10-QPeriod: Q3 FY2019

CURTISS WRIGHT CORP Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 31, 2019For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported solid financial performance for the nine months ended September 30, 2019, with total net sales increasing by 4% to $1.83 billion, driven by growth in its Defense and Power segments. Net earnings rose by 13% to $218.2 million. The company's operating income also saw a healthy increase of 7%, reflecting improved operational efficiency and strategic acquisitions, particularly in the Defense segment, which experienced a notable 8% increase in third-quarter sales. The balance sheet reflects strategic investments, with goodwill increasing to $1.1 billion due to acquisitions. The company has a strong liquidity position, with $297.7 million in cash and cash equivalents and an undrawn credit facility of $471 million as of September 30, 2019. Management is actively returning capital to shareholders through share repurchases and dividends, signaling confidence in future performance. While facing some headwinds in the Commercial/Industrial segment due to lower general industrial demand and specific challenges in the Power segment related to the AP1000 program, the overall performance indicates a resilient business model with significant contributions from its defense-related operations.

Financial Highlights

56 data points
Beta

Revenue

$614.88M

36.8% Gross Margin

Net Income

$82.51M

13.4% Net Margin

EPS (Diluted)

$1.92

Total Assets

$3.48B

Cash & Equivalents

$297.71M

Free Cash Flow

$102.18M

Financial Statements
Beta
Revenue$614.88M
Cost of Revenue$388.80M
Gross Profit$226.08M
R&D Expenses$18.36M
Operating Income$105.57M
Interest Expense$7.95M
Net Income$82.51M
EPS (Basic)$1.93
EPS (Diluted)$1.92
Shares Outstanding (Basic)42.71M
Shares Outstanding (Diluted)42.99M

Key Highlights

  • 1Total net sales for the nine months ended September 30, 2019, increased by 4% to $1.83 billion, compared to the prior year period.
  • 2Net earnings for the nine months ended September 30, 2019, increased by 13% to $218.2 million, with diluted EPS of $5.07.
  • 3Operating income for the nine months ended September 30, 2019, rose by 7% to $283.3 million, with an improved operating margin of 15.5%.
  • 4The Defense segment showed strong performance, with third-quarter sales up 8% and operating income up 14%, driven by increased demand in aerospace and naval defense.
  • 5The company made a significant acquisition in the nine months ended September 30, 2019, for $50 million (Tactical Communications Group) and another in 2018 for $210.2 million (Dresser-Rand Government Business), contributing to growth and goodwill.
  • 6Cash flow from operating activities significantly improved, increasing by $60 million to $159 million for the nine months ended September 30, 2019, partly due to a prior year pension contribution.
  • 7Curtiss-Wright maintained a strong liquidity position with $297.7 million in cash and cash equivalents and an available credit facility of $471 million as of September 30, 2019.

Frequently Asked Questions

Revenue growth was primarily driven by increases in the Defense segment (8% increase in Q3, 3% year-to-date) and the Power segment (10% year-to-date, largely due to the DRG acquisition). The Commercial/Industrial segment also saw modest growth.

Acquisitions, particularly the Dresser-Rand Government Business (DRG) in 2018 and Tactical Communications Group (TCG) in 2019, contributed to sales growth, especially in the Power and Defense segments. Goodwill on the balance sheet increased to $1.1 billion, reflecting these strategic integrations.

Curtiss-Wright maintains a strong liquidity position with $297.7 million in cash and cash equivalents as of September 30, 2019. They also have an undrawn revolving credit facility of $471 million, indicating ample resources to meet operational and capital needs. Operating cash flow also showed a significant increase.

The company is involved in legal proceedings, most notably a claim from Canadian Natural Resources Limited (CNRL) related to a 2011 refinery fire, which is currently in mediation and for which the company cannot estimate a potential loss. They are also involved in asbestos litigation but believe their liability is unlikely to be material due to limited use and product conditions. The AP1000 program in China also presents potential liquidated damages, though responsibility for delays is uncertain.