10-QPeriod: Q2 FY2016

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 28, 2016For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported mixed financial results for the six months ended June 30, 2016. While total net sales decreased by 5% to $1.04 billion compared to the prior year, operating income saw a notable decline of 9% to $125.4 million, primarily driven by lower sales volumes in the Commercial/Industrial and Defense segments, alongside specific unfavorable contract adjustments and restructuring costs. Despite the overall revenue decline, the Power segment showed significant improvement with a 47% increase in operating income, largely due to higher AP1000 program revenues and favorable contract adjustments. The company also demonstrated robust operating cash flow, increasing significantly due to the absence of a large voluntary pension contribution made in the prior year, and also benefited from a $20 million gain from interest rate swap terminations. Management remains confident in the company's liquidity and ability to meet its capital needs.

Financial Highlights

55 data points
Beta

Revenue

$532.77M

34.8% Gross Margin

Net Income

$39.96M

7.5% Net Margin

EPS (Diluted)

$0.88

Total Assets

$2.98B

Cash & Equivalents

$383.15M

Free Cash Flow

$79.46M

Financial Statements
Beta
Revenue$532.77M
Cost of Revenue$347.39M
Gross Profit$185.38M
R&D Expenses$15.24M
Operating Income$68.09M
Interest Expense$10.27M
Net Income$39.96M
EPS (Basic)$0.90
EPS (Diluted)$0.88
Shares Outstanding (Basic)44.49M
Shares Outstanding (Diluted)45.16M

Key Highlights

  • 1Total net sales decreased by 5% to $1.04 billion for the six months ended June 30, 2016, compared to $1.09 billion in the prior year.
  • 2Operating income decreased by 9% to $125.4 million for the six months ended June 30, 2016, reflecting lower volumes in key segments.
  • 3The Power segment showed strong performance with a 47% increase in operating income to $30.7 million, driven by the AP1000 program and favorable contract adjustments.
  • 4Commercial/Industrial and Defense segments experienced sales declines of 6% and 6% respectively, impacting overall revenue.
  • 5Net earnings from continuing operations decreased to $72.8 million from $83.3 million in the comparable prior year period.
  • 6Operating cash flow significantly increased to $156.6 million from a negative $111.3 million, largely due to the absence of a prior year pension contribution and gains from interest rate swap terminations.
  • 7The company repurchased $55 million of common stock during the first six months of 2016, down from $97 million in the prior year period.

Frequently Asked Questions

The revenue decline was primarily driven by lower sales volumes in the Commercial/Industrial segment (down 6%) and the Defense segment (down 6%), influenced by reduced demand for severe-service industrial valves and lower sales of aerospace and defense-related products.

Overall operating income decreased by 9% due to lower sales volumes and certain unfavorable contract adjustments. However, the Power segment's operating income surged by 47%, largely offsetting declines in other segments. Favorable contract adjustments related to the AP1000 program and the termination of interest rate swaps also impacted the results.

Curtiss-Wright demonstrated strong operating cash flow for the period. As of June 30, 2016, the company had $383.2 million in cash and cash equivalents and ample borrowing capacity under its revolving credit agreement. Debt levels remained stable, and the company was in compliance with all debt covenants, with significant room to borrow additional debt without violating covenants.

The company is involved in several legal proceedings, including a significant claim from Canadian Natural Resources Limited (CNRL) related to a refinery incident. While the company believes it has adequate defenses, it cannot estimate potential losses, and unfavorable outcomes could materially affect financial results. Additionally, the company faces asbestos litigation, for which it maintains insurance coverage and believes liability is unlikely to be material.