10-QPeriod: Q2 FY2019

CURTISS WRIGHT CORP Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 1, 2019For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported solid financial performance for the second quarter and the first half of 2019, demonstrating revenue growth and improved profitability. Total net sales for the second quarter increased by 3% to $639 million, and for the first half of the year, sales grew by 4% to $1.22 billion. The company saw particularly strong performance in its Power segment, with sales up 9% for the quarter and 16% for the first half, driven by increased naval defense production and the impact of the Dresser-Rand Government business (DRG) acquisition. The Defense segment experienced a slight sales decrease for the quarter but remained flat year-to-date, while the Commercial/Industrial segment saw modest growth. Overall operating income increased by 4% for the quarter and 7% for the first half, reflecting improved operational efficiencies and the absence of certain acquisition-related costs. Net earnings for the second quarter rose to $80.1 million ($1.86 per diluted share) from $74.8 million ($1.68 per diluted share) in the prior year, and for the first half, net earnings were $135.7 million ($3.15 per diluted share) compared to $118.4 million ($2.66 per diluted share) in the prior year. The company also managed its debt effectively, with interest expense decreasing due to a debt prepayment. Cash flow from operations showed improvement, driven by higher collections and lower inventory costs, although investing activities utilized more cash due to acquisitions. Curtiss-Wright ended the period with a strong liquidity position, indicating continued financial stability.

Financial Highlights

55 data points
Beta

Revenue

$639.00M

36.0% Gross Margin

Net Income

$80.07M

12.5% Net Margin

EPS (Diluted)

$1.86

Total Assets

$3.43B

Cash & Equivalents

$216.34M

Free Cash Flow

$75.81M

Financial Statements
Beta
Revenue$639.00M
Cost of Revenue$408.95M
Gross Profit$230.04M
R&D Expenses$18.90M
Operating Income$105.69M
Interest Expense$7.96M
Net Income$80.07M
EPS (Basic)$1.87
EPS (Diluted)$1.86
Shares Outstanding (Basic)42.76M
Shares Outstanding (Diluted)43.02M

Key Highlights

  • 1Total net sales increased by 3% to $639 million for Q2 2019 and by 4% to $1.22 billion for the first six months of 2019.
  • 2Operating income grew by 4% to $105.7 million for Q2 2019 and by 7% to $177.7 million for the first six months of 2019.
  • 3Net earnings per diluted share for Q2 2019 were $1.86, up from $1.68 in Q2 2018, and for the first six months were $3.15, up from $2.66.
  • 4The Power segment showed significant growth, with Q2 sales up 9% and first-half sales up 16%, driven by naval defense and the DRG acquisition.
  • 5Defense segment sales were down 1% for Q2 but flat year-to-date, impacted by shifts in product mix and prior-year contract adjustments.
  • 6Cash flow from operating activities increased significantly due to higher collections and lower inventory, partially offset by a prior year pension contribution.
  • 7The company completed an acquisition for $50 million in Q1 2019, contributing to increased goodwill and intangible assets.
  • 8Share repurchases amounted to $25 million in the first six months of 2019, and the company maintained compliance with debt covenants.

Frequently Asked Questions

Curtiss-Wright saw a 3% increase in total net sales for the second quarter of 2019, reaching $639 million. For the first six months of 2019, total net sales grew by 4% to $1.22 billion. This growth was driven primarily by the Power segment, with contributions from the Commercial/Industrial segment, while the Defense segment experienced a slight decline in quarterly sales.

Profitability improved year-over-year. Operating income increased by 4% to $105.7 million in Q2 2019 and by 7% to $177.7 million in the first half of 2019. Net earnings also rose, with diluted earnings per share reaching $1.86 in Q2 2019 and $3.15 for the first half, up from $1.68 and $2.66 respectively in the prior year periods. This improvement was attributed to higher sales, operational efficiencies, and the absence of certain acquisition-related costs.

The Power segment was a key growth driver, with sales up 9% in Q2 and 16% year-to-date, bolstered by naval defense contracts and the DRG acquisition. The Commercial/Industrial segment showed modest growth in sales. The Defense segment's sales were flat year-to-date despite a small quarterly decrease, impacted by a less favorable product mix and the non-recurrence of prior year contract adjustments.

Curtiss-Wright reported a significant increase in net cash provided by operating activities for the first six months of 2019, largely due to improved working capital management and the absence of a large voluntary pension contribution made in the prior year. While investing activities used more cash due to acquisitions, the company maintains sufficient liquidity through cash on hand, operating cash flow, and its revolving credit facility to meet its capital needs.