10-QPeriod: Q2 FY2017

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 27, 2017For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported solid financial performance for the six months ended June 30, 2017, with total net sales increasing by 5% to $1.09 billion, driven by growth across its Commercial/Industrial, Defense, and Power segments. Net earnings rose by 14% to $83.2 million, reflecting improved operating income of $134.5 million, up 7% year-over-year. The company's strategic focus on diversified niche markets appears to be paying off, with particular strength noted in the Power segment due to increased production on the AP1000 China Direct program and a robust nuclear aftermarket. The Defense segment saw a notable boost from the acquisition of Teletronics Technology Corporation (TTC), contributing significantly to sales and new orders. Despite overall positive trends, operating income in the Defense segment saw a decline due to integration costs associated with the TTC acquisition. The company also highlighted its strong liquidity position and continued commitment to returning capital to shareholders through dividends and share repurchases. Management remains confident in the company's ability to meet its financial obligations and pursue growth opportunities, although potential impacts from the Westinghouse bankruptcy and other legal proceedings are being monitored.

Financial Highlights

55 data points
Beta

Revenue

$567.65M

34.4% Gross Margin

Net Income

$50.65M

8.9% Net Margin

EPS (Diluted)

$1.13

Total Assets

$3.12B

Cash & Equivalents

$342.71M

Free Cash Flow

$72.96M

Financial Statements
Beta
Revenue$567.65M
Cost of Revenue$372.64M
Gross Profit$195.01M
R&D Expenses$15.79M
Operating Income$79.73M
Interest Expense$10.75M
Net Income$50.65M
EPS (Basic)$1.15
EPS (Diluted)$1.13
Shares Outstanding (Basic)44.21M
Shares Outstanding (Diluted)44.81M

Key Highlights

  • 1Total net sales for the first six months of 2017 increased by 5% to $1.09 billion compared to the same period in 2016.
  • 2Net earnings for the first six months of 2017 increased by 14% to $83.2 million, with diluted EPS at $1.86.
  • 3Operating income grew by 7% to $134.5 million for the first six months of 2017, indicating improved operational performance.
  • 4The company successfully integrated the acquisition of Teletronics Technology Corporation (TTC) in the Defense segment, contributing $23 million in sales for the six-month period.
  • 5The Power segment showed significant strength, with sales up 11% to $280 million, driven by AP1000 program production and aftermarket services.
  • 6Despite growth in sales, Defense segment operating income decreased by 9% due to $7 million in purchase accounting costs related to the TTC acquisition.
  • 7The company generated $60.9 million in cash from operating activities for the first six months of 2017, though this was lower than the prior year, impacted by AP1000 program collections and an interest rate swap termination benefit in 2016.

Frequently Asked Questions

The acquisition of TTC, completed in January 2017, contributed $23 million in sales for the first six months of 2017 and significantly boosted new orders in the Defense segment. However, it also resulted in $7 million of purchase accounting costs that negatively impacted the segment's operating income during this period.

The Power segment's growth was primarily driven by increased production levels on the AP1000 China Direct and domestic programs, contributing $35 million and $6 million in additional revenue, respectively, for the first six months of 2017. Improved profitability in the nuclear aftermarket business also contributed to the segment's strong performance.

Curtiss-Wright had approximately $6.5 million in pre-petition billings outstanding with WEC as of June 30, 2017. The company expects to collect post-petition amounts due and has assessed that pre-petition amounts will be substantially recoverable. They are monitoring the bankruptcy proceedings but do not believe that rejection of outstanding contracts would have a material adverse impact on their cash flow or operations.

Curtiss-Wright reported $60.9 million in cash provided by operating activities for the first six months of 2017. The company had $342.7 million in cash and cash equivalents as of June 30, 2017. They also had $451 million in unused credit available under their revolving credit agreement. Management is evaluating cash utilization through share repurchases, acquisitions, increased dividends, and debt reduction.