Curtiss-Wright Reports Fourth Quarter and Full-Year 2019 Financial Results; Issues Initial Full-Year 2020 Guidance

DAVIDSON, N.C.--()--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2019.

Fourth Quarter 2019 Highlights:

  • Reported diluted earnings per share (EPS) of $2.08, with Adjusted diluted EPS of $2.12 (defined below), up 10% and 12%, respectively, compared to the prior year;
  • Reported free cash flow of $243 million, with Adjusted free cash flow of $248 million and an Adjusted free cash flow conversion of 277%;
  • Net sales of $656 million, up 1%;
  • Reported operating income of $121 million, up 10%, with Reported operating margin of 18.4%, up 140 basis points;
  • Adjusted operating income of $123 million, up 12%, with Adjusted operating margin of 18.8%, up 180 basis points; and
  • Share repurchases of approximately $12 million.

Full-Year 2019 Highlights:

  • Reported diluted EPS of $7.15, with Adjusted diluted EPS of $7.27, up 15% and 14%, respectively, compared to the prior year;
  • Reported free cash flow of $352 million, with Adjusted free cash flow of $371 million and an Adjusted free cash flow conversion of 121%;
  • Net sales of $2.5 billion, up 3%, including 2% organic growth;
  • Reported operating income of $404 million, up 8%, with Reported operating margin of 16.2%, up 70 basis points;
  • Adjusted operating income of $411 million, up 7%, with Adjusted operating margin of 16.5%, up 70 basis points;
  • New orders of $2.6 billion increased 6%, while Backlog of $2.2 billion increased 7% from December 31, 2018; and
  • Share repurchases of $50 million.

“We delivered record Adjusted diluted EPS in the fourth quarter, driven by continued strong sales growth in our defense markets and the benefits of our ongoing margin improvement initiatives,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “In addition, we generated nearly $250 million in Adjusted free cash flow, along with robust free cash flow conversion of 277% in the quarter.”

“Our full-year 2019 results were highlighted by a strong operational performance, as we delivered higher sales and operating income in all three segments, improved profitability that produced a 16.5% Adjusted operating margin, and double-digit growth in Adjusted diluted EPS. Adjusted free cash flow of $371 million was also strong, driven by solid growth in earnings as well as our continued efforts to reduce working capital.”

Full-Year 2020 Guidance

The Company is issuing full-year 2020 financial guidance as follows:

(In millions, except EPS)

2020 Reported

Guidance

2020

Adjustments

2020 Adjusted

Guidance(1)(2)

Total Sales

$2,590 - $2,630

-

$2,590 - $2,630

Operating Income

$390 - $399

$38

$428 - $437

Operating Margin

15.1% - 15.2%

150 bps

16.5% - 16.6%

Diluted EPS

$6.82 - $7.02

$0.68

$7.50 - $7.70

Diluted Shares Outstanding

43.0

-

43.0

Free Cash Flow

$193 - $213

$177

$370 - $390

(1) 2020 Adjusted guidance excludes $28 million in restructuring costs (impacting all three segments), $7 million in one-time backlog amortization and transaction costs associated with the acquisition of 901D, and $3 million in one-time transition and IT security costs associated with the relocation of our DRG business.

(2) 2020 Adjusted free cash flow guidance excludes a $150 million voluntary contribution made in January to the Company’s corporate defined benefit pension plan, a $14 million cash impact from restructuring, and a $13 million capital investment related to the new, state-of-the-art naval facility principally for DRG.

Full-year 2020 Adjusted guidance notes (compared to Adjusted full-year 2019):

  • Expect solid sales growth of 4% - 6%, driven by increases in all defense markets;
  • Expect Adjusted operating income growth of 4% - 6%, Adjusted operating margin of 16.5% to 16.6% (flat to up 10 basis points) and Adjusted diluted EPS of $7.50 to $7.70 (up 3% - 6%);
  • Commercial/Industrial segment reflects improved profitability due to higher sales and the benefits of our ongoing margin improvement initiatives; Adjusted guidance excludes $13 million in restructuring costs;
  • Defense segment reflects reduced profitability, despite higher sales, mainly due to a $5 million increase in R&D investments; Adjusted guidance excludes $4 million in restructuring costs and $7 million in first year purchase accounting costs associated with acquisitions;
  • Power segment reflects reduced profitability, despite higher sales, mainly due to a $5 million increase in R&D investments; Adjusted guidance excludes $11 million in restructuring costs and $3 million in one-time transition and IT security costs; and
  • Expect Adjusted free cash flow to range from $370 to $390 million, representing an Adjusted free cash flow conversion rate in excess of 115%.

In addition, the Company has reorganized two business units to better align to its management structure and to shift most of the naval defense revenue into the Defense and Power segments. Historical financials will be available on the Company’s website.

A more detailed breakdown of the Company’s 2020 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted non-GAAP amounts can be found in the accompanying schedules.

Mr. Adams continued, “For 2020, we anticipate increased sales driven by growth in all defense markets, improved profitability despite significantly increasing our year-over-year R&D investments, and strong free cash flow generation. We will continue to execute on our ongoing margin improvement initiatives, including various restructuring actions. These initiatives are expected to generate approximately $20 million in annualized savings beginning in 2021, and support Curtiss-Wright’s long-term profitable growth. Overall, we expect to maintain top-quartile performance for all of our key financial metrics and deliver significant long-term value for our shareholders.”

Fourth Quarter 2019 Operating Results

(In millions)

4Q-2019

4Q-2018

Change

Sales

$

655.8

$

648.6

1%

Reported operating income

$

120.7

$

110.0

10%

Adjustments (1)

 

2.5

 

0.4

 

Adjusted operating income (1)

$

123.2

$

110.4

12%

Adjusted operating margin (1)

 

18.8%

 

17.0%

180 bps

(1) Adjusted results exclude one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions, and one-time transition and IT security costs associated with the relocation of our DRG business in the current year.

  • Sales of $656 million, up $7 million, or 1%, compared to the prior year (1% organic, 1% acquisitions, partially offset by 1% unfavorable foreign currency translation);
  • From an end market perspective, total sales to the defense markets increased 9% (8% organic), led by strong growth in aerospace and naval defense, while total sales to the commercial markets decreased 5%, as higher commercial aerospace sales were more than offset by reduced power generation and general industrial sales. Please refer to the accompanying tables for an overall breakdown of sales by end market;
  • Reported operating income was $121 million, up 10%, while reported operating margin increased 140 basis points to 18.4%;
  • Adjusted operating income of $123 million, up 12%, principally reflects higher profitability on strong defense revenues in the Commercial/Industrial and Defense segments, partially offset by lower power generation revenues in the Power segment;
  • Adjusted operating margin of 18.8%, up 180 basis points, primarily reflects higher revenues and favorable absorption in the Commercial/Industrial and Defense segments, and increased profitability in the Power segment, despite lower revenues, due to the benefits of our ongoing margin improvement initiatives; and
  • Non-segment expenses of $8 million decreased by $1 million, or 10% compared to the prior year, primarily due to lower environmental expenses.

Net Earnings and Diluted EPS

(In millions, except EPS)

4Q-2019

4Q-2018

Change

Reported net earnings

$

89.4

$

82.8

8%

Adjustments, net of tax (1)

 

1.9

 

0.4

 

Adjusted net earnings (1)

$

91.3

$

83.2

10%

Reported diluted EPS

$

2.08

$

1.89

10%

Adjustments, net of tax (1)

 

0.04

 

0.01

 

Adjusted diluted EPS (1)

$

2.12

$

1.90

12%

(1) Adjusted results exclude one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions, and one-time transition and IT security costs associated with the relocation of our DRG business in the current year.

  • Reported net earnings of $89 million, up $7 million, or 8% from the prior year, principally reflecting higher segment operating income and lower corporate expenses;
  • Reported diluted EPS of $2.08, up 10% from the prior year, principally reflecting higher net earnings, as well as a lower share count;
  • Adjusted net earnings of $91 million, up 10%;
  • Adjusted diluted EPS of $2.12, up 12%; and
  • Effective tax rate (ETR) of 24.6% increased slightly compared to the prior year quarter.

Free Cash Flow

(In millions)

4Q-2019

4Q-2018

Change

Net cash provided by operating activities

$

262.4

$

237.3

11%

Capital expenditures

 

(19.8)

 

(23.1)

14%

Reported free cash flow

$

242.6

$

214.2

13%

Adjustment to capital expenditures (DRG facility investment) (1)

 

5.3

 

-

 

Adjusted free cash flow (1)

$

247.9

$

214.2

16%

(1) Adjusted free cash flow excludes fourth quarter 2019 capital investment related to the new, state-of-the-art naval facility principally for DRG (Power segment).

  • Reported free cash flow of $243 million, increased $28 million, or 13%, compared to the prior year, driven by improved working capital, primarily due to the timing of advanced payments received in the fourth quarter of 2019 which were expected in 2020;
  • Capital expenditures decreased by $3 million to $20 million compared to the prior year, primarily due to lower capital investments within the Commercial/Industrial segment, despite a $5 million investment related to the new, state-of-the-art naval facility for the DRG business; and
  • Adjusted free cash flow, which excludes the DRG facility investment in the current period, increased $34 million to $248 million.

New Orders and Backlog

  • For full-year 2019, new orders of $2.6 billion increased 6% compared to the prior year, led by strong organic growth in naval defense and commercial aerospace orders.
  • Backlog of $2.2 billion increased 7% from December 31, 2018.

Other Items – Share Repurchase

  • During the fourth quarter, the Company repurchased 92,006 shares of its common stock for approximately $12 million.
  • Year-to-date, the Company repurchased 410,530 shares for $50 million.

Fourth Quarter 2019 Segment Performance

Commercial/Industrial

(In millions)

4Q-2019

4Q-2018

Change

Sales

$

323.2

$

304.8

6%

Reported operating income

$

52.7

$

46.9

12%

Reported operating margin

 

16.3%

 

15.4%

90 bps

  • Sales of $323 million, up $18 million, or 6%, compared to the prior year;
  • Strong sales growth in the aerospace and naval defense markets principally reflects higher sales of actuation systems on the F-35 program and higher sales of valves on the Virginia class submarine program;
  • Commercial aerospace market sales increased primarily due to higher sales of actuation equipment and sensors;
  • Lower general industrial market sales reflect reduced demand for industrial vehicles, industrial valves and surface treatment services; and
  • Reported operating income was $53 million, up 12%, while reported operating margin increased 90 basis points to 16.3%, principally reflecting favorable overhead absorption on higher defense revenues and a one-time gain on sale of a product line, partially offset by a shift in mix to lower margin actuation products.

Defense

(In millions)

4Q-2019

4Q-2018

Change

Sales

$

163.5

$

150.9

8%

Reported operating income

$

44.1

$

36.5

21%

Adjustments (1)

 

0.5

 

-

Adjusted operating income (1)

$

44.6

$

36.5

22%

Adjusted operating margin (1)

 

27.2%

 

24.2%

300 bps

(1) Adjusted results exclude one-time backlog amortization and transaction costs for current year acquisition.

  • Sales of $163 million, up $13 million, or 8%, compared to the prior year (6% organic, 2% acquisition);
  • Higher aerospace defense market revenues principally reflect increased sales of embedded computing and avionics equipment on various unmanned aerial vehicles (UAVs) and helicopter platforms, as well as the contribution from the TCG acquisition, partially offset by lower revenues on various fighter jet programs;
  • Naval defense market revenue growth was primarily due to higher sales of embedded computing and aircraft handling equipment on various platforms;
  • Lower ground defense market revenues reflect reduced sales of embedded computing equipment on the Abrams tank platform and lower sales of our turret drive stabilization systems for armored tanks to international customers;
  • Reported operating income was $44 million, with Reported operating margin of 27.0%; and
  • Adjusted operating income was $45 million, up 22% from the prior year, while Adjusted operating margin increased 300 basis points to 27.2%, primarily reflecting favorable mix on higher defense revenues.

Power

(In millions)

4Q-2019

4Q-2018

Change

Sales

$

169.1

$

192.9

(12%)

Reported operating income

$

32.3

$

36.1

(10%)

Adjustments (1)

 

2.0

 

0.4

 

Adjusted operating income (1)

$

34.3

$

36.5

(6%)

Adjusted operating margin (1)

 

20.3%

 

18.9%

140 bps

(1) Adjusted results exclude one-time Inventory Step-up, Backlog Amortization and Transaction costs for prior year acquisition, and one-time transition and IT security costs associated with the relocation of our DRG business in the current year.

  • Sales of $169 million, down $24 million, or 12%, compared to the prior year;
  • Lower naval defense market sales primarily reflect the timing of naval spares and service center revenues;
  • Reduced power generation market sales primarily reflect lower domestic aftermarket revenues, as well as the timing of production on the China Direct AP1000 program;
  • Reported operating income was $32 million, with Reported operating margin of 19.1%; and
  • Adjusted operating income was $34 million, down 6%, while Adjusted operating margin increased 140 basis points to 20.3%, primarily reflecting higher profitability in the aftermarket power generation business, despite lower sales volumes, due to savings generated by our margin improvement initiatives.

**********

Conference Call & Webcast Information

The Company will host a conference call to discuss fourth quarter and full-year 2019 financial results and expectations for 2020 guidance at 9:00 a.m. ET on Thursday, February 27, 2020. 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

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

($'s in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

Change

 

December 31,

 

Change

 

 

2019

 

2018

 

$

%

 

2019

 

2018

 

$

%

Product sales

 

$

552,918

 

 

$

541,689

 

 

$

11,229

 

2%

 

$

2,073,530

 

 

$

1,993,249

 

 

$

80,281

 

4%

Service sales

 

102,853

 

 

106,933

 

 

(4,080)

 

(4)%

 

414,431

 

 

418,586

 

 

(4,155)

 

(1)%

Total net sales

 

655,771

 

 

648,622

 

 

7,149

 

1%

 

2,487,961

 

 

2,411,835

 

 

76,126

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

343,286

 

 

336,402

 

 

6,884

 

2%

 

1,329,761

 

 

1,272,599

 

 

57,162

 

4%

Cost of service sales

 

66,733

 

 

71,168

 

 

(4,435)

 

(6)%

 

259,455

 

 

267,975

 

 

(8,520)

 

(3)%

Total cost of sales

 

410,019

 

 

407,570

 

 

2,449

 

1%

 

1,589,216

 

 

1,540,574

 

 

48,642

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

245,752

 

 

241,052

 

 

4,700

 

2%

 

898,745

 

 

871,261

 

 

27,484

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

18,017

 

 

19,291

 

 

(1,274)

 

(7)%

 

72,520

 

 

64,525

 

 

7,995

 

12%

Selling expenses

 

30,558

 

 

32,095

 

 

(1,537)

 

(5)%

 

120,861

 

 

126,641

 

 

(5,780)

 

(5)%

General and administrative expenses

 

76,523

 

 

79,661

 

 

(3,138)

 

(4)%

 

301,411

 

 

306,469

 

 

(5,058)

 

(2)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

120,654

 

 

110,005

 

 

10,649

 

10%

 

403,953

 

 

373,626

 

 

30,327

 

8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

8,164

 

 

8,264

 

 

(100)

 

(1)%

 

31,347

 

 

33,983

 

 

(2,636)

 

(8)%

Other income, net

 

6,152

 

 

4,099

 

 

2,053

 

50%

 

23,856

 

 

16,596

 

 

7,260

 

44%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

118,642

 

 

105,840

 

 

12,802

 

12%

 

396,462

 

 

356,239

 

 

40,223

 

11%

Provision for income taxes

 

(29,234)

 

 

(23,005)

 

 

(6,229)

 

(27)%

 

(88,879)

 

 

(80,490)

 

 

(8,389)

 

(10)%

Net earnings

 

$

89,408

 

 

$

82,835

 

 

$

6,573

 

8%

 

$

307,583

 

 

$

275,749

 

 

$

31,834

 

12%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

2.09

 

 

$

1.91

 

 

 

 

 

$

7.20

 

 

$

6.28

 

 

 

 

Diluted earnings per share

 

$

2.08

 

 

$

1.89

 

 

 

 

 

$

7.15

 

 

$

6.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share

 

$

0.17

 

 

$

0.15

 

 

 

 

 

$

0.66

 

 

$

0.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

42,687

 

 

43,447

 

 

 

 

 

42,739

 

 

43,892

 

 

 

 

Diluted

 

42,986

 

 

43,782

 

 

 

 

 

43,016

 

 

44,316

 

 

 

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

Change

 

 

 

2019

 

2018

 

%

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

391,033

 

 

$

276,066

 

 

42%

 

Receivables, net

 

632,194

 

 

593,755

 

 

6%

 

Inventories, net

 

424,835

 

 

423,426

 

 

0%

 

Other current assets

 

81,729

 

 

50,719

 

 

61%

 

Total current assets

 

1,529,791

 

 

1,343,966

 

 

14%

Property, plant, and equipment, net

 

385,593

 

 

374,660

 

 

3%

Goodwill

 

1,166,680

 

 

1,088,032

 

 

7%

Other intangible assets, net

 

479,907

 

 

429,567

 

 

12%

Operating lease right-of-use assets, net

 

165,490

 

 

 

 

NM

Other assets

 

36,800

 

 

19,160

 

 

92%

 

Total assets

 

$

3,764,261

 

 

$

3,255,385

 

 

16%

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of long-term and short term debt

 

$

 

 

$

243

 

 

NM

 

Accounts payable

 

222,000

 

 

232,983

 

 

(5)%

 

Accrued expenses

 

164,744

 

 

166,954

 

 

(1)%

 

Income taxes payable

 

7,670

 

 

5,811

 

 

32%

 

Deferred revenue

 

276,115

 

 

236,508

 

 

17%

 

Other current liabilities

 

74,202

 

 

44,829

 

 

66%

 

Total current liabilities

 

744,731

 

 

687,328

 

 

8%

Long-term debt, net

 

760,639

 

 

762,313

 

 

0%

Deferred tax liabilities

 

80,159

 

 

47,121

 

 

70%

Accrued pension and other postretirement benefit costs

 

138,635

 

 

101,227

 

 

37%

Long-term operating lease liability

 

145,124

 

 

 

 

NM

Long-term portion of environmental reserves

 

15,026

 

 

15,777

 

 

(5)%

Other liabilities

 

105,575

 

 

110,838

 

 

(5)%

 

Total liabilities

 

1,989,889

 

 

1,724,604

 

 

15%

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock, $1 par value

 

$

49,187

 

 

$

49,187

 

 

0%

Additional paid in capital

 

116,070

 

 

118,234

 

 

(2)%

Retained earnings

 

2,497,111

 

 

2,191,471

 

 

14%

Accumulated other comprehensive loss

 

(325,274)

 

 

(288,447)

 

 

13%

Less: cost of treasury stock

 

(562,722)

 

 

(539,664)

 

 

4%

 

Total stockholders' equity

 

1,774,372

 

 

1,530,781

 

 

16%

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

3,764,261

 

 

$

3,255,385

 

 

16%

 

 

 

 

 

 

 

 

NM = Not Meaningful

 

 

 

 

 

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

SEGMENT INFORMATION (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

 

 

 

Change

 

 

 

 

 

Change

 

 

2019

 

2018

 

%

 

2019

 

2018

 

%

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial/Industrial

 

$

323,219

 

 

$

304,835

 

 

6%

 

$

1,239,881

 

 

$

1,209,178

 

 

3%

Defense

 

163,491

 

 

150,924

 

 

8%

 

579,329

 

 

554,374

 

 

5%

Power

 

169,061

 

 

192,863

 

 

(12)%

 

668,751

 

 

648,283

 

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

655,771

 

 

$

648,622

 

 

1%

 

$

2,487,961

 

 

$

2,411,835

 

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (expense):

 

 

 

 

 

 

 

 

 

 

Commercial/Industrial

 

$

52,687

 

 

$

46,922

 

 

12%

 

$

196,455

 

 

$

182,669

 

 

8%

Defense

 

44,129

 

 

36,462

 

 

21%

 

129,653

 

 

128,446

 

 

1%

Power

 

32,304

 

 

36,066

 

 

(10)%

 

112,954

 

 

98,858

 

 

14%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segments

 

$

129,120

 

 

$

119,450

 

 

8%

 

$

439,062

 

 

$

409,973

 

 

7%

Corporate and other

 

(8,466)

 

 

(9,445)

 

 

10%

 

(35,109)

 

 

(36,347)

 

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating income

 

$

120,654

 

 

$

110,005

 

 

10%

 

$

403,953

 

 

$

373,626

 

 

8%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margins:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial/Industrial

 

16.3%

 

15.4%

 

90 bps

 

15.8%

 

15.1%

 

70 bps

Defense

 

27.0%

 

24.2%

 

280 bps

 

22.4%

 

23.2%

 

(80 bps)

Power

 

19.1%

 

18.7%

 

40 bps

 

16.9%

 

15.2%

 

170 bps

Total Curtiss-Wright

 

18.4%

 

17.0%

 

140 bps

 

16.2%

 

15.5%

 

70 bps

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment margins

 

19.7%

 

18.4%

 

130 bps

 

17.6%

 

17.0%

 

60 bps

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

SALES BY END MARKET (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

 

 

 

Change

 

 

 

 

 

Change

 

 

2019

 

2018

 

%

 

2019

 

2018

 

%

Defense markets:

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

122,886

 

 

$

104,142

 

 

18%

 

$

416,841

 

 

$

376,951

 

 

11%

Ground

 

24,049

 

 

28,667

 

 

(16)%

 

93,432

 

 

97,131

 

 

(4)%

Naval

 

144,405

 

 

134,020

 

 

8%

 

568,776

 

 

486,476

 

 

17%

Total Defense

 

$

291,340

 

 

$

266,829

 

 

9%

 

$

1,079,049

 

 

$

960,558

 

 

12%

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial markets:

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

112,801

 

 

$

108,529

 

 

4%

 

$

433,038

 

 

$

414,422

 

 

4%

Power Generation

 

113,979

 

 

124,317

 

 

(8)%

 

392,173

 

 

431,793

 

 

(9)%

General Industrial

 

137,651

 

 

148,947

 

 

(8)%

 

583,701

 

 

605,062

 

 

(4)%

Total Commercial

 

$

364,431

 

 

$

381,793

 

 

(5)%

 

$

1,408,912

 

 

$

1,451,277

 

 

(3)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Curtiss-Wright

 

$

655,771

 

 

$

648,622

 

 

1%

 

$

2,487,961

 

 

$

2,411,835

 

 

3%

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.

The Company’s presentation of its financials and guidance includes an Adjusted (non-GAAP) view that excludes first year purchase accounting costs associated with its acquisitions, as well as one-time transition and IT security costs, and capital investments, specifically associated with the relocation of the DRG business in the Power segment. Transition costs include relocation of employees and equipment as well as overlapping facility and labor costs associated with the relocation. The Company is also excluding significant restructuring costs in 2020 associated with its operations. We believe this Adjusted view will provide improved transparency to the investment community in order to better measure Curtiss-Wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within 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; one-time transition and IT security costs associated with the relocation of a business in the current year period; and significant restructuring costs in 2020 associated with its operations.

Organic Sales and Organic Operating Income

The Corporation discloses organic sales and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic sales and organic operating income are defined as sales and operating income excluding the impact of foreign currency fluctuations and contributions from acquisitions made during the last twelve months.

 

Three Months Ended

 

December 31,

 

2019 vs. 2018

 

Commercial/Industrial

 

Defense

 

Power

 

Total Curtiss-Wright

 

Sales

 

Operating income

 

Sales

 

Operating income

 

Sales

 

Operating income

 

Sales

 

Operating income

Organic

6%

 

13%

 

6%

 

21%

 

(12)%

 

(10)%

 

1%

 

10%

Acquisitions

0%

 

0%

 

2%

 

0%

 

0%

 

0%

 

1%

 

0%

Foreign Currency

0%

 

(1)%

 

0%

 

0%

 

0%

 

0%

 

(1)%

 

0%

Total

6%

 

12%

 

8%

 

21%

 

(12)%

 

(10)%

1%

 

10%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

December 31,

 

2019 vs. 2018

 

Commercial/Industrial

 

Defense

 

Power

 

Total Curtiss-Wright

 

Sales

 

Operating income

 

Sales

 

Operating income

 

Sales

 

Operating income

 

Sales

 

Operating income

Organic

4%

 

8%

 

3%

 

0%

 

(1)%

 

11%

 

2%

 

6%

Acquisitions

0%

 

0%

 

2%

 

0%

 

4%

 

3%

 

2%

 

1%

Foreign Currency

(1)%

 

0%

 

0%

 

1%

 

0%

 

0%

 

(1)%

 

1%

Total

3%

 

8%

 

5%

 

1%

 

3%

 

14%

3%

 

8%

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. Adjusted free cash flow excludes a capital investment in the Power segment related to the new, state-of-the-art naval facility principally for DRG, voluntary contributions to the Company’s corporate defined benefit pension plan made in the first quarters of 2018 and 2020, and the cash impact from restructuring in 2020. 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

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

262,389

 

 

$

237,298

 

 

$

421,404

 

 

$

336,273

 

Capital expenditures

(19,833)

 

 

(23,130)

 

 

(69,752)

 

 

(53,417)

 

Free cash flow

$

242,556

 

 

$

214,168

 

 

$

351,652

 

 

$

282,856

 

Adjustment to capital expenditures (DRG facility investment)

 

5,298

 

 

 

 

19,284

 

 

 

Voluntary pension payment

 

 

 

 

 

 

50,000

 

Adjusted free cash flow

$

247,854

 

 

$

214,168

 

 

$

370,936

 

 

$

332,856

 

Free Cash Flow Conversion

277%

 

259%

 

121%

 

121%

CURTISS-WRIGHT CORPORATION
2019 Reconciliation Reported (GAAP) to Adjusted (Non-GAAP)
($'s in millions, except per share data)
 

2018

Reported

(GAAP)

2018

Adjustments (1)

(Non-GAAP)

2018

Adjusted (1)

(Non-GAAP)

2019

Reported

(GAAP)

2019

Adjustments (1)

(Non-GAAP)

2019

Adjusted (1)

(Non-GAAP)

2019 Chg vs

2018 Adjusted

Sales:
Commercial/Industrial

$

 

1,209

 

$

 

-

 

$

 

1,209

 

$

 

1,240

 

$

 

-

 

$

 

1,240

 

Defense

 

554

 

 

-

 

 

554

 

 

579

 

 

2

 

 

581

 

Power

 

648

 

 

-

 

 

648

 

 

669

 

 

-

 

 

669

 

Total sales

$

 

2,412

 

$

 

-

 

$

 

2,412

 

$

 

2,488

 

$

 

2

 

$

 

2,490

 

3

%

 
Operating income:
Commercial/Industrial

$

 

183

 

$

 

-

 

$

 

183

 

$

 

196

 

$

 

-

 

$

 

196

 

Defense

 

128

 

 

-

 

 

128

 

 

130

 

 

2

 

 

132

 

Power

 

99

 

 

9

 

 

108

 

 

113

 

 

4

 

 

117

 

Total segments

 

410

 

 

9

 

 

419

 

 

439

 

 

7

 

 

446

 

Corporate and other

 

(36

)

 

-

 

 

(36

)

 

(35

)

 

-

 

 

(35

)

Total operating income

$

 

374

 

$

 

9

 

$

 

382

 

$

 

404

 

$

 

7

 

$

 

411

 

7

%

 
Interest expense

$

 

(34

)

$

 

-

 

$

 

(34

)

$

 

(31

)

 

-

 

$

 

(31

)

Other income, net

 

17

 

 

-

 

 

17

 

 

24

 

 

-

 

 

24

 

Earnings before income taxes

356

 

 

 

9

 

 

365

 

 

396

 

 

7

 

 

403

 

 

 

Provision for income taxes

 

(81

)

 

(2

)

 

(83

)

 

(89

)

 

(2

)

 

(90

)

Net earnings

$

 

276

 

$

 

7

 

$

 

282

 

$

 

308

 

$

 

5

 

$

 

313

 

 
Diluted earnings per share

$

 

6.22

 

$

 

0.15

 

$

 

6.37

 

$

 

7.15

 

$

 

0.12

 

$

 

7.27

 

14

%

Diluted shares outstanding

 

44.3

 

 

44.3

 

 

43.0

 

 

43.0

 

Effective tax rate

 

22.6

%

 

22.6

%

 

22.4

%

 

22.4

%

 
Operating margins:
Commercial/Industrial

 

15.1

%

 

-

 

 

15.1

%

 

15.8

%

 

-

 

 

15.8

%

70 bps
Defense

 

23.2

%

 

-

 

 

23.2

%

 

22.4

%

+30 bps

 

22.7

%

(50 bps)
Power

 

15.2

%

+140 bps

 

16.6

%

 

16.9

%

+60 bps

 

17.5

%

90 bps
Total operating margin

 

15.5

%

+30 bps

 

15.8

%

 

16.2

%

+30 bps

 

16.5

%

70 bps
 
Free cash flow (2)

$

 

283

 

$

 

50

 

$

 

333

 

$

 

352

 

$

 

19

 

$

 

371

 

11

%

 
Note: Full year amounts may not add due to rounding
(1) 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, as well as one-time transition and IT security costs related to the relocation of the DRG business.
(2) Free Cash Flow is defined as cash flow from operations less capital expenditures. 2018 Adjusted Free Cash Flow excludes a voluntary contribution to the Company’s corporate defined benefit pension plan of $50 million. 2019 Adjusted Free Cash Flow excludes a $19 million capital investment in the Power segment related to construction of a new, state-of-the-art naval facility for the DRG business.
 
CURTISS-WRIGHT CORPORATION
2020 Segment Reorganization
As of February 26, 2020
($'s in millions, except per share data)
 

2019 Adjusted

(Non-GAAP)

 

Business Unit

Realignment

 

2019 Adjusted

(Non-GAAP)

 

2020 Adjusted Guidance

(Non-GAAP)

(Prior Structure) (New Structure) (New Structure)
Low High
Sales:
Commercial/Industrial

$

1,240

 

$

(102

)

$

1,138

 

$

1,140

 

$

1,160

 

Defense

 

581

 

 

47

 

 

628

 

 

690

 

 

700

 

Power

 

669

 

 

55

 

 

724

 

 

760

 

 

770

 

Total sales

$

2,490

 

$

-

 

$

2,490

 

$

2,590

 

$

2,630

 

 
Operating income:
Commercial/Industrial

$

196

 

$

(17

)

$

180

 

$

180

 

$

184

 

Defense

 

132

 

 

8

 

 

140

 

 

152

 

 

155

 

Power

 

117

 

 

9

 

 

126

 

 

130

 

 

132

 

Total segments

 

446

 

 

-

 

 

446

 

 

462

 

 

472

 

Corporate and other

 

(35

)

 

-

 

 

(35

)

 

(34

)

 

(35

)

Total operating income

$

411

 

$

-

 

$

411

 

$

428

 

$

437

 

 
Interest expense

$

(31

)

$

-

 

$

(31

)

$

(32

)

$

(33

)

Other income, net

 

24

 

 

-

 

 

24

 

 

24

 

 

25

 

Earnings before income taxes

 

403

 

 

-

 

 

403

 

 

419

 

 

429

 

Provision for income taxes

 

(90

)

 

-

 

 

(90

)

 

(96

)

 

(99

)

Net earnings

$

313

 

$

-

 

$

313

 

$

323

 

$

331

 

 
Diluted earnings per share

$

7.27

 

$

-

 

$

7.27

 

$

7.50

 

$

7.70

 

Diluted shares outstanding

 

43.0

 

 

43.0

 

 

43.0

 

 

43.0

 

Effective tax rate

 

22.4

%

 

22.4

%

 

23.0

%

 

23.0

%

 
Operating margins:
Commercial/Industrial

 

15.8

%

 

-

 

 

15.8

%

 

15.8

%

 

15.9

%

Defense

 

22.7

%

(40 bps)

 

22.3

%

 

22.0

%

 

22.1

%

Power

 

17.5

%

(10 bps)

 

17.4

%

 

17.1

%

 

17.2

%

Total operating margin

 

16.5

%

 

-

 

 

16.5

%

 

16.5

%

 

16.6

%

 
Notes:
(1) Full year amounts may not add due to rounding
(2) The above supplemental financial information by reportable segment for the 2019 and 2020 reporting periods reflects the Corporation’s first quarter 2020 segment reorganization.
 
CURTISS-WRIGHT CORPORATION
2020 Guidance (New Segment Structure)
As of February 26, 2020
($'s in millions, except per share data)
 

2019

Reported

(GAAP)

 

2019

Adjustments (1)

(Non-GAAP)

2019

Adjusted

(Non-GAAP)

2020

Reported Guidance

(GAAP)

2020

Adjustments (2)

(Non-GAAP)

2020

Adjusted Guidance (3)(4)(5)

(Non-GAAP)

Low High Low High 2020 Chg vs 2019 Adjusted
Sales:
Commercial/Industrial

$

1,138

 

$

-

 

$

1,138

 

$

1,140

 

$

1,160

 

$

-

 

$

1,140

 

$

1,160

 

Defense

 

626

 

 

2

 

 

628

 

 

690

 

 

700

 

 

-

 

 

690

 

 

700

 

Power

 

724

 

 

-

 

 

724

 

 

760

 

 

770

 

 

-

 

 

760

 

 

770

 

Total sales

$

2,488

 

$

2

 

$

2,490

 

$

2,590

 

$

2,630

 

$

-

 

$

2,590

 

$

2,630

 

4 to 6%
 
Operating income:
Commercial/Industrial

$

180

 

$

-

 

$

180

 

$

167

 

$

171

 

$

13

 

$

180

 

$

184

 

Defense

 

137

 

 

2

 

 

140

 

 

141

 

 

144

 

 

11

 

 

152

 

 

155

 

Power

 

122

 

 

4

 

 

126

 

 

116

 

 

119

 

 

14

 

 

130

 

 

132

 

Total segments

 

439

 

 

7

 

 

446

 

 

424

 

 

434

 

 

38

 

 

462

 

 

472

 

Corporate and other

 

(35

)

 

-

 

 

(35

)

 

(34

)

 

(35

)

 

-

 

 

(34

)

 

(35

)

Total operating income

$

404

 

$

7

 

$

411

 

$

390

 

$

399

 

$

38

 

$

428

 

$

437

 

4 to 6%
 
Interest expense

$

(31

)

$

-

 

$

(31

)

$

(32

)

$

(33

)

$

-

 

$

(32

)

$

(33

)

Other income, net

 

24

 

 

-

 

 

24

 

 

24

 

 

25

 

 

-

 

 

24

 

 

25

 

Earnings before income taxes

 

397

 

 

7

 

 

403

 

 

381

 

 

392

 

 

38

 

 

419

 

 

429

 

Provision for income taxes

 

(89

)

 

(2

)

 

(90

)

 

(88

)

 

(90

)

 

(9

)

 

(96

)

 

(99

)

Net earnings

$

308

 

$

5

 

$

313

 

$

294

 

$

302

 

$

29

 

$

323

 

$

331

 

 
Diluted earnings per share

$

7.15

 

$

0.12

 

$

7.27

 

$

6.82

 

$

7.02

 

$

0.68

 

$

7.50

 

$

7.70

 

3 to 6%
Diluted shares outstanding

 

43.0

 

 

43.0

 

 

43.0

 

 

43.0

 

 

43.0

 

 

43.0

 

Effective tax rate

 

22.4

%

 

22.4

%

 

23.0

%

 

23.0

%

 

23.0

%

 

23.0

%

 
Operating margins:
Commercial/Industrial

 

15.8

%

 

-

 

 

15.8

%

 

14.6

%

 

14.8

%

+110 bps

 

15.8

%

 

15.9

%

0 to 10 bps
Defense

 

21.9

%

+40 bps

 

22.3

%

 

20.4

%

 

20.6

%

+160 bps

 

22.0

%

 

22.1

%

(20 to 30 bps)
Power

 

16.9

%

+50 bps

 

17.4

%

 

15.3

%

 

15.4

%

+180 bps

 

17.1

%

 

17.2

%

(20 to 30 bps)
Total operating margin

 

16.2

%

+30 bps

 

16.5

%

 

15.1

%

 

15.2

%

+150 bps

 

16.5

%

 

16.6

%

0 to 10 bps
 
Free cash flow (6)

$

352

 

$

19

 

$

371

 

$

193

 

$

213

 

$

177

 

$

370

 

$

390

 

 
Notes: Full year amounts may not add due to rounding. All financial information by reportable segment for the 2019 and 2020 reporting periods reflects the Corporation’s first quarter 2020 segment reorganization.
(1) 2019 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 (Defense segment), specifically one-time backlog amortization and transaction costs, as well as one-time transition and IT security costs related to the relocation of the DRG business (Power Segment).
(2) 2020 Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding restructuring costs (impacting all three segments), the impact of first year purchase accounting costs, specifically one-time backlog amortization and transaction costs associated with the acquisition of 901D (Defense Segment), and one-time transition and IT security costs related to the relocation of the DRG business (Power Segment).
(3) Commercial/Industrial segment 2020 guidance reflects improved profitability due to higher sales and benefits of our ongoing margin improvement initiatives. Adjusted guidance excludes $13 million in restructuring costs.
(4) Defense segment 2020 guidance reflects reduced profitability, despite higher sales, due to a $5 million increase in R&D investments. Adjusted guidance excludes $4 million in restructuring costs and $7 million in one-time backlog amortization and transaction costs associated with the acquisition of 901D.
(5) Power segment 2020 guidance reflects reduced profitability, despite higher sales, due to a $5 million increase in R&D investments. Adjusted guidance excludes $11 million in restructuring costs and $3 million in one-time transition and IT security costs related to the relocation of the DRG business.
(6) Free Cash Flow is defined as cash flow from operations less capital expenditures. 2019 Adjusted Free Cash Flow excludes a $19 million capital investment in the Power segment related to construction of a new, state-of-the-art naval facility for the DRG business. 2020 Adjusted Free Cash Flow guidance excludes a voluntary contribution to the Company’s corporate defined benefit pension plan of $150 million, a $14 million cash impact from restructuring, and a $13 million capital investment in the Power segment related to construction of a new, state-of-the-art naval facility for the DRG business.
 
CURTISS-WRIGHT CORPORATION
2020 Sales Growth Guidance by End Market
As of February 26, 2020
 
2020 % Change vs 2019
(Prior)
Defense Markets
Aerospace 4 - 6%
Ground 5 - 7%
Navy 12 - 14%
Total Defense 8 - 10%
 
Commercial Markets
Commercial Aerospace 0 - 2%
Power Generation 3 - 5%
General Industrial Flat
Total Commercial 0 - 2%
 
Total Curtiss-Wright Sales 4 - 6%

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 9,100 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, 2018, and subsequent reports filed with the Securities and Exchange Commission.

This press release and additional information are available at www.curtisswright.com.

Contacts

Jim Ryan
(704) 869-4621
Jim.Ryan@curtisswright.com

Release Summary

Curtiss-Wright reports record 4th quarter 2019 Adjusted diluted EPS and nearly $250 million in Adjusted free cash flow.

Social Media Profiles

Contacts

Jim Ryan
(704) 869-4621
Jim.Ryan@curtisswright.com