10-QPeriod: Q2 FY2008

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 8, 2008For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported strong financial performance for the six months ended June 30, 2008, driven by significant sales growth across its three key segments: Flow Control, Motion Control, and Metal Treatment. Total sales increased by 27% year-over-year to $887 million, fueled by both robust organic growth and contributions from acquisitions made in 2007. Net earnings also saw a healthy increase of 19% to $49 million, or $1.08 per diluted share. The company highlighted substantial order intake, particularly in the Flow Control segment, driven by large orders for next-generation reactor coolant pumps for AP1000 nuclear power plants, as well as continued strength in the oil and gas market. While the company experienced increased general and administrative expenses, partly due to integration costs from acquisitions and higher labor costs, overall operating income grew by 23% to $90 million. Management remains optimistic about future growth, supported by a strong backlog and strategic investments in its core competencies and market positions.

Key Highlights

  • 1Total sales for the first six months of 2008 increased by 27% to $886.8 million compared to the same period in 2007.
  • 2Net earnings for the first six months of 2008 rose by 19% to $48.9 million, with diluted EPS growing to $1.08 from $0.91.
  • 3The Flow Control segment showed exceptional growth, with sales up 45.4% and operating income up 76.1%, largely driven by orders for AP1000 nuclear reactors and the oil and gas market.
  • 4Operating income margin for the consolidated company remained stable at 10.2% for the six months ended June 30, 2008, though acquisition-related amortization impacted newer businesses.
  • 5The company's backlog increased by 34% to $1.745 billion as of June 30, 2008, indicating strong future demand, with approximately 34% of this backlog defense-related.
  • 6Capital expenditures were $46.6 million for the three months and $46.5 million for the six months ended June 30, 2008, with significant investment in the AP1000 program.
  • 7Cash and cash equivalents increased to $85.2 million at June 30, 2008, from $66.5 million at December 31, 2007, demonstrating improved liquidity.

Frequently Asked Questions

Revenue growth was driven by a combination of strong organic growth across all three segments (Flow Control, Motion Control, and Metal Treatment) and significant contributions from acquisitions made in 2007. Key markets such as power generation, oil and gas, and defense were particularly strong performers. Specific drivers included sales of next-generation reactor coolant pumps for AP1000 nuclear reactors and increased capital spending in the oil and gas sector.

The acquisitions made in 2007 contributed substantially to the company's revenue and order growth in the first half of 2008. They provided incremental sales of $117 million and incremental new orders of $105 million for the six-month period. However, these acquisitions also contributed to increased general and administrative expenses and were subject to first-year intangible amortization, which negatively impacted their operating income margins (4.2% compared to 11.1% for base businesses).

The company expects to make approximately $60 million in additional capital expenditures during the remainder of 2008, primarily for machinery, equipment, facility expansions, and new product lines, with a notable focus on the AP1000 project. Liquidity appears strong, with cash and cash equivalents increasing to $85.2 million at June 30, 2008. The company also has $226 million in unused credit available under its revolving credit agreement.

The company acknowledges various risks including performance issues with suppliers, potential legal proceedings, changes in defense budgets, economic conditions, product demand, and unanticipated environmental remediation expenses. Increased general and administrative expenses and foreign currency translation (particularly impacting the Motion Control segment's operating income) were also noted as challenges.