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Curtiss-Wright Reports 2004 Financial Results

February 03, 2005

NOTE : BY PRESS RELEASE DATED MARCH 1, 2005, CURTISS-WRIGHT CORPORATION REVISED INFORMATION CONTAINED IN THIS PRESS RELEASE CONCERNING SALES, OPERATING INCOME, NET EARNINGS AND EARNINGS PER DILUTED SHARE. THE CHART IMMEDIATELY BELOW SETS FORTH THE CORRECT FIGURES. ANY CONFLICTING DATA ELSEWHERE IN THIS RELEASE SHOULD NOT BE RELIED UPON.

(in 000's)
Q4
2004
Sales
$281,104
$955, 039
Operating Income
$34,361
$110,719
Net Earnings
$20,413
$65,066
Earnings per Diluted Share
$0.94
$3.02
       Full Year and Fourth Quarter Sales up 28% and 45%, Respectively

       Full Year and Fourth Quarter Earnings up 30% & 56%, Respectively

                   Ninth Consecutive Year of Revenue Growth

                           Backlog at Record Level

ROSELAND, N.J., Feb. 3 /PRNewswire-FirstCall/ -- Curtiss-Wright Corporation (NYSE: CW, CW.B) today reports financial results for the full year and quarter ended December 31, 2004. The highlights are as follows:

Fourth Quarter 2004 Operating Highlights

  • Net sales for the fourth quarter of 2004 increased 45% to $281.1 million from $193.7 million in the fourth quarter of 2003. Acquisitions made in the fourth quarter of 2003 and in 2004 contributed $52.8 million in incremental sales in the fourth quarter of 2004.
  • Operating income in the fourth quarter of 2004 increased 49% to $38.8 million from $26.1 million in the fourth quarter of 2003. Acquisitions made in the fourth quarter of 2003 and in 2004 contributed $3.6 million in incremental operating income in the fourth quarter of 2004. The increase in operating income was achieved despite absorbing approximately $0.8 million of costs in the quarter related to compliance with Sarbanes-Oxley Section 404.
  • Net earnings for the fourth quarter of 2004 increased 56% to $23.1 million, or $1.06 per diluted share, from $14.8 million, or $0.70 per diluted share, in the fourth quarter of 2003 (adjusted for the 2-for-1 stock split in December 2003). The net earnings for the fourth quarter of 2004 included nonrecurring tax benefits of $1.2 million (approximately $0.06 per diluted share) resulting from a favorable IRS appeals settlement and research and development tax credits. In addition, the increase in net earnings in the fourth quarter of 2004 was achieved despite the absorption of Sarbanes-Oxley compliance costs (approximately $0.02 per diluted share).
  • New orders received in the fourth quarter of 2004 were $315.7 million, up 40% compared to the fourth quarter of 2003.

Full Year 2004 Operating Highlights

  • Net sales for the full year 2004 increased 28% to $955.0 million from $746.1 million in 2003. Acquisitions made in 2003 and 2004 contributed $154.2 million in incremental sales in 2004 as compared to 2003.
  • Operating income in 2004 increased 29% to $115.1 million from $89.3 million in 2003. Acquisitions made in 2003 and 2004 contributed $11.0 million in incremental operating income in 2004 as compared to 2003. The increase in operating income was achieved despite a $2.1 million decrease in pension income and approximately $2.5 million of incremental costs related to compliance with Sarbanes-Oxley Section 404 in 2004 as compared to 2003.
  • Net earnings in 2004 increased 30% to $67.7 million, or $3.14 per diluted share, from $52.3 million, or $2.50 per diluted share, in 2003 (adjusted for the 2-for-1 stock split in December 2003). The net earnings for 2004 included nonrecurring tax benefits of $3.4 million (approximately $0.16 per diluted share). In addition, the increase in 2004 net earnings was achieved despite a decrease in pension income (approximately $0.06 per diluted share) and incremental Sarbanes-Oxley costs (approximately $0.07 per diluted share).
  • New orders received in 2004 were $998.9 million, up 34% compared to 2003. Backlog increased 24% to a new record high of $627.7 million at December 31, 2004 from $505.5 million at December 31, 2003.

"We are pleased to report our ninth consecutive year of revenue growth along with higher operating income and earnings in 2004," commented Martin R. Benante, Chairman and CEO of Curtiss-Wright Corporation. "Over the last five years Curtiss-Wright has delivered a compounded annual growth rate in sales of 27%, operating income of 22% and earnings per share of 20%. During this same time, our total shareholder return was 28%, which is much better than the relative indices and at the top of the aerospace and defense industries. Achievement of these results during a time frame during which we acquired over 30 businesses is a strong indication of our ability to integrate acquisitions quickly and profitably. Our diversification strategy has provided growth in 2004 for both our defense markets, which grew 30%, and commercial and industrial markets, which grew 26%, over the prior year period. We also experienced strong organic sales growth of 21% from our Metal Treatment segment, and strong organic operating income growth in our Metal Treatment and Motion Control segments, which grew 55% and 22%, respectively, in 2004."

Sales

Sales growth in 2004 for the fourth quarter and full year as compared to 2003 was driven by contributions from acquisitions and organic growth in some of our base businesses. Acquisitions made in 2003 and 2004 have contributed $52.8 million and $154.2 million in incremental sales for the quarter and full year ended December 31, 2004, respectively, over the comparable periods in 2003. The remaining base businesses experienced organic growth of 18% and 7% for the quarter and full year ended December 31, 2004, respectively, over the prior year periods. The organic sales growth in the fourth quarter of 2004 was driven by our Flow Control and Metal Treatment segments, which experienced organic growth of 29% and 19%, respectively, compared to the prior year period. Our Motion Control segment grew 6% organically in fourth quarter of 2004 as compared to the prior year period.

In our base businesses, higher sales from our Metal Treatment segment of global shot peening services, higher sales from our Flow Control segment to the commercial power generation and oil and gas markets, and higher domestic military aerospace and global commercial aerospace aftermarket sales from our Motion Control segment, all contributed to the organic growth. In addition, foreign currency translation favorably impacted sales by $3.9 million and $15.8 million for the quarter and full year ended December 31, 2004, respectively, compared to the prior year periods.

Operating Income

Operating income in 2004 for the fourth quarter and full year increased 48% and 29%, respectively, over the 2003 prior year periods. The increases were due to higher sales volumes, favorable sales mix, reduction in certain reserve requirements, and previously implemented cost control initiatives. Overall, organic operating income growth was 32% and 19% for the quarter and full year ended December 31, 2004, respectively, compared to the prior year periods. The strong quarterly operating income performance was lead by our Flow Control segment, which produced organic growth of 42%, while the Metal Treatment and Motion Control segments grew organically by 20% and 18%, respectively, as compared to the prior year period. The segment operating income growth was achieved despite the absorption of costs associated with Sarbanes-Oxley Rule 404 compliance.

The higher segment operating income was partially offset by lower pension income of $0.2 million and $2.1 million for the quarter and full year ended December 31, 2004, respectively, over the comparable prior year periods. In addition, foreign currency translation favorably impacted operating income by $0.9 million and $2.9 million for the quarter and full year ended December 31, 2004, respectively, compared to the prior year periods.

On a consolidated basis, our operating margin was 13.8% in the fourth quarter of 2004 versus 13.5% in the prior year. Our full year operating margin was 12.1% for 2004 and 12.0% for 2003. Our operating margins continue to be adversely affected by higher amortization expense due to our robust acquisition activity over the past couple of years.

Net Earnings

Net earnings increased 56% and 30% for the quarter and full year ended December 31, 2004, respectively, over the comparable prior year periods. This was achieved as a result of strong operating income from our business segments, which increased $11.7 million and $28.4 million for the quarter and full year ended December 31, 2004, respectively, over the prior year periods.

Net earnings for 2004 includes nonrecurring tax benefits totaling $3.4 million. These improvements were offset by higher interest expense associated with the debt incurred to fund our acquisition program and from higher interest rates.

Segment Performance

Flow Control -- Sales for the fourth quarter of 2004 were $118.3 million, up 51% over the comparable period last year, principally due to strong organic growth of 29% in the base businesses, and from the contributions from the 2004 acquisitions. Higher sales of flow control and electronic products to the U.S. Navy, higher sales of valves, pumps, other electromechanical products, and field services to the commercial power generation market, and higher sales of valves to the oil and gas market, all contributed to the organic growth in 2004. Sales of this business segment also benefited from favorable foreign currency translation of $0.5 million in the fourth quarter of 2004 as compared to the prior year period.

Operating income for this segment increased 58% in the fourth quarter of 2004 compared to the prior year period. The improvement was due to strong organic growth of 42%, lead by higher sales volume of our U.S. Navy, commercial power generation, and oil and gas products, favorable sales mix, and previously implemented cost reduction initiatives. The organic operating income increase is also due to inventory write-offs in 2003 that did not reoccur in 2004.

Motion Control -- Sales for the fourth quarter of 2004 of $115.9 million increased 49% over last year, principally due to the contributions from the 2003 and 2004 acquisitions, which contributed $33.1 million of incremental sales in the fourth quarter of 2004. Sales from the base businesses increased 6% in the fourth quarter of 2004 as compared to the prior year period. This organic growth increase was due to higher electronic military aerospace sales and higher commercial aerospace aftermarket sales from our repair and overhaul and integrated sensors businesses. This improvement was partially offset by lower ground defense sales associated with the Bradley Fighting Vehicle and lower commercial aerospace OEM sales. Sales of this business segment also benefited from favorable foreign currency translation of $1.9 million in the fourth quarter of 2004 as compared to the prior year period.

Operating income for this segment increased 40% for the fourth quarter of 2004 compared to the prior year period. The improvement was driven by higher sales volume previously mentioned, favorable sales mix, and previously implemented cost control initiatives. This segment also benefited from reductions in reserve requirements at its European integrated sensors business.

Metal Treatment -- Sales for the fourth quarter of 2004 of $46.8 million were 24% higher than the comparable period last year. The improvement was mainly due to organic growth of 19% driven by higher overall shot peening revenues to the European aerospace and automotive markets, and the contributions from the 2004 acquisitions. This segment also experienced organic growth in the coatings and heat treating businesses. Favorable foreign currency translation positively impacted sales by $1.5 million in the fourth quarter of 2004 as compared to the prior year period.

Operating income increased 23% for the fourth quarter of 2004 as compared to the prior year period. Operating income improved in our shot peening businesses primarily as a result of higher sales volume, especially for our higher margin laser peening business. In addition, favorable sales mix, cost reduction programs, and favorable foreign currency translation also contributed to the higher operating income.

2005 Management Guidance

For the full year 2005, management expects to achieve revenues in the range of $1.05 billion to $1.10 billion, operating income in the range of $130 - $138 million, which includes $2 million of pension expense from the Curtiss-Wright pension plan, and earnings per share in the range of $3.24 to $3.45 per share. This guidance reflects our expectations of 10-15% growth in revenue, 15-20% growth in operating income, and 10 - 15% growth in EPS, excluding $0.16 per share of nonrecurring tax benefits reported in 2004.

Full year free cash flow (defined as cash flow from operating activities less capital expenditures) is expected to be between $55 and $60 million for 2005.

EPS guidance is based on an estimated fully diluted shares outstanding of 22 million shares for the full year 2005. 2005 guidance includes an estimate for costs associated with the continuation of Sarbanes-Oxley compliance, but it does not include estimates for compliance with the new accounting rules for the expensing of equity-based compensation costs and it does not assume any acquisitions which may be completed in 2005.

Mr. Benante concluded, "In 2004, we continued to demonstrate our ability to generate long-term shareholder value by growing our sales and earnings. Over the past several years our operating income has been growing faster than our sales while we executed a very active, yet disciplined, acquisition program. Our strong performance in 2004 once again demonstrates our ability to execute our strategy and achieve our financial targets. Our successful growth is the result of our diversification and ability to deliver the high performance, technologically advanced products for which Curtiss-Wright is world renowned. We continue to experience increasing demand for our new technologies, many of which are only at the beginning of their life cycles, which should continue to provide superior returns to our shareholders into the future. Our diversification strategy, the continued successful integration of our acquisitions, and ongoing emphasis on technology will continue to generate growth opportunities in each of our three business segments in 2005 and beyond."

The Company will host a conference call to discuss the 2004 results at 10:00 EST Friday, February 4, 2005. A live webcast of the call can be heard on the Internet by visiting the company's website at http://curtisswright2014.q4web.com and clicking on the investor information page or by visiting other websites that provide links to corporate webcasts.

                 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF EARNINGS
                    (In thousands, except per share data)


                                    Three Months Ended    Twelve Months Ended
                                        December 31,          December 31,
                                      2004       2003       2004       2003
    Net sales                       $281,104   $193,663
  $955,039   $746,071
    Cost of sales                    180,067    125,476    624,536    505,153
      Gross profit                   101,037     68,187    330,503    240,918


    Research & development expenses    9,416      5,617     33,825     22,111
    Selling expenses                  16,888      9,929     61,648     38,816
    General and
     administrative expenses          35,455     25,529    118,526     90,849
    Environmental remediation and
     administrative expenses, net        394      1,043        885      1,423
    Pension expense (income), net        123        (31)       500     (1,611)


      Operating income                38,761     26,100    115,119     89,330


    Other income (expenses), net          76        207         65        389
    Interest expense                  (3,613)    (2,757)   (12,031)    (5,663)


    Earnings before income taxes      35,224     23,550    103,153     84,056
    Provision for income taxes        12,171      8,796     35,447     31,788


    Net earnings                     $23,053    $14,754    $67,706    $52,268


    Basic earnings per share           $1.08      $0.71      $3.19      $2.53
    Diluted earnings per share         $1.06      $0.70      $3.14      $2.50

    Dividends per share                $0.09      $0.09      $0.36      $0.32


    Weighted average
     shares outstanding:
      Basic                           21,418     20,735     21,196     20,640
      Diluted                         21,762     21,064     21,547     20,887


                                        Three Months          Twelve Months
                                           Change                 Change
                                        $           %         $           %
    Net sales                        $87,441      45.15%  $208,968      28.01%
    Cost of sales                     54,591      43.51%   119,383      23.63%
      Gross profit                    32,850      48.18%    89,585      37.18%


    Research & development expenses    3,799      67.63%    11,714      52.98%
    Selling expenses                   6,959      70.09%    22,832      58.82%
    General and administrative
     expenses                          9,926      38.88%    27,677      30.46%
    Environmental remediation and
     administrative expenses, net       (649)       N/A       (538)       N/A
    Pension expense (income), net        154    -496.77%     2,111
   -131.04%


      Operating income                12,661      48.51%    25,789      28.87%


    Other income (expenses), net        (131)    -63.29%      (324)    -83.29%
    Interest expense                    (856)     31.05%    (6,368)    112.45%


    Earnings before income taxes      11,674      49.57%    19,097      22.72%
    Provision for income taxes         3,375      38.37%     3,659      11.51%


    Net earnings                      $8,299      56.25%   $15,438      29.54%

Share and per share amounts have been restated to reflect the Corporation's 2-for-1 stock split on December 17, 2003.



                 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)


                                      December 31,  December 31,   Change
                                          2004        2003       $        %
    Assets
      Current Assets:
      Cash and cash equivalents         $41,038     $98,672  $(57,634) -58.4%
      Receivables, net                  214,084     143,362    70,722   49.3%
      Inventories, net                  115,979      97,880    18,099   18.5%
      Deferred income taxes              25,693      23,630     2,063    8.7%
      Other current assets               12,460      10,979     1,481   13.5%


        Total current assets            409,254     374,523    34,731    9.3%
      Property, plant,
       and equipment, net               265,243     238,139    27,104   11.4%
      Prepaid pension costs              77,802      77,877       (75)  -0.1%
      Goodwill, net                     364,313     220,058   144,255   65.6%
      Other intangible assets, net      140,369      48,268    92,101  190.8%
      Other assets                       21,459      14,800     6,659   45.0%


        Total Assets                 $1,278,440    $973,665  $304,775   31.3%


    Liabilities
      Current Liabilities:
      Short-term debt                      $1,630      $997      $633   63.5%
      Accounts payable                     65,364    43,776    21,588   49.3%
      Accrued expenses                     63,413    44,938    18,475   41.1%
      Income taxes payable                 13,895     6,748     7,147  105.9%
      Other current liabilities            52,793    39,424    13,369   33.9%


        Total current liabilities         197,095   135,883    61,212   45.0%


      Long-term debt                      340,860   224,151   116,709   52.1%
      Deferred income taxes                41,803    21,798    20,005   91.8%
      Accrued pension & other
       postretirement benefit costs        80,612    75,633     4,979    6.6%
      Long-term portion of
       environmental reserves              18,956    21,083    (2,127) -10.1%
      Other liabilities                    20,860    16,236     4,624   28.5%


        Total Liabilities                 700,186   494,784   205,402   41.5%



    Stockholders' Equity
      Common stock, $1 par value           16,646    16,611        35    0.2%
      Class B common stock, $1 par value    8,765     8,765         0    0.0%
      Capital surplus                      55,885    52,998     2,887    5.4%
      Retained earnings                   603,710   543,670    60,040   11.0%
      Unearned portion of restricted stock    (34)      (55)       21  -38.2%
      Accumulated other comprehensive
       income                              36,797    22,634    14,163   62.6%
                                          721,769   644,623    77,146   12.0%
      Less:  cost of treasury stock       143,515   165,742   (22,227) -13.4%


        Total Stockholders' Equity        578,254   478,881    99,373   20.8%


        Total Liabilities and
         Stockholders' Equity          $1,278,440  $973,665  $304,775   31.3%




                 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
                             SEGMENT INFORMATION
                                (In thousands)


                              Three Months Ended         Twelve Months Ended
                                   December 31,               December 31,
                                               %                          %
                            2004      2003   Change    2004      2003   Change
    Sales:
    Flow Control         $118,335   $78,146   51.4% $388,139  $341,271   13.7%
    Motion Control        115,927    77,724   49.2%  388,576   265,905   46.1%
    Metal Treatment        46,842    37,793   23.9%  178,324   138,895   28.4%


    Total Sales          $281,104  $193,663   45.2% $955,039  $746,071   28.0%


    Operating Income:
    Flow Control          $15,529    $9,815   58.2%  $44,651   $39,991   11.7%
    Motion Control         16,203    11,616   39.5%   44,903    30,350   48.0%
    Metal Treatment         7,308     5,953   22.8%   28,279    19,055   48.4%


    Total Segments         39,040    27,384   42.6%  117,833    89,396   31.8%
    Pension (Expense)
     /Income                 (123)       31 -496.8%     (500)    1,611 -131.0%
    Corporate & Other        (156)   (1,315) -88.1%   (2,214)   (1,677)  32.0%


    Total Operating
     Income               $38,761   $26,100   48.5% $115,119   $89,330   28.9%



    Operating Margins:
    Flow Control             13.1%     12.6%            11.5%     11.7%
    Motion Control           14.0%     14.9%            11.6%     11.4%
    Metal Treatment          15.6%     15.8%            15.9%     13.7%
    Total Curtiss-Wright     13.8%     13.5%            12.1%     12.0%


About Curtiss-Wright

Curtiss-Wright Corporation is a diversified company headquartered in Roseland, New Jersey. The Company designs, manufactures and overhauls products for motion control and flow control applications and provides a variety of metal treatment services. The firm employs approximately 5,600 people. More information on Curtiss-Wright can be found at http://curtisswright2014.q4web.com.

Forward-looking statements in this release are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 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. Please refer to the Company's current SEC filings under the Securities and Exchange Act of 1934, as amended, for further information.

This press release and additional information is available at http://curtisswright2014.q4web.com.

SOURCE Curtiss-Wright Corporation

CONTACT: Alexandra M. Deignan of Curtiss-Wright Corporation,
+1-973-597-4734, or
adeignan@curtisswright.com
/Web site: http://curtisswright2014.q4web.com
(CW CWB)

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