10-QPeriod: Q1 FY2019

CURTISS WRIGHT CORP Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 9, 2019For Securities:CW

Summary

Curtiss-Wright Corporation reported solid financial performance for the first quarter of 2019, with total net sales increasing by 6% year-over-year to $578.3 million. This growth was primarily driven by a significant 24% increase in the Power segment, largely attributed to the incremental impact of the Dresser-Rand Government Business (DRG) acquisition and higher naval defense sales. The Defense segment also saw a modest 2% increase in sales. Operating income rose by 12% to $72.0 million, with a corresponding increase in operating margin to 12.5%. This improvement was fueled by the DRG acquisition, favorable overhead absorption in the Power segment, and ongoing margin improvement initiatives across all segments. Net earnings saw a substantial 27% increase to $55.6 million, translating to diluted earnings per share of $1.29, up from $0.98 in the prior year period. The company's strategic focus on niche markets and diversification across aerospace, defense, power generation, and industrial sectors appears to be yielding positive results.

Financial Highlights

54 data points
Beta

Revenue

$578.31M

34.0% Gross Margin

Net Income

$55.59M

9.6% Net Margin

EPS (Diluted)

$1.29

Total Assets

$3.33B

Cash & Equivalents

$154.43M

Free Cash Flow

-$68.89M

Financial Statements
Beta
Revenue$578.31M
Cost of Revenue$381.44M
Gross Profit$196.87M
R&D Expenses$17.24M
Operating Income$72.05M
Interest Expense$7.27M
Net Income$55.59M
EPS (Basic)$1.30
EPS (Diluted)$1.29
Shares Outstanding (Basic)42.80M
Shares Outstanding (Diluted)43.06M

Key Highlights

  • 1Total net sales increased 6% to $578.3 million for Q1 2019 compared to Q1 2018.
  • 2Power segment sales surged 24%, significantly boosted by the DRG acquisition and naval defense orders.
  • 3Operating income grew 12% to $72.0 million, with operating margin improving to 12.5%.
  • 4Net earnings increased 27% to $55.6 million, with diluted EPS rising to $1.29.
  • 5The company acquired one business, Tactical Communications Group (TCG), for $49 million during the quarter.
  • 6New orders increased 23% to $746.7 million, driven by naval defense orders.
  • 7Cash used in operating activities decreased by $19 million due to a prior year pension contribution, though net cash used in investing activities increased significantly due to acquisitions.

Frequently Asked Questions

The primary driver of the sales increase was the Power segment, which saw a 24% rise driven by the incremental impact of the Dresser-Rand Government Business (DRG) acquisition and higher naval defense sales. The Defense segment also contributed with a modest 2% increase.

Curtiss-Wright acquired TCG for $49 million during the first quarter of 2019. This acquisition contributed to an increase in goodwill and intangible assets on the balance sheet and was a factor in the overall increase in investing activities cash outflow for the period. Its integration into the Defense segment is expected to contribute to future revenues and earnings.

The company believes its cash and cash equivalents, cash flow from operations, available borrowings under its credit facility, and ability to raise additional capital are sufficient to meet its short-term and long-term capital needs. Despite using $51.9 million in operating cash flow during the quarter, this was an improvement from the prior year, partially due to a significant pension contribution in the prior year. The company also had substantial unused credit availability under its revolving credit agreement.

The company is involved in several legal proceedings, including asbestos-related lawsuits and a significant claim from Canadian Natural Resources Limited (CNRL) related to a 2011 refinery incident. While the company believes it has adequate legal defenses and insurance for asbestos claims, the CNRL claim's outcome is uncertain and could materially affect financial condition, results of operations, and cash flows in a future period. The company is unable to estimate a range of potential losses for this matter at this time.