revolving credit agreement.

Key Highlights

  • 1Net sales increased by 9.3% to $309.6 million for the three months ended June 30, 2006, and by 9.3% to $592.2 million for the six months ended June 30, 2006, compared to the prior year periods.
  • 2Diluted earnings per share rose to $0.48 for Q2 2006, up from $0.41 in Q2 2005, and to $0.75 for the six months ended June 30, 2006, up from $0.74 in the prior year period.
  • 3The company completed two acquisitions in the first six months of 2006: Enpro Systems and Allegheny Coatings, which contributed $5.0 million in incremental sales in Q2 2006 and $10.9 million in incremental sales for the six-month period.
  • 4Operating income was largely flat for the quarter at $33.1 million, but decreased by 4.9% to $57.7 million for the six-month period, impacted by a prior year gain on sale of real estate and higher G&A expenses.
  • 5The Metal Treatment segment demonstrated strong performance, with sales up 12.2% for the quarter and 25.1% in operating income year-over-year.
  • 6The company's backlog increased by 10% to $882.7 million at June 30, 2006, compared to $805.6 million at December 31, 2005, with approximately 65% being defense-related.
  • 7Cash and cash equivalents decreased to $43.1 million at June 30, 2006, from $59.0 million at December 31, 2005, reflecting cash used for acquisitions and capital expenditures.

Frequently Asked Questions

Revenue growth was primarily driven by organic sales increases in the Flow Control and Metal Treatment segments, supported by strong demand in markets such as oil and gas, commercial aerospace, and automotive. The company also benefited from the incremental sales contributions of its recent acquisitions, Enpro Systems and Allegheny Coatings.

For the second quarter, operating income was stable at $33.1 million. However, for the six-month period, operating income saw a decrease of 4.9% to $57.7 million compared to the prior year. This was partly due to a gain on the sale of real estate in the prior year's comparable period and increased general and administrative expenses, including those related to the adoption of FAS 123(R) and higher pension costs.

Curtiss-Wright maintains a healthy liquidity position. Working capital increased, and the company had $43.1 million in cash and cash equivalents at June 30, 2006. Importantly, the company had $336.0 million in unused credit available under its revolving credit agreement, expiring in July 2009, providing ample financial flexibility.

The acquisitions of Enpro Systems and Allegheny Coatings are contributing to revenue growth and expanding the company's backlog. However, they also incurred initial operating losses, which slightly impacted overall operating income in the short term. The company is integrating these businesses to realize their full potential.