10-QPeriod: Q2 FY2015

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 30, 2015For Securities:CW

Summary

Curtiss-Wright Corporation's (CW) Q2 2015 results show a decline in total net sales and operating income compared to the prior year, largely driven by decreases in the Power segment, specifically impacting the AP1000 program and lower aftermarket sales. While the Commercial/Industrial segment experienced a slight sales dip, its operating income remained stable with margin improvements. The Defense segment demonstrated resilience, with modest sales growth and significant operating income and margin expansion due to higher sales in ground and aerospace defense. The company has undergone segment realignment and is actively managing discontinued operations. Despite overall revenue softness, strategic initiatives in the Defense segment are yielding positive results. Investors should monitor the performance of the AP1000 program and its impact on the Power segment, as well as the continued strength of the Defense segment. Cash flow from operations was negative for the six-month period, primarily due to a significant voluntary pension contribution. The company also repurchased a substantial amount of its stock during the period. Curtiss-Wright maintains compliance with its debt covenants and has sufficient liquidity to meet its financial obligations.

Financial Highlights

55 data points
Beta

Revenue

$545.19M

33.4% Gross Margin

Net Income

$25.74M

4.7% Net Margin

EPS (Diluted)

$0.53

Total Assets

$3.11B

Cash & Equivalents

$244.98M

Free Cash Flow

$53.23M

Financial Statements
Beta
Revenue$545.19M
Cost of Revenue$362.84M
Gross Profit$182.35M
R&D Expenses$15.32M
Operating Income$65.44M
Interest Expense$8.98M
Net Income$25.74M
EPS (Basic)$0.54
EPS (Diluted)$0.53
Shares Outstanding (Basic)47.22M
Shares Outstanding (Diluted)48.26M

Key Highlights

  • 1Total net sales decreased by 4% for the quarter and 2% for the six-month period, primarily due to declines in the Power segment.
  • 2Operating income decreased by 9% for the quarter, but increased by 4% for the six-month period, with mixed segment performance.
  • 3The Defense segment showed strength with a 35% increase in operating income for the quarter and a 26% increase for the six-month period, driven by margin improvement initiatives and favorable foreign currency translation.
  • 4The Power segment experienced a significant 90% decrease in operating income for the quarter, largely attributed to increased costs on the AP1000 program and lower aftermarket sales.
  • 5Discontinued operations and assets held for sale continue to be managed, with two businesses divested in the first half of 2015.
  • 6Cash flow from operating activities was negative ($111 million) for the six months ended June 30, 2015, primarily due to a $145 million voluntary pension contribution.
  • 7The company repurchased $97 million of common stock in the first six months of 2015, a significant increase from the prior year.

Frequently Asked Questions

The decrease in the Power segment's sales and operating income is primarily attributed to increased costs associated with the AP1000 program, lower aftermarket sales supporting domestic nuclear operating reactors due to deferred spending, and decreased revenues on both domestic and China AP1000 programs.

The Defense segment demonstrated strong performance with a 1% increase in sales and a significant 35% increase in operating income for the quarter. This growth was driven by higher sales of turret drive stabilization systems and embedded computing products, coupled with the benefits of ongoing margin improvement initiatives and favorable foreign currency translation.

The company is actively managing discontinued operations, having divested two businesses in the first half of 2015. While these operations are reported separately, they represent a strategic portfolio review and their results (losses) are deducted from net earnings, impacting the overall reported figures. The company aims to streamline its operations through these divestitures.

The company's cash flow from operating activities was negative for the six-month period, largely due to a substantial voluntary pension contribution of $145 million. Despite this, the company maintains sufficient liquidity, with $245 million in cash and cash equivalents and an unused credit facility of $448 million. Management believes these resources, along with operational cash flow and access to capital markets, are adequate to meet short-term and long-term needs.