10-QPeriod: Q1 FY2018

CURTISS WRIGHT CORP Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported solid financial performance for the first quarter of 2018, with total net sales increasing by 5% to $547.5 million compared to the same period in 2017. This growth was primarily driven by increases in the Commercial/Industrial and Defense segments. The company saw a significant improvement in operating income, which rose by 35% to $64.5 million, leading to a healthy increase in net earnings of 34% to $43.6 million, or $0.98 per diluted share. The company also highlighted the adoption of new accounting standards, ASC 606 for revenue recognition and ASC 715 for pension cost presentation, which were implemented on January 1, 2018. While these adoptions had some impact on reported figures, the underlying operational performance remains strong. Curtiss-Wright continues to focus on margin improvement initiatives and strategic investments, positioning itself for continued growth across its diverse end markets.

Financial Highlights

54 data points
Beta

Revenue

$547.52M

33.1% Gross Margin

Net Income

$43.64M

8.0% Net Margin

EPS (Diluted)

$0.98

Total Assets

$3.18B

Cash & Equivalents

$396.52M

Free Cash Flow

-$80.23M

Financial Statements
Beta
Revenue$547.52M
Cost of Revenue$366.33M
Gross Profit$181.19M
R&D Expenses$15.94M
Operating Income$64.50M
Interest Expense$8.20M
Net Income$43.64M
EPS (Basic)$0.99
EPS (Diluted)$0.98
Shares Outstanding (Basic)44.19M
Shares Outstanding (Diluted)44.68M

Key Highlights

  • 1Total net sales increased by 5% to $547.5 million in Q1 2018 compared to Q1 2017.
  • 2Operating income saw a substantial increase of 35% to $64.5 million, with operating margin improving to 11.8%.
  • 3Net earnings grew by 34% to $43.6 million, resulting in diluted EPS of $0.98, up from $0.73 in the prior year.
  • 4The Commercial/Industrial segment showed a 6% increase in sales, driven by industrial vehicles and aerospace defense.
  • 5The Defense segment experienced a 4% sales increase and a significant 78% jump in operating income, benefiting from margin improvements and post-acquisition accounting adjustments.
  • 6The company adopted new accounting standards, ASC 606 (Revenue from Contracts with Customers) and ASC 715 (Pension Cost Presentation), effective January 1, 2018.
  • 7A significant acquisition of Dresser-Rand Government Business for $212.5 million was completed shortly after the quarter end, expected to bolster the Power segment.

Frequently Asked Questions

The primary driver of sales growth was a combination of increases across the Commercial/Industrial segment (up 6%) and the Defense segment (up 4%). Specific areas contributing to this growth included industrial vehicles, surface treatment services, naval defense programs, and aerospace defense components.

The adoption of ASC 606, Revenue from Contracts with Customers, on a modified retrospective basis resulted in a net decrease of $1.8 million to net income for the first quarter of 2018. It also caused adjustments to the balance sheet, including increases in receivables and inventories, and a decrease in deferred revenue and retained earnings as of January 1, 2018.

Curtiss-Wright expects to recover substantially all of its general unsecured claims, including pre-petition billings of $2.9 million, as part of WEC's approved Plan of Reorganization. The company will continue to honor executory contracts and expects to collect post-petition amounts due, while monitoring the situation for any potential business impacts.

The company is involved in a significant claim from Canadian Natural Resources Limited (CNRL) related to a 2011 refinery incident, with the claim reduced to approximately $400 million. While the company believes it has adequate legal defenses, unfavorable developments could materially affect its financial condition, results of operations, or cash flows. Other legal matters, including asbestos litigation, are not expected to have a material impact.