SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 25, 2018
CURTISS-WRIGHT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
1-134 |
13-0612970 |
State or Other Jurisdiction of Incorporation or Organization |
Commission File Number |
IRS Employer Identification No. |
130 Harbour Place Drive, Suite 300
Davidson, North Carolina
|
28036 |
Address of Principal Executive Offices |
Zip Code |
Registrant’s telephone number, including area code: (704) 869-4600
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CURTISS-WRIGHT CORPORATION |
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By: |
/s/ Glenn E. Tynan |
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Glenn E. Tynan |
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Vice-President and |
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Chief Financial Officer |
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Date: |
July 25, 2018 |
EXHIBIT INDEX
Exhibit |
Description |
99.1 | |
Presentation shown during investor and securities analyst webcast on on July 26, 2018 |
Curtiss-Wright Reports Second Quarter 2018 Financial Results; Raises Full-Year Revenue, EPS and Free Cash Flow Guidance
DAVIDSON, N.C.--(BUSINESS WIRE)--July 26, 2018--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the second quarter ended June 30, 2018.
Beginning this quarter, coinciding with the initial reporting of the recent acquisition of Dresser-Rand’s government business (“DRG”), the Company has elected to change the presentation of its financials and guidance to include an Adjusted (non-GAAP) view that excludes first year purchase accounting costs associated with its acquisitions. We believe this change will provide improved transparency to the investment community in order to better measure Curtiss-Wright’s core operating and financial performance and improve comparisons of our key financial metrics to our peers. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within this release.
Second Quarter 2018 Highlights
Full-Year 2018 Business Outlook
Full-Year 2018 Adjusted EPS Guidance: |
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Prior Reported Guidance (GAAP) |
Updated Reported Guidance (GAAP) |
Adjustments (Non-GAAP)(1) |
Current Adjusted Guidance (Non-GAAP) |
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Forecasted reported diluted EPS (GAAP) | $5.47 - $5.62 | - | - | - | |||||
Increase from Operational Performance | $0.28 | $5.75 - $5.90 | - | - | |||||
Adjustments (1) | - | - | $0.33 | ||||||
Tax impact on Adjustments (1) | - | - | ($0.08) | ||||||
Forecasted Adjusted diluted EPS (Non-GAAP) | - | - | - | $6.00 - $6.15 | |||||
(1) Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions. |
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“We generated strong second quarter results which exceeded our expectations, as we delivered solid 9% top-line growth led by strong defense and industrial sales, and improved profitability driven by the benefits of our ongoing margin improvement initiatives, to produce Adjusted diluted EPS of $1.80,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation.
“As a result of the strong first half results and our outlook for continued momentum through the remainder of this year, we have increased our full-year revenue, EPS and free cash flow guidance. We are projecting another solid operational performance including higher sales in all end markets, double-digit growth in operating income driving strong margin expansion and solid free cash flow generation.”
Second Quarter 2018 Operating Results |
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(In millions) | 2Q-2018 | 2Q-2017 | Change | |||
Sales | $ 620.3 | $ 567.7 | 9% | |||
Reported operating income (GAAP) | $ 102.1 | $ 79.7 | 28% | |||
Adjustments (1) | 7.0 | 5.2 | - | |||
Adjusted operating income (Non-GAAP) | $ 109.1 | $ 85.0 | 28% | |||
Adjusted operating margin (Non-GAAP) | 17.6% | 15.0% | 260 bps | |||
(1) Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions, including DRG in 2018 (Power segment) and TTC in 2017 (Defense segment). |
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Net Earnings and Diluted EPS |
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(In millions, except EPS) | 2Q-2018 | 2Q-2017 | Change | ||||
Reported net earnings (GAAP) | $ 74.8 | $ 50.7 | 48% | ||||
Adjustments (1) | 7.0 | 5.2 | - | ||||
Tax impact on Adjustments (1) |
(1.6) |
(1.6) |
- |
||||
Adjusted net earnings (Non-GAAP) | $ 80.2 | $ 54.3 | 48% | ||||
Reported diluted EPS (GAAP) | $1.68 | $1.13 | 48% | ||||
Adjustments (1) | $0.16 | $0.12 | - | ||||
Tax impact on Adjustments (1) |
($0.04) |
($0.04) |
- | ||||
Adjusted diluted EPS (Non-GAAP) | $1.80 | $1.21 | 49% | ||||
(1) Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions. |
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Free Cash Flow |
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(In millions) | 2Q-2018 | 2Q-2017 | Change | |||||||||||||
Net cash provided by operating activities | $ 97.9 | $ 85.9 | 14% | |||||||||||||
Capital expenditures | (10.9) | (12.9) | 16% | |||||||||||||
Free cash flow | $ 87.1 | $ 73.0 | 19% | |||||||||||||
Adjusted free cash flow | $ 87.1 | $ 73.0 | 19% | |||||||||||||
New Orders and Backlog
Other Items – Share Repurchase
Second Quarter 2018 Segment Performance
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Commercial/Industrial |
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(In millions) | 2Q-2018 | 2Q-2017 | Change | |||||||||||||||
Sales | $ | 312.5 | $ | 291.6 | 7% | |||||||||||||
Reported operating income (GAAP) | $ | 51.7 | $ | 43.6 | 19% | |||||||||||||
Reported operating margin (GAAP) | 16.6% | 15.0% | 160 bps | |||||||||||||||
Defense |
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(In millions) | 2Q-2018 | 2Q-2017 | Change | ||||||
Sales | $ | 146.2 | $ | 126.4 | 16% | ||||
Reported operating income (GAAP) | $ | 38.6 | $ | 21.1 | 83% | ||||
Adjustments (1) | - | 5.2 | - | ||||||
Adjusted operating income (Non-GAAP) | $ | 38.6 | $ | 26.3 | 47% | ||||
Adjusted operating margin (Non-GAAP) | 26.4% | 20.8% | 560 bps | ||||||
(1) Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions. |
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Power |
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(In millions) | 2Q-2018 | 2Q-2017 | Change | ||||||
Sales | $ | 161.7 | $ | 149.7 | 8% | ||||
Reported operating income (GAAP) | $ | 19.2 | $ | 23.9 | (20%) | ||||
Adjustments (1) | 7.0 | - | - | ||||||
Adjusted operating income (Non-GAAP) | $ | 26.2 | $ | 23.9 | 10% | ||||
Adjusted operating margin (Non-GAAP) | 16.2% | 15.9% | 30 bps | ||||||
(1) Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions. |
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Full-Year 2018 Guidance
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The Company is updating its full-year 2018 financial guidance as follows: |
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(In millions, except EPS) |
Prior Reported Guidance (GAAP) |
Increase from Operational Performance |
Updated Reported Guidance (GAAP) |
Adjustments (Non-GAAP)(1) |
Current Adjusted Guidance (Non-GAAP) |
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Total Sales | $2,415 - $2,455 | $30 | $2,445 - $2,485 | $2,445 - $2,485 | |||||||
Operating Income | $343 - $353 | $13 | $357 - $367 | $14 | $371 - $382 | ||||||
Operating Margin | 14.2% - 14.4% | 40 bps | 14.6% - 14.8% | 60 bps | 15.2% - 15.4% | ||||||
Interest Expense | ($36 - $37) | $1 | ($35 - $36) | - | ($35 - $36) | ||||||
Effective Tax Rate | 24% | - | 24% | - | 24% | ||||||
Diluted EPS | $5.47 - $5.62 | $0.28 | $5.75 - $5.90 | $0.25 | $6.00 - $6.15 | ||||||
Diluted Shares Outstanding | 44.7 | (0.1) | 44.6 | - | 44.6 | ||||||
Free Cash Flow | $240 - $260 | $10 | $250 - $270 | $50 | $300 - $320 | ||||||
(1) Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions. |
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Notes:
Non-GAAP Financial Results
The company reports its financial performance in accordance with accounting principles generally accepted in the United States of America ("GAAP"). This press release refers to "Adjusted" amounts, which are Non-GAAP financial measures described below.
We utilize a number of different financial measures in analyzing and assessing the overall performance of our business, and in making operating decisions, forecasting and planning for future periods. We consider the use of the non-GAAP measures to be helpful in assessing the performance of the ongoing operation of our business. We believe that disclosing non-GAAP financial measures provides useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance.
Beginning with the second quarter of 2018 coinciding with the initial reporting of the DRG acquisition, the Company has elected to also present its financials and guidance on an Adjusted, non-GAAP basis for operating income, operating margin, net earnings and diluted earnings per share to exclude first year purchase accounting costs associated with its acquisitions, specifically one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions.
Management believes that this approach will provide improved transparency to the investment community in order to measure Curtiss-Wright’s core operating and financial performance, provide quarter-over-quarter comparisons excluding one-time items and show better comparisons among company peers.
Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within this release. All per share amounts are reported on a diluted basis.
Conference Call & Webcast Information
The Company will host a conference call to discuss second quarter 2018 financial results at 9:00 a.m. EDT on Thursday, July 26, 2018. A live webcast of the call and the accompanying financial presentation, as well as a replay of the call, will be made available on the internet by visiting the Investor Relations section of the Company’s website at www.curtisswright.com.
(Tables to Follow)
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||
($'s in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
June 30, | Change | June 30, | Change | |||||||||||||||||||||||||||||||||||
2018 | 2017 | $ | % | 2018 | 2017 | $ | % | |||||||||||||||||||||||||||||||
Product sales | $ | 511,676 | $ | 459,774 | $ | 51,902 | 11 | % | $ | 956,363 | $ | 883,003 | $ | 73,360 | 8 | % | ||||||||||||||||||||||
Service sales | 108,622 | 107,879 | 743 | 1 | % | 211,457 | 208,241 | 3,216 | 2 | % | ||||||||||||||||||||||||||||
Total net sales | 620,298 | 567,653 | 52,645 | 9 | % | 1,167,820 | 1,091,244 | 76,576 | 7 | % | ||||||||||||||||||||||||||||
Cost of product sales | 324,184 | 302,794 | 21,390 | 7 | % | 623,495 | 592,404 | 31,091 | 5 | % | ||||||||||||||||||||||||||||
Cost of service sales | 69,614 | 69,849 | (235 | ) | 0 | % | 136,634 | 136,895 | (261 | ) | 0 | % | ||||||||||||||||||||||||||
Total cost of sales | 393,798 | 372,643 | 21,155 | 6 | % | 760,129 | 729,299 | 30,830 | 4 | % | ||||||||||||||||||||||||||||
Gross profit | 226,500 | 195,010 | 31,490 | 16 | % | 407,691 | 361,945 | 45,746 | 13 | % | ||||||||||||||||||||||||||||
Research and development expenses | 15,054 | 15,788 | (734 | ) | (5 | %) | 30,995 | 31,379 | (384 | ) | (1 | %) | ||||||||||||||||||||||||||
Selling expenses | 32,665 | 29,055 | 3,610 | 12 | % | 64,185 | 58,513 | 5,672 | 10 | % | ||||||||||||||||||||||||||||
General and administrative expenses | 76,705 | 70,435 | 6,270 | 9 | % | 145,937 | 144,629 | 1,308 | 1 | % | ||||||||||||||||||||||||||||
Operating income | 102,076 | 79,732 | 22,344 | 28 | % | 166,574 | 127,424 | 39,150 | 31 | % | ||||||||||||||||||||||||||||
Interest expense | 9,566 | 10,750 | (1,184 | ) | (11 | %) | 17,770 | 21,127 | (3,357 | ) | (16 | %) | ||||||||||||||||||||||||||
Other income, net | 3,971 | 3,729 | 242 | 6% | 8,654 | 7,576 | 1,078 | 14% | ||||||||||||||||||||||||||||||
Earnings before income taxes | 96,481 | 72,711 | 23,770 | 33 | % | 157,458 | 113,873 | 43,585 | 38 | % | ||||||||||||||||||||||||||||
Provision for income taxes | (21,693 | ) | (22,061 | ) | 368 | (2 | %) | (39,027 | ) | (30,676 | ) | (8,351 | ) | 27 | % | |||||||||||||||||||||||
Net earnings | $ | 74,788 | $ | 50,650 | $ | 24,138 | 48 | % | $ | 118,431 | $ | 83,197 | $ | 35,234 | 42 | % | ||||||||||||||||||||||
Net earnings per share: | ||||||||||||||||||||||||||||||||||||||
Basic earnings per share | $ | 1.69 | $ | 1.15 | $ | 2.68 | $ | 1.88 | ||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 1.68 | $ | 1.13 | $ | 2.66 | $ | 1.86 | ||||||||||||||||||||||||||||||
Dividends per share | $ | 0.15 | $ | 0.13 | $ | 0.30 | $ | 0.26 | ||||||||||||||||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||||||||
Basic | 44,124 | 44,213 | 44,144 | 44,221 | ||||||||||||||||||||||||||||||||||
Diluted | 44,553 | 44,807 | 44,604 | 44,825 |
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | |||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||||||||||||
($'s in thousands, except par value) | |||||||||||||||
June 30, | December 31, | Change | |||||||||||||
2018 | 2017 | % | |||||||||||||
Assets | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 218,898 | $ | 475,120 | (54 | %) | |||||||||
Receivables, net | 575,142 | 494,923 | 16 | % | |||||||||||
Inventories, net | 436,250 | 378,866 | 15 | % | |||||||||||
Other current assets | 53,953 | 52,951 | 2 | % | |||||||||||
Total current assets | 1,284,243 | 1,401,860 | (8 | %) | |||||||||||
Property, plant, and equipment, net | 374,995 | 390,235 | (4 | %) | |||||||||||
Goodwill | 1,103,562 | 1,096,329 | 1 | % | |||||||||||
Other intangible assets, net | 449,096 | 329,668 | 36 | % | |||||||||||
Other assets | 18,292 | 18,229 | 0 | % | |||||||||||
Total assets | $ | 3,230,188 | $ | 3,236,321 | 0 | % | |||||||||
Liabilities | |||||||||||||||
Current liabilities: | |||||||||||||||
Current portion of long-term and short-term debt | $ | 959 | $ | 150 | 539 | % | |||||||||
Accounts payable | 179,566 | 185,176 | (3 | %) | |||||||||||
Accrued expenses | 131,263 | 150,406 | (13 | %) | |||||||||||
Income taxes payable | 4,957 | 4,564 | 9 | % | |||||||||||
Deferred revenue | 231,187 | 214,891 | 8 | % | |||||||||||
Other current liabilities | 47,752 | 35,810 | 33 | % | |||||||||||
Total current liabilities | 595,684 | 590,997 | 1 | % | |||||||||||
Long-term debt | 813,150 | 813,989 | 0 | % | |||||||||||
Deferred tax liabilities, net | 56,143 | 49,360 | 14 | % | |||||||||||
Accrued pension and other postretirement benefit costs | 65,698 | 121,043 | (46 | %) | |||||||||||
Long-term portion of environmental reserves | 14,757 | 14,546 | 1 | % | |||||||||||
Other liabilities | 108,660 | 118,586 | (8 | %) | |||||||||||
Total liabilities | 1,654,092 | 1,708,521 | (3 | %) | |||||||||||
Stockholders' equity | |||||||||||||||
Common stock, $1 par value | 49,187 | 49,187 | 0 | % | |||||||||||
Additional paid in capital | 119,025 | 120,609 | (1 | %) | |||||||||||
Retained earnings | 2,047,250 | 1,944,324 | 5 | % | |||||||||||
Accumulated other comprehensive loss | (239,516 | ) | (216,840 | ) | (10 | %) | |||||||||
Less: cost of treasury stock | (399,850 | ) | (369,480 | ) | (8 | %) | |||||||||
Total stockholders' equity | 1,576,096 | 1,527,800 | 3 | % | |||||||||||
Total liabilities and stockholders' equity | $ | 3,230,188 | $ | 3,236,321 | 0 | % |
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | ||||||||||||||||||||||||||||
SEGMENT INFORMATION (UNAUDITED) | ||||||||||||||||||||||||||||
($'s in thousands) | ||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||
2018 | 2017 | % | 2018 | 2017 | % | |||||||||||||||||||||||
Sales: |
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Commercial/Industrial | $ | 312,463 | $ | 291,599 | 7 | % | $ | 609,104 | $ | 570,421 | 7 | % | ||||||||||||||||
Defense | 146,177 | 126,361 | 16 | % | 265,078 | 241,023 | 10 | % | ||||||||||||||||||||
Power | 161,658 | 149,693 | 8 | % | 293,638 | 279,800 | 5 | % | ||||||||||||||||||||
Total sales | $ | 620,298 | $ | 567,653 | 9 | % | $ | 1,167,820 | $ | 1,091,244 | 7 | % | ||||||||||||||||
Operating income (expense): |
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Commercial/Industrial | $ | 51,736 | $ | 43,620 | 19 | % | $ | 90,961 | $ | 74,172 | 23 | % | ||||||||||||||||
Defense | 38,641 | 21,128 | 83 | % | 58,369 | 32,225 | 81 | % | ||||||||||||||||||||
Power | 19,201 | 23,875 | (20 | %) | 34,543 | 39,420 | (12 | %) | ||||||||||||||||||||
Total segments | $ | 109,578 | $ | 88,623 | 24 | % | $ | 183,873 | $ | 145,817 | 26 | % | ||||||||||||||||
Corporate and other | (7,502 | ) | (8,891 | ) | 16 | % | (17,299 | ) | (18,393 | ) | 6 | % | ||||||||||||||||
Total operating income | $ | 102,076 | $ | 79,732 | 28 | % | $ | 166,574 | $ | 127,424 | 31 | % | ||||||||||||||||
Operating margins: |
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Commercial/Industrial | 16.6 | % | 15.0 | % | 160 | bps | 14.9 | % | 13.0 | % | 190 | bps | ||||||||||||||||
Defense | 26.4 | % | 16.7 | % | 970 | bps | 22.0 | % | 13.4 | % | 860 | bps | ||||||||||||||||
Power | 11.9 | % | 15.9 | % | (400 | bps) | 11.8 | % | 14.1 | % | (230 | bps) | ||||||||||||||||
Total Curtiss-Wright | 16.5 | % | 14.0 | % |
250 |
bps |
14.3 | % | 11.7 | % |
260 |
bps |
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Segment margins | 17.7 | % | 15.6 | % | 210 | bps | 15.7 | % | 13.4 | % | 230 | bps |
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | ||||||||||||||||||||||||||||
SALES BY END MARKET (UNAUDITED) | ||||||||||||||||||||||||||||
($'s in thousands) | ||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||
2018 | 2017 | % | 2018 | 2017 | % | |||||||||||||||||||||||
Defense markets: | ||||||||||||||||||||||||||||
Aerospace | $ | 98,268 | $ | 89,367 | 10 | % | $ | 174,209 | $ | 154,661 | 13 | % | ||||||||||||||||
Ground | 20,272 | 17,515 | 16 | % | 42,282 | 37,251 | 14 | % | ||||||||||||||||||||
Naval | 132,005 | 100,048 | 32 | % | 234,786 | 191,018 | 23 | % | ||||||||||||||||||||
Other | 3,422 | 5,964 | (43 | %) | 8,004 | 13,006 | (38 | %) | ||||||||||||||||||||
Total Defense | $ | 253,967 | $ | 212,894 | 19 | % | $ | 459,281 | $ | 395,936 | 16 | % | ||||||||||||||||
Commercial markets: | ||||||||||||||||||||||||||||
Aerospace | $ | 104,617 | $ | 100,353 | 4 | % | $ | 204,021 | $ | 198,966 | 3 | % | ||||||||||||||||
Power Generation | 102,075 | 114,773 | (11 | %) | 201,087 | 220,324 | (9 | %) | ||||||||||||||||||||
General Industrial | 159,639 | 139,633 | 14 | % | 303,431 | 276,018 | 10 | % | ||||||||||||||||||||
Total Commercial | $ | 366,331 | $ | 354,759 | 3 | % | $ | 708,539 | $ | 695,308 | 2 | % | ||||||||||||||||
Total Curtiss-Wright | $ | 620,298 | $ | 567,653 | 9 | % | $ | 1,167,820 | $ | 1,091,244 | 7 | % | ||||||||||||||||
Use of Non-GAAP Financial Information (Unaudited)
The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these non-GAAP measures provide investors with additional insight into the Company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
Beginning with the second quarter of 2018, coinciding with the initial reporting of the DRG acquisition, the Company has elected to also present its financials and guidance on an Adjusted, non-GAAP basis for operating income, operating margin, net earnings and diluted earnings per share to exclude first year purchase accounting costs associated with its acquisitions, specifically one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions that are included under GAAP.
Management believes that this approach will provide improved transparency to the investment community in order to measure Curtiss-Wright’s core operating and financial performance, provide quarter-over-quarter comparisons excluding one-time items and show better comparisons among company peers. Additional details and tables reconciling the GAAP to non-GAAP financial measures are included in this release.
The following definitions are provided:
Adjusted Operating Income, Operating Margin, Net Income and Diluted EPS
These Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding the impact of first year purchase accounting costs associated with acquisitions for current and prior year periods, specifically one-time inventory step-up, backlog amortization and transaction costs.
Organic Revenue and Organic Operating Income
The Corporation discloses organic revenue and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic revenue and organic operating income are defined as revenue and operating income excluding the impact of foreign currency fluctuations and contributions from acquisitions made during the last twelve months.
Three Months Ended | ||||||||||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||||||||||
2018 vs. 2017 | ||||||||||||||||||||||||||||||||
Commercial/Industrial | Defense | Power | Total Curtiss-Wright | |||||||||||||||||||||||||||||
Sales | Operating income | Sales | Operating income | Sales | Operating income | Sales | Operating income | |||||||||||||||||||||||||
Organic | 5 | % | 16 | % | 15 | % | 86 | % | (7 | %) | (3 | %) | 4 | % | 32 | % | ||||||||||||||||
Acquisitions | 0 | % | 0 | % | 0 | % | 0 | % | 15 | % | (17 | %) | 4 | % | (5 | %) | ||||||||||||||||
Foreign Currency | 2 | % | 3 | % | 1 | % | (3 | %) | 0 | % | 0 | % | 1 | % | 1 | % | ||||||||||||||||
Total | 7 | % | 19 | % | 16 | % | 83 | % | 8 | % | (20 |
%) |
|
9 | % | 28 | % | |||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||||||||||
2018 vs. 2017 | ||||||||||||||||||||||||||||||||
Commercial/Industrial | Defense | Power | Total Curtiss-Wright | |||||||||||||||||||||||||||||
Sales | Operating income | Sales | Operating income | Sales | Operating income | Sales | Operating income | |||||||||||||||||||||||||
Organic | 5 | % | 21 | % | 9 | % | 86 | % | (3 | %) | (2 | %) | 4 | % | 34 | % | ||||||||||||||||
Acquisitions | 0 | % | 0 | % | 0 | % | 0 | % | 8 | % | (10 | %) | 2 | % | (3 | %) | ||||||||||||||||
Foreign Currency | 2 | % | 2 | % | 1 | % | (5 | %) | 0 | % | 0 | % | 1 | % | 0 | % | ||||||||||||||||
Total | 7 | % | 23 | % | 10 | % | 81 | % | 5 | % | (12 |
%) |
|
7 | % | 31 | % | |||||||||||||||
Free Cash Flow and Free Cash Flow Conversion
The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as cash flow provided by operating activities less capital expenditures. The Corporation discloses free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as free cash flow divided by net earnings from continuing operations.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | |||||||||||||||||||
NON-GAAP FINANCIAL DATA (UNAUDITED) | |||||||||||||||||||
($'s in thousands) | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Net cash provided by operating activities | $ | 97,947 | $ | 85,873 | $ | 26,685 | $ | 60,932 | |||||||||||
Capital expenditures | (10,881 | ) | (12,914 | ) | (19,852 | ) | (23,288 | ) | |||||||||||
Free cash flow | $ | 87,066 | $ | 72,959 | $ | 6,833 | $ | 37,644 | |||||||||||
Pension payment | — | — | 50,000 | — | |||||||||||||||
Adjusted free cash flow | $ | 87,066 | $ | 72,959 | $ | 56,833 | $ | 37,644 | |||||||||||
Free Cash Flow Conversion | 116 | % | 144 | % | 48 | % | 45 | % |
CURTISS-WRIGHT CORPORATION | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 Guidance (1) (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of July 25, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
($'s in millions, except per share data) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted (Non-GAAP) |
2018 Prior Reported Guidance (GAAP) |
2018 Reported Guidance (GAAP) |
2018 Current Adjusted Guidance (Non-GAAP) |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 |
Low | High |
2018 Chg vs 2017 Reported |
Increase from Operational Performance |
Low | High |
2018 Chg vs 2017 Adjusted |
Adjustments (Non-GAAP)(3) |
Low | High |
2018 Chg vs 2017 Adjusted (3) |
|||||||||||||||||||||||||||||||||||||||||||||||
Sales: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial/Industrial | $ | 1,163 | $ | 1,193 | $ | 1,213 | $ | 20 | $ | 1,213 | $ | 1,233 | $ | - | $ | 1,213 | $ | 1,233 | ||||||||||||||||||||||||||||||||||||||||
Defense | 555 | 565 | 575 | 10 | 575 | 585 | - | 575 | 585 | |||||||||||||||||||||||||||||||||||||||||||||||||
Power | 553 | 657 | 667 | - | 657 | 667 | - | 657 | 667 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total sales | $ | 2,271 | $ | 2,415 | $ | 2,455 | 6 to 8% | $ | 30 | $ | 2,445 | $ | 2,485 | 8 to 9% | $ | - | $ | 2,445 | $ | 2,485 | 8 to 9% | |||||||||||||||||||||||||||||||||||||
Operating income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial/Industrial | $ | 168 | $ | 177 | $ | 182 | $ | 6 | $ | 183 | $ | 188 | $ | - | $ | 183 | $ | 188 | ||||||||||||||||||||||||||||||||||||||||
Defense | 119 | 121 | 124 | 3 | 124 | 127 | - | 124 | 127 | |||||||||||||||||||||||||||||||||||||||||||||||||
Power | 81 | 80 | 83 | 4 | 85 | 87 | 14 | 99 | 102 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total segments | 368 | 378 | 389 | 13 | 391 | - | 402 | 14 | 405 | # | 416 | |||||||||||||||||||||||||||||||||||||||||||||||
Corporate and other | (34 | ) | (34 | ) | (35 | ) | - | (34 | ) | (35 | ) | - | (34 | ) | (35 | ) | ||||||||||||||||||||||||||||||||||||||||||
Total operating income | $ | 335 | $ | 343 | $ | 353 | 6 to 9% | $ | 13 | $ | 357 | $ | 367 | 7 to 10% | $ | 14 | $ | 371 | $ | 382 | 11 to 14% | |||||||||||||||||||||||||||||||||||||
Interest expense | $ | (41 | ) | $ | (36 | ) | $ | (37 | ) | $ | 1 | $ | (35 | ) | $ | (36 | ) | $ | - | $ | (35 | ) | $ | (36 | ) | |||||||||||||||||||||||||||||||||
Other income, net | 16 | 14 | 14 | 1 | 15 | 15 | - | 15 | 15 | |||||||||||||||||||||||||||||||||||||||||||||||||
Earnings before income taxes | 309 | 322 | 331 | - | 337 | 347 | - | 352 | 361 | |||||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | (88 | ) | (77 | ) | (79 | ) | (4 | ) | (81 | ) | (83 | ) | (3 | ) | (84 | ) | (87 | ) | ||||||||||||||||||||||||||||||||||||||||
Net earnings | $ | 222 | $ | 245 | $ | 251 | $ | 12 | $ | 256 | $ | 263 | $ | 11 | $ | 267 | $ | 274 | ||||||||||||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 4.96 | $ | 5.47 | $ | 5.62 | 14 to 17% | $ | 0.28 | $ | 5.75 | $ | 5.90 | 16 to 19% | $ | 0.25 | $ | 6.00 | $ | 6.15 | 21 to 24% | |||||||||||||||||||||||||||||||||||||
Diluted shares outstanding | 44.8 | 44.7 | 44.7 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Effective tax rate | 28.3 | % | 24.0 | % | 24.0 | % | 24.0 | % | 24.0 | % | 24.0 | % | 24.0 | % | ||||||||||||||||||||||||||||||||||||||||||||
Operating margins: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial/Industrial | 14.5 | % | 14.8 | % | 15.0 | % | +30 bps | 15.1 | % | 15.2 | % | 60 to 70 bps | - | 15.1 | % | 15.2 | % | 60 to 70 bps | ||||||||||||||||||||||||||||||||||||||||
Defense | 21.4 | % | 21.3 | % | 21.5 | % | +20 bps | 21.5 | % | 21.7 | % | 10 to 30 bps | - | 21.5 | % | 21.7 | % | 10 to 30 bps | ||||||||||||||||||||||||||||||||||||||||
Power | 14.7 | % | 12.2 | % | 12.4 | % | +70 bps | 12.9 | % | 13.1 | % | (160 to 180 bps) | +220 bps | 15.1 | % | 15.3 | % | 40 to 60 bps | ||||||||||||||||||||||||||||||||||||||||
Total operating margin | 14.7 | % | 14.2 | % | 14.4 | % | +40 bps | 14.6 | % | 14.8 | % | (10) to 10 bps | +60 bps | 15.2 | % | 15.4 | % | 50 to 70 bps | ||||||||||||||||||||||||||||||||||||||||
Note: Full year amounts may not add due to rounding | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Full-year 2017 and 2018 effective tax rate guidance includes the impacts of the Tax Cuts and Jobs Act. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Reconciliations of 2017 Reported (GAAP) results to Adjusted (non-GAAP) results are furnished within this release. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3) Adjustments include one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions. |
CURTISS-WRIGHT CORPORATION | ||||||
2018 Sales Growth Guidance by End Market | ||||||
As of July 25, 2018 | ||||||
2018 % Change vs 2017 | 2018 % Change vs 2017 | |||||
(Prior) | (Current) | |||||
Defense Markets |
||||||
Aerospace | 8 - 10% | 11 - 13% | ||||
Ground | 0 - 2% | 0 - 2% | ||||
Navy | 16 - 18% | 20 - 22% | ||||
Total Defense (Including Other Defense) | 9 - 11% | 13 - 15% | ||||
Commercial Markets |
||||||
Commercial Aerospace | 0 - 2% | 0 - 2% | ||||
Power Generation | 6 - 8% | 2 - 4% | ||||
General Industrial | 4 - 6% | 8 - 10% | ||||
Total Commercial | 3 - 5% | 3 - 5% | ||||
Total Curtiss-Wright Sales | 6 - 8% | 8 - 9% | ||||
Note: Full year amounts may not add due to rounding |
CURTISS-WRIGHT CORPORATION | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 Reconciliation Reported (GAAP)(1) to Adjusted (Non-GAAP) (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
($'s in millions, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Reported
1Q 2017 |
Adjustments (Non-GAAP) |
Adjusted 1Q 2017 |
Reported
2Q 2017 |
Adjustments (Non-GAAP) |
Adjusted
2Q 2017 |
Reported
3Q 2017 |
Reported
4Q 2017 |
Reported FY 2017 |
Adjustments (Non-GAAP) |
Adjusted
FY 2017 |
|||||||||||||||||||||||||||||||||||||||||||
Sales: |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial/Industrial | $ | 279 | $ | - | $ | 279 | $ | 292 | $ | - | $ | 292 | $ | 294 | $ | 298 | $ | 1,163 | $ | - | $ | 1,163 | |||||||||||||||||||||||||||||||
Defense | 115 | - | 115 | 126 | - | 126 | 142 | 173 | 555 | - | 555 | ||||||||||||||||||||||||||||||||||||||||||
Power | 130 | - | 130 | 150 | - | 150 | 132 | 141 | 553 | - | 553 | ||||||||||||||||||||||||||||||||||||||||||
Total sales | $ | 524 | - | $ | 524 | $ | 568 | - | $ | 568 | $ | 568 | $ | 612 | $ | 2,271 | - | $ | 2,271 | ||||||||||||||||||||||||||||||||||
Operating income: |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial/Industrial | $ | 31 | $ | - | $ | 31 | $ | 44 | $ | - | $ | 44 | $ | 47 | $ | 47 | $ | 168 | $ | - | $ | 168 | |||||||||||||||||||||||||||||||
Defense | 11 | 5 | 16 | 21 | 5 | 26 | 34 | 44 | 109 | 10 | 119 | ||||||||||||||||||||||||||||||||||||||||||
Power | 16 | - | 16 | 24 | - | 24 | 18 | 24 | 81 | - | 81 | ||||||||||||||||||||||||||||||||||||||||||
Total segments | 57 | 5 | 62 | 89 | 5 | 94 | 98 | 115 | 359 | 10 | 368 | ||||||||||||||||||||||||||||||||||||||||||
Corporate and other | (10 | ) | - | (10 | ) | (9 | ) | - | (9 | ) | (6 | ) | (9 | ) | (34 | ) | - | (34 | ) | ||||||||||||||||||||||||||||||||||
Total operating income | $ | 48 | $ | 5 | $ | 52 | $ | 80 | $ | 5 | $ | 85 | $ | 92 | $ | 105 | $ | 325 | $ | 10 | $ | 335 | |||||||||||||||||||||||||||||||
Interest expense | $ | (10 | ) | $ | - | $ | (10 | ) | $ | (11 | ) | $ | - | $ | (11 | ) | $ | (10 | ) | $ | (10 | ) | $ | (41 | ) | $ | - | $ | (41 | ) | |||||||||||||||||||||||
Other income, net | 4 | - | 4 | 4 | - | 4 | 4 | 4 | 16 | - | 16 | ||||||||||||||||||||||||||||||||||||||||||
Earnings before income taxes | 41 | 5 | 46 | 73 | 5 | 78 | 86 | 99 | 300 | 10 | 309 | ||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | (9 | ) | (1 | ) | (10 | ) | (22 | ) | (2 | ) | (24 | ) | (22 | ) | (32 | ) | (85 | ) | (3 | ) | (88 | ) | |||||||||||||||||||||||||||||||
Net earnings | $ | 33 | $ | 4 | $ | 36 | $ | 51 | $ | 4 | $ | 54 | $ | 64 | $ | 68 | $ | 215 | $ | 7 | $ | 222 | |||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.73 | $ | 0.08 | $ | 0.81 | $ | 1.13 | $ | 0.08 | $ | 1.21 | $ | 1.43 | $ | 1.52 | $ | 4.80 | $ | 0.16 | $ | 4.96 | |||||||||||||||||||||||||||||||
Diluted shares outstanding | 44.9 | 44.9 | 44.8 | 44.8 | 44.7 | 44.7 | 44.8 | 44.8 | |||||||||||||||||||||||||||||||||||||||||||||
Effective tax rate | 20.9 | % | 20.9 | % | 30.3 | % | 30.3 | % | 26.0 | % | 31.8 | % | 28.3 | % | 28.3 | % | |||||||||||||||||||||||||||||||||||||
Operating margins: |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial/Industrial | 11.0 | % | 11.0 | % | 15.0 | % | 15.0 | % | 15.9 | % | 15.8 | % | 14.5 | % | 14.5 | % | |||||||||||||||||||||||||||||||||||||
Defense | 9.7 | % | +395 bps | 13.6 | % | 16.7 | % | +410 bps | 20.8 | % | 23.7 | % | 25.2 | % | 19.7 | % | +170 bps | 21.4 | % | ||||||||||||||||||||||||||||||||||
Power | 11.9 | % | 11.9 | % | 15.9 | % | 15.9 | % | 13.5 | % | 17.0 | % | 14.7 | % | 14.7 | % | |||||||||||||||||||||||||||||||||||||
Total operating margin | 9.1 | % | +90 bps | 10.0 | % | 14.0 | % | +100 bps | 15.0 | % | 16.3 | % | 17.2 | % | 14.3 | % | +40 bps | 14.7 | % | ||||||||||||||||||||||||||||||||||
Note: Full year amounts may not add due to rounding | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Reported 2017 results reflect the retrospective impact from the adoption of ASU 2017-07 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which results in reclassification of the non-service components of Pension expense from Operating Income to Other Income/Expense effective for fiscal years beginning after December 15, 2017. This accounting change lowers operating income by $14.6 million and lowers operating margin by 70 basis points for the full-year 2017 period. This change is neutral to earnings per share. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Adjusted operating income, operating margin and diluted EPS exclude first year purchase accounting costs, specifically one-time inventory step-up, backlog amortization and transaction costs, associated with the acquisition of TTC in 2017 (Defense segment). First year purchase accounting costs in the third and fourth quarters of 2017 are not material. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
About Curtiss-Wright Corporation
Curtiss-Wright Corporation (NYSE: CW) is a global innovative company that delivers highly engineered, critical function products and services to the commercial, industrial, defense and energy markets. Building on the heritage of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of providing reliable solutions through trusted customer relationships. The company employs approximately 8,600 people worldwide. For more information, visit www.curtisswright.com.
Certain statements made in this press release, including statements about future revenue, financial performance guidance, quarterly and annual revenue, net income, operating income growth, future business opportunities, cost saving initiatives, the successful integration of the Company’s acquisitions, and future cash flow from operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include, but are not limited to: a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information are available at www.curtisswright.com.
CONTACT:
Curtiss-Wright Corporation
Jim Ryan, 704-869-4621
Jim.Ryan@curtisswright.com
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