10-QPeriod: Q2 FY2013

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 2, 2013For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported a strong second quarter and first half of 2013, with significant year-over-year increases in net sales and earnings from continuing operations. Net sales grew 17% in Q2 and 18% for the first half, largely driven by the incremental impact of recent acquisitions, particularly in the Flow Control and Controls segments. While organic sales saw a slight decline due to a customer loss in the general industrial market, overall revenue growth was robust, supported by strong performance in commercial aerospace, oil and gas, and general industrial sectors. Profitability also showed substantial improvement, with operating income increasing 43% in Q2 and 26% for the first half. This was bolstered by strong organic operating income growth, particularly in the Surface Technologies segment, and the absence of significant restructuring charges and contract adjustments that impacted the prior year. The company successfully integrated acquisitions, managed costs, and benefited from favorable market conditions in several key areas, leading to improved margins and earnings per share. The company also increased its dividend and highlighted its robust liquidity position with an undrawn revolving credit facility.

Financial Highlights

56 data points
Beta

Revenue

$524.14M

34.8% Gross Margin

Net Income

$33.37M

6.4% Net Margin

EPS (Diluted)

$0.70

Total Assets

$3.23B

Cash & Equivalents

$143.04M

Free Cash Flow

$44.77M

Financial Statements
Beta
Revenue$524.14M
Cost of Revenue$400.01M
Gross Profit$182.39M
R&D Expenses$14.85M
Operating Income$60.58M
Interest Expense$9.34M
Net Income$33.37M
EPS (Basic)$0.71
EPS (Diluted)$0.70
Shares Outstanding (Basic)46.79M
Shares Outstanding (Diluted)47.51M

Key Highlights

  • 1Net sales increased by 17% year-over-year to $617.7 million for the three months ended June 30, 2013, and by 18% to $1.21 billion for the six months ended June 30, 2013.
  • 2Earnings from continuing operations increased by 46% to $33.4 million for the three months ended June 30, 2013, and by 27% to $54.3 million for the six months ended June 30, 2013.
  • 3Operating income grew significantly by 43% in Q2 2013 to $57.8 million and by 26% in the first half of 2013 to $95.8 million.
  • 4The company successfully integrated acquisitions, with incremental sales from acquisitions contributing significantly to the overall revenue growth across segments.
  • 5The Surface Technologies segment showed exceptional operating income growth of 148% in Q2 and 70% in the first half, driven by increased sales volume and the absence of prior year restructuring charges.
  • 6The company increased its quarterly dividend by 11.1% to $0.10 per share.
  • 7Liquidity remains strong, with $450 million available under its revolving credit facility and no outstanding borrowings as of June 30, 2013.

Frequently Asked Questions

The significant increase in sales and operating income was primarily driven by the incremental impact of recent acquisitions, particularly in the Flow Control and Controls segments. Strong performance in commercial markets, including aerospace, oil and gas, and general industrial, also contributed. Additionally, the absence of significant restructuring charges and contract adjustments that impacted the prior year's results boosted operating income.

All three segments—Flow Control, Controls, and Surface Technologies—showed strong performance. Flow Control and Controls benefited from acquisitions and recovery in certain markets. Surface Technologies demonstrated exceptional operating income growth due to increased sales volume and operational improvements, compounded by the prior year's restructuring charges not recurring.

The company acknowledges the potential impact of U.S. government defense budget reductions and sequestration. While specific impacts are undetermined, any significant reduction in defense spending, contract cancellations, or delays could materially affect the company's results of operations, financial position, or cash flows. Management is monitoring the situation closely.

Curtiss-Wright has a diversified funding strategy, including cash flow from operations, debt issuances, and an undrawn revolving credit facility. The company issued $400 million in Senior Notes in February 2013. Management believes its current cash, cash flow, credit facility, and access to capital markets are sufficient to meet its short-term and long-term capital needs, including dividends, share repurchases, and strategic acquisitions.