10-QPeriod: Q1 FY2020

CURTISS WRIGHT CORP Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:CW

Summary

Curtiss-Wright Corporation (CW) reported its first-quarter 2020 results, demonstrating resilience amidst a challenging economic environment. Total net sales increased by 4% year-over-year to $601.2 million, driven primarily by a significant 24% surge in the Defense segment, which benefited from increased demand in naval and aerospace defense markets, including contributions from a recent acquisition. Conversely, the Commercial/Industrial and Power segments experienced slight sales declines. Net earnings for the quarter were $51.8 million, a decrease of 7% from the prior year, largely attributed to a higher effective tax rate and a substantial negative impact from foreign currency translation adjustments within other comprehensive income. While operating income remained largely flat year-over-year, the company highlighted restructuring initiatives aimed at improving efficiency, projecting $25-$30 million in pre-tax charges and expected annual cost savings of $20 million. The company also repurchased a notable $112 million in common stock during the quarter, underscoring its commitment to returning capital to shareholders.

Financial Highlights

54 data points
Beta

Revenue

$601.23M

33.4% Gross Margin

Net Income

$51.76M

8.6% Net Margin

EPS (Diluted)

$1.21

Total Assets

$3.63B

Cash & Equivalents

$157.76M

Free Cash Flow

-$211.21M

Financial Statements
Beta
Revenue$601.23M
Cost of Revenue$400.65M
Gross Profit$200.58M
R&D Expenses$18.31M
Operating Income$72.45M
Interest Expense$7.49M
Net Income$51.76M
EPS (Basic)$1.22
EPS (Diluted)$1.21
Shares Outstanding (Basic)42.46M
Shares Outstanding (Diluted)42.77M

Key Highlights

  • 1Total net sales rose 4% to $601.2 million, driven by a strong performance in the Defense segment (+24%).
  • 2Net earnings decreased 7% to $51.8 million, impacted by a higher tax rate and foreign currency translation losses.
  • 3Operating income remained stable at $72.4 million, with margin improvement in Defense offset by costs in Power and a slight decline in Commercial/Industrial.
  • 4The company initiated restructuring activities across segments, expecting $25-$30 million in charges for 2020, with anticipated annual savings of $20 million.
  • 5Significant share repurchases of $112 million were made during the quarter.
  • 6The company reported a substantial negative impact of $50.3 million from foreign currency translation adjustments in Other Comprehensive Income.
  • 7COVID-19 is noted as a potential risk to demand in commercial aerospace and general industrial markets in Q2 and beyond, though its material impact on Q1 results was limited.

Frequently Asked Questions

The primary driver of the sales increase was the Defense segment, which saw a 24% rise in sales. This was fueled by higher demand in naval defense (including contributions from the 901D acquisition) and aerospace defense markets, particularly for embedded computing equipment and valve systems.

Net earnings decreased by 7% primarily due to a higher effective tax rate (26.6% in Q1 2020 vs. 20.9% in Q1 2019), which was partly due to a valuation allowance against certain foreign deferred tax assets. Additionally, significant negative foreign currency translation adjustments in Other Comprehensive Income, amounting to a $50.3 million loss, also impacted overall comprehensive income.

Curtiss-Wright is implementing restructuring activities across its segments, projecting $25-$30 million in pre-tax charges for 2020 with an expectation of achieving approximately $20 million in annual cost savings. The company also stated its belief that its current cash position, operational cash flow, and borrowing capacity are sufficient to meet its financial obligations through the remainder of the year, despite the uncertainties posed by COVID-19.

The company significantly increased its share repurchase activity in the first quarter of 2020, spending $112 million to repurchase approximately 1.1 million shares, compared to $12 million in the prior year quarter. The company plans to repurchase at least $150 million of its common stock during the 2020 calendar year.