10-QPeriod: Q1 FY2009

CURTISS WRIGHT CORP Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 8, 2009For Securities:CW

Summary

Curtiss-Wright Corporation reported a 2.2% decrease in net sales for the first quarter of 2009, reaching $423.8 million compared to $433.4 million in the prior year period. This decline was primarily driven by a 4% organic sales decrease in the base businesses, notably in the Metal Treatment and Motion Control segments. Despite lower revenues, the company experienced an increase in new orders by 1% to $457 million and a 2% rise in backlog to $1,713 million, with approximately 40% of the backlog attributed to defense markets. Net earnings for the quarter were $15.8 million, or $0.35 per diluted share, a decrease from $21.8 million, or $0.48 per diluted share, in the first quarter of 2008. This was influenced by a combination of factors including unfavorable foreign currency translation, a decline in sales volume on higher margin programs leading to overhead under-absorption, and competitive pricing pressures. The company actively pursued cost reduction and restructuring initiatives to mitigate these impacts. Curtiss-Wright also completed two strategic acquisitions during the quarter, Nu-Torque and EST Group, Inc., enhancing its capabilities in the Flow Control segment.

Key Highlights

  • 1Net sales declined 2.2% year-over-year to $423.8 million, attributed to a 4% organic sales decrease in base businesses, though new orders and backlog showed modest growth.
  • 2Net earnings decreased by 27% to $15.8 million, with diluted EPS at $0.35 compared to $0.48 in the prior year quarter.
  • 3The company completed two acquisitions in Q1 2009: Nu-Torque for $5 million and EST Group for $40 million, bolstering the Flow Control segment.
  • 4Operating income saw a significant 23.5% drop to $31.1 million, with Metal Treatment operating income down 49.5% and Flow Control down 6.3%.
  • 5Despite overall revenue decline, the Flow Control segment showed a 4.6% increase in sales, driven by growth in power generation and naval defense markets.
  • 6The company is actively implementing cost reduction and restructuring initiatives to offset declines, with an estimated annualized savings of $5 million to $10 million.
  • 7Long-term debt increased significantly from $513.5 million at year-end 2008 to $609.5 million at the end of Q1 2009, largely to fund acquisitions.

Frequently Asked Questions

The decrease in net sales was primarily driven by a 4% organic sales decline in the company's base businesses, particularly in the Metal Treatment and Motion Control segments. This was exacerbated by negative foreign currency translation impacts. The decline in earnings was due to lower sales volume impacting overhead absorption, competitive pricing pressures, and unfavorable product mix on certain programs.

Curtiss-Wright completed two acquisitions in the first quarter of 2009: Nu-Torque for $5 million and EST Group for $40 million. These acquisitions are expected to enhance the Flow Control segment's capabilities. Nu-Torque resulted in a gain on bargain purchase, positively impacting operating income, while both acquisitions contributed to the increase in long-term debt.

The company is focusing on cost reduction and restructuring initiatives to mitigate current pressures, with an expected annualized savings of $5 million to $10 million. While facing challenges in certain commercial markets, the company benefits from its significant exposure to defense markets, which showed increased sales. The company aims to maintain strong positions in niche markets and leverage its engineering and manufacturing competencies.

Long-term debt increased significantly due to funding acquisitions. The company utilized $251 million of its revolving credit facility during the quarter. As of March 31, 2009, the company had $122 million in unused credit available. Working capital increased to $426 million, and cash and cash equivalents stood at $64 million, indicating adequate liquidity.