10-QPeriod: Q2 FY2012

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 3, 2012For Securities:CW

Summary

Curtiss-Wright Corporation's (CW) 10-Q filing for the period ending June 30, 2012, indicates a period of mixed performance with top-line growth partially offset by declining operating income. Total sales increased by 4% to $526.4 million for the quarter and 7% to $1.03 billion for the six months, driven by higher volumes across all segments and contributions from recent acquisitions, particularly in the commercial aerospace and power generation markets. However, operating income saw a decline of 17% to $40.5 million for the quarter and 14% to $76.1 million for the six months. This decline in profitability was primarily attributed to a significant decrease in the Flow Control segment's operating income, impacted by unexpected cost overruns on the AP1000 nuclear power plant contract and lower defense-related sales. The Metal Treatment segment showed strong sales growth and improved operating income when excluding restructuring charges. The company also reported increased interest expenses and effective tax rate. Despite the profitability pressures, the company maintained a strong liquidity position with $213 million in cash and cash equivalents and a healthy current ratio of 2.6:1. Additionally, the company announced a 12.5% increase in its quarterly dividend.

Financial Highlights

56 data points
Beta

Revenue

$526.39M

31.2% Gross Margin

Net Income

$22.74M

4.3% Net Margin

EPS (Diluted)

$0.48

Total Assets

$2.68B

Cash & Equivalents

$213.08M

Free Cash Flow

$2.41M

Financial Statements
Beta
Revenue$526.39M
Cost of Revenue$362.38M
Gross Profit$164.01M
R&D Expenses$15.35M
Operating Income$40.54M
Interest Expense$6.53M
Net Income$22.74M
EPS (Basic)$0.49
EPS (Diluted)$0.48
Shares Outstanding (Basic)46.82M
Shares Outstanding (Diluted)47.50M

Key Highlights

  • 1Total sales increased by 4% to $526.4 million in Q2 2012 and 7% year-to-date to $1.03 billion, driven by volume increases and acquisitions.
  • 2Operating income decreased by 17% to $40.5 million in Q2 2012 and 14% year-to-date to $76.1 million, primarily due to issues in the Flow Control segment.
  • 3The Flow Control segment experienced a 30% drop in operating income for the quarter, impacted by unexpected costs on the AP1000 nuclear contract and lower defense sales.
  • 4Metal Treatment segment sales grew 13% in the quarter and 20% year-to-date, with operating income showing significant improvement when excluding restructuring and impairment charges.
  • 5The company divested its Heat Treating business on March 30, 2012, for $52 million, with results reported under discontinued operations.
  • 6Cash flow from operations improved to $18.2 million for the six months ended June 30, 2012, compared to $15.1 million in the prior year.
  • 7The company increased its quarterly dividend by 12.5% to $0.09 per share and repurchased approximately $5 million in stock during the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by higher sales volumes across all three segments (Flow Control, Motion Control, and Metal Treatment). Acquisitions, particularly those integrated into the commercial aerospace and power generation markets, also contributed significantly to the top-line increase.

The decline in operating income was mainly due to a significant decrease in the Flow Control segment's profitability. This was impacted by unexpected additional costs on a long-term contract for AP1000 nuclear power plant reactor coolant pumps and a reduction in defense-related sales within this segment. Restructuring charges in the Metal Treatment segment also impacted reported operating income.

Curtiss-Wright sold its Heat Treating business on March 30, 2012, for $52 million. The results of this business have been reclassified as discontinued operations for all periods presented, which affects comparability of the Metal Treatment segment's historical results and removes its contribution from continuing operations.

The company's financial condition remained strong with $213 million in cash and cash equivalents and a current ratio of 2.6:1. Interest expense increased due to higher average debt levels and borrowing rates. The company was in compliance with its debt covenants and was in the process of renewing its revolving credit facility, which had $373 million in unused capacity at the end of the quarter.