10-QPeriod: Q3 FY2007

CURTISS WRIGHT CORP Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 9, 2007For Securities:CW

Summary

Curtiss-Wright Corporation reported a strong third quarter and nine-month performance for 2007, driven by significant revenue growth across all segments, particularly Flow Control and Motion Control. The company experienced substantial increases in net sales, rising to $396.3 million for the quarter and $1,094.5 million for the nine months, representing year-over-year growth of 27% and 21%, respectively. This growth was fueled by both organic expansion and the impact of strategic acquisitions, notably the integration of Benshaw, Inc., VSC, and IMC Magnetics Corporation. Net earnings also saw a healthy increase, reaching $25.2 million ($0.56 per diluted share) for the third quarter and $66.1 million ($1.47 per diluted share) for the nine months, up 24% and 23% respectively. The company's backlog significantly increased due to substantial new orders, especially from the AP1000 reactor coolant pump contracts, bolstering future revenue visibility.

Key Highlights

  • 1Significant revenue growth driven by both organic expansion and strategic acquisitions, with Q3 sales up 27% and nine-month sales up 21% year-over-year.
  • 2Net earnings increased substantially: Q3 net earnings grew 24% to $25.2 million, and nine-month net earnings grew 23% to $66.1 million.
  • 3Acquisition activity was robust, with four businesses acquired in the first nine months of 2007, contributing positively to sales and earnings.
  • 4Backlog saw a significant increase, rising 57% to $1,376.8 million at September 30, 2007, largely due to major new orders for AP1000 reactor coolant pumps.
  • 5Operating income increased by 19% for Q3 and 24% for the first nine months, reflecting improved sales and cost management, although operating margins experienced a slight decline due to acquisition integration and R&D investments.
  • 6The company successfully refinanced its credit facility, increasing availability to $425 million (with an accordion feature up to $600 million) and extending maturity to 2012, providing enhanced financial flexibility.
  • 7The Flow Control segment showed strong performance, particularly in the oil and gas market driven by coker valve products, despite a decline in U.S. Navy sales.

Frequently Asked Questions

Revenue growth in Q3 2007 was driven by a combination of strong organic growth of 12% across all segments and incremental sales of $48.1 million from acquisitions made in 2006 and 2007. Key markets contributing to organic growth included oil and gas, commercial aerospace, and defense.

The company acquired four businesses in the first nine months of 2007, contributing $75.3 million in incremental sales and $5.0 million in incremental operating income during that period. These acquisitions, while boosting revenue and contributing to earnings, also initially had lower margins, impacting overall operating margin.

The substantial increase in new orders ($675.7 million in Q3 2007) and backlog ($1,376.8 million at Sept 30, 2007) is largely due to major new contracts for reactor coolant pumps for China's AP1000 reactors. This significantly enhances future revenue visibility and demonstrates strong demand in the nuclear power sector.

Yes, Curtiss-Wright refinanced its credit facility on August 10, 2007, entering into a Second Amended and Restated Credit Agreement. This increased the available credit to $425 million (with an option to expand to $600 million), extended the maturity date to August 10, 2012, and provided improved pricing and covenant terms, enhancing financial flexibility for future growth and acquisitions.