10-QPeriod: Q3 FY2009

CURTISS WRIGHT CORP Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 6, 2009For Securities:CW

Summary

Curtiss-Wright Corporation reported flat net sales for the third quarter of 2009 compared to the prior year, at $435.7 million. However, net earnings declined by 27% to $20.1 million, or $0.44 per diluted share, down from $27.5 million, or $0.60 per diluted share, in the same period of 2008. This decline was primarily driven by a significant decrease in operating income, impacted by lower volumes in the Metal Treatment and Flow Control segments, particularly in the general industrial and oil and gas markets, exacerbated by under-absorption of overhead costs. The company made strategic acquisitions during the first nine months of 2009, including EST Group, Inc. and Nu-Torque, which contributed to incremental sales and goodwill. Despite challenges in certain markets due to weak global economic conditions, Curtiss-Wright saw continued organic growth in its power generation and defense markets, notably benefiting from programs like the Ford class aircraft carrier and Global Hawk UAV. The company maintained a solid financial position, with cash and cash equivalents increasing to $72.5 million, and adequate liquidity through its revolving credit facility.

Financial Highlights

30 data points
Beta

Revenue

$435.75M

32.7% Gross Margin

Net Income

$20.11M

4.6% Net Margin

EPS (Diluted)

$0.44

Cash & Equivalents

$72.50M

Free Cash Flow

$23.28M

Financial Statements
Beta
Revenue$435.75M
Cost of Revenue$293.44M
Gross Profit$142.31M
R&D Expenses$13.82M
Operating Income$36.22M
Interest Expense$5.92M
Net Income$20.11M
EPS (Basic)$0.44
EPS (Diluted)$0.44
Shares Outstanding (Basic)45.36M
Shares Outstanding (Diluted)45.83M

Key Highlights

  • 1Net sales remained stable at $435.7 million for Q3 2009, flat compared to Q3 2008.
  • 2Net earnings decreased by 27% to $20.1 million in Q3 2009, with diluted EPS at $0.44, down from $0.60 in Q3 2008.
  • 3Operating income declined by 24.8% to $36.2 million, significantly impacted by challenges in the Metal Treatment and Flow Control segments.
  • 4The company completed strategic acquisitions of EST Group, Inc. and Nu-Torque in the first nine months of 2009, contributing to goodwill and future growth potential.
  • 5Despite market headwinds, the defense and power generation markets showed continued organic growth, offsetting declines in other sectors.
  • 6Cash and cash equivalents increased to $72.5 million as of September 30, 2009, indicating a healthy liquidity position.
  • 7Restructuring charges of $4.1 million were incurred in Q1 2009 as part of ongoing cost-saving initiatives across multiple segments.

Frequently Asked Questions

The primary reason for the decline in net earnings and earnings per share is a significant decrease in operating income. This was driven by lower volumes in the Metal Treatment and Flow Control segments, particularly in the general industrial and oil and gas markets, which led to under-absorption of overhead costs. Cost reduction programs and strong performance in defense and power generation markets partially offset these declines.

The acquisitions of EST Group, Inc. and Nu-Torque in the first nine months of 2009 contributed $16.5 million in goodwill and generated incremental sales. While these acquisitions added to revenue, the Motion Control segment experienced incremental operating losses primarily due to amortization expenses, which tend to be higher in the early stages of ownership. The Nu-Torque acquisition also resulted in a $1.9 million gain on bargain purchase.

Despite the challenging economic environment impacting general industrial, oil and gas, and commercial aerospace markets, Curtiss-Wright is focusing on its core competencies and strategic initiatives. The company continues to experience strong organic growth in its defense and power generation markets, indicating resilience in these sectors. The strategy remains to be a balanced and diversified company, leveraging engineering and precision manufacturing expertise across niche markets, supported by disciplined acquisitions.

Curtiss-Wright incurred $4.1 million in business consolidation costs in the first nine months of 2009 as part of a plan to consolidate operations, reduce workforce, and consolidate locations. These costs impacted various segments and were recorded in cost of sales, general and administrative expenses, selling, and R&D. The company expects to complete the majority of these activities by the end of 2009 and anticipates annualized cash savings of $10-15 million upon completion.