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Curtiss-Wright Reports First Quarter 2020 Financial Results

Solid Q1 Earnings Performance Driven by Defense Market Sales Growth

Proactive Actions Taken to Protect Employees and Business Continuity in Response to COVID-19

Maintains Strong Balance Sheet with Ample Liquidity

Suspends 2020 Guidance

Curtiss-Wright Corporation (NYSE: CW) reports financial results for the first quarter ended March 31, 2020.

First Quarter 2020 Highlights:

  • Reported diluted earnings per share (EPS) of $1.21, with Adjusted diluted EPS of $1.34 (defined below), down 6% and up 3%, respectively, compared to the prior year;
  • Net sales of $601 million, up 4%;
  • Reported operating income of $72 million, up 1%, with Reported operating margin of 12.0%, down 50 basis points;
  • Adjusted operating income of $80 million, up 10%, with Adjusted operating margin of 13.3%, up 80 basis points;
  • Share repurchases of approximately 1.1 million shares or $112 million, including $100 million conducted opportunistically at an average share price below $100 per share; and
  • Company maintains a strong balance sheet with Adjusted Net Debt-to-EBITDA of 1.4x, providing ample liquidity.

"We delivered solid Adjusted diluted EPS of $1.34 in the first quarter, exceeding our expectations, due to strong sales growth in our defense markets, which we expect to remain resilient," said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. "However, the challenges posed by the COVID-19 pandemic have caused volatility and disruption across our operations and the global economy, with a heightened impact in our most economically-sensitive, industrial end markets. As we moved through the quarter, several of our operations were impacted due primarily to customer driven delays and government-mandated shutdowns."

"Curtiss-Wright is a well-positioned, agile business with significant financial flexibility. Our continued focus on free cash flow generation and maintaining a strong balance sheet provides us with ample liquidity to continue to execute our balanced capital allocation strategy and will help mitigate the impact of reduced sales and profitability that we expect in the quarters ahead."

COVID-19 Impact and Response:

"On behalf of Curtiss-Wright Corporation, our deepest sympathies go out to all who have been affected by the outbreak of COVID-19," continued Mr. Adams. "Since this crisis began, our team has taken the necessary actions to protect the health and safety of our employees and continuity of our operations."

In response to COVID-19, the Company has taken the following actions:

  • Implemented several health and safety best-practices in alignment with Centers for Disease Control (CDC) guidelines and local government requirements, including limiting employee travel, practicing social distancing and working from home (where appropriate) across our offices and manufacturing facilities globally;
  • Utilizing our recession planning scenarios developed in 2019, we are conducting stress testing of all of our segments, to determine and plan for potential sales and profitability risks; and
  • Implementing various cost containment and mitigation plans, that began in the first quarter, including workforce reductions, employee furloughs, reduced discretionary spending and measures to preserve profitability and Free Cash Flow.

Full-Year 2020 Guidance Update:

Due to the ongoing uncertainty of the COVID-19 situation and its potential impact on the Company’s operations and financial results, Curtiss-Wright’s previously communicated guidance for full-year 2020 has been suspended.

Mr. Adams concluded, "We are confident that the decisions we are making today will position Curtiss-Wright to weather the challenging environment before us and enable us to emerge an even stronger company when the pandemic subsides. Consistent with how we have always run the business, we are approaching these uncertain times proactively and remain focused on executing on our long-term strategy to deliver significant value for our shareholders."

Balance Sheet and Liquidity Highlights as of March 31, 2020:

  • Curtiss-Wright maintains a flexible and conservative capital structure, including significant dry powder for acquisitions and other corporate needs;
  • Cash balance of $158 million;
  • Adjusted Net Debt of $739 million, with the next maturity of $100 million due in 2021;
  • $500 million Revolver with current capacity of $324 million, $200 million accordion feature available, maturing in 2023;
  • Borrowing capacity of $1.5 billion before reaching debt covenants;
  • Adjusted Net Debt-to-Net Capitalization of 30.7%; and
  • Comfortable Leverage ratios:
    • Adjusted Debt-to-EBITDA: 1.7x
    • Adjusted Net Debt-to-EBITDA: 1.4x
    • Interest coverage: 16.9x.

First Quarter 2020 Operating Results

(In millions)

1Q-2020

1Q-2019

Change

Sales

$

601.2

$

578.3

4%

Reported operating income

$

72.4

$

72.0

1%

Adjustments (1)

 

7.6

 

0.5

 

Adjusted operating income (1)

$

80.0

$

72.5

10%

Adjusted operating margin (1)

 

13.3%

 

12.5%

80 bps

(1)

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

 

 

  • Sales of $601 million, up $23 million, or 4%, compared to the prior year (1% organic, 3% acquisitions);
  • From an end market perspective, total sales to the defense markets increased 26% (20% organic), led by strong growth in aerospace and naval defense, while total sales to the commercial markets decreased 11%, principally due to reduced demand in power generation and general industrial. Please refer to the accompanying tables for an overall breakdown of sales by end market;
  • Adjusted operating income of $80 million, up 10%, principally reflects higher profitability on strong defense revenues in the Defense segment, partially offset by lower power generation revenues in the Power segment and higher non-segment foreign currency transactional losses; and
  • Adjusted operating margin of 13.3%, up 80 basis points, primarily reflects higher revenues and favorable absorption in the Defense segment, and increased profitability in the Commercial/Industrial segment, despite lower revenues, due to the benefits of our cost containment actions.

Net Earnings and Diluted EPS

(In millions, except EPS)

1Q-2020

1Q-2019

Change

Reported net earnings

$

51.8

$

55.6

(7%)

Adjustments, net of tax (1)

 

5.5

 

0.4

 

Adjusted net earnings (1)

$

57.3

$

56.0

2%

Reported diluted EPS

$

1.21

$

1.29

(6%)

Adjustments, net of tax (1)

 

0.13

 

0.01

 

Adjusted diluted EPS (1)

$

1.34

$

1.30

3%

(1)

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

 
  • Reported net earnings of $52 million, down $4 million, or 7% from the prior year, principally reflecting higher corporate expenses and a higher effective tax rate, partially offset by higher segment operating income;
  • Reported diluted EPS of $1.21, down 6% from the prior year, principally reflecting lower net earnings, partially offset by a lower share count;
  • Adjusted net earnings of $57 million, up 2%;
  • Adjusted diluted EPS of $1.34, up 3%; and
  • Effective tax rate (ETR) of 26.6%, an increase from 20.9% in the prior year quarter, primarily due to a change in valuation allowances.

Free Cash Flow

(In millions)

1Q-2020

 

1Q-2019

 

Change

Net cash used for operating activities

$

(192.6

)

$

(51.9

)

(271%)

Capital expenditures

 

(18.6

)

 

(17.0

)

(9%)

Reported free cash flow

$

(211.2

)

$

(68.9

)

(207%)

Pension contribution (1)

$

150.0

 

 

-

 

 

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

 

7.7

 

 

5.1

 

51%

Restructuring (1)

 

0.7

 

 

-

 

 

Adjusted free cash flow (1)

$

(52.9

)

$

(63.8

)

17%

(1)

Adjusted free cash flow excludes a $150 million voluntary contribution made in January 2020 to the Company’s corporate defined benefit pension plan, a capital investment related to the new, state-of-the-art naval facility principally for DRG which impacted both periods, and the cash impact from restructuring in the current period.

 
  • Reported free cash flow was ($211) million, a decrease of $142 million compared to the prior year, principally due to a $150 million voluntary contribution to the Company’s corporate defined benefit pension plan, as well as the timing of advanced payments received in the fourth quarter of 2019 which were expected in 2020;
  • Capital expenditures increased by $2 million to $19 million compared to the prior year, primarily due to higher capital investments within the Power segment, principally related to the new, state-of-the-art naval facility for the DRG business; and
  • Adjusted free cash flow, which excludes the pension contribution and restructuring in the current period, as well as the DRG facility investment in the current and prior periods, improved by $11 million, or 17%, to ($53 million).

New Orders and Backlog

  • During the first quarter, new orders of $570 million decreased 24% compared to the prior year, principally due to the timing of strong naval defense orders in the prior year period.
  • Backlog of $2.1 billion decreased 2% from December 31, 2019.

Share Repurchase and Dividends

  • During the first quarter, the Company repurchased 1.1 million shares of its common stock for approximately $112 million, which included a $100 million opportunistic share repurchase program in March.
  • The Company also declared a quarterly dividend of $0.17 a share, unchanged from the previous quarter.

First Quarter 2020 Segment Performance

Commercial/Industrial

(In millions)

1Q-2020

1Q-2019

Change

Sales

$

264.4

$

269.9

(2%)

Reported operating income

$

35.0

$

35.2

(1%)

Adjustments (1)

 

1.0

 

-

 

Adjusted operating income (1)

$

36.0

$

35.2

2%

Adjusted operating margin (1)

 

13.6%

 

13.0%

60 bps

(1)

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

 
  • Sales of $264 million, down $5 million, or 2%, 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 both the CVN-80 and CVN-81 aircraft carrier programs, respectively;
  • Commercial aerospace market sales increased primarily due to higher sales of actuation equipment;
  • Lower general industrial market sales principally reflect reduced demand for industrial vehicle products and surface treatment services;
  • Reported operating income was $35 million, with Reported operating margin of 13.2%; and
  • Adjusted operating income was $36 million, up 2% from the prior year, while Adjusted operating margin increased 60 basis points to 13.6%, principally reflecting favorable mix for actuation products and the benefits of our cost containment initiatives.

Defense

(In millions)

1Q-2020

1Q-2019

Change

Sales

$

166.1

$

133.8

24%

Reported operating income

$

28.7

$

20.7

38%

Adjustments (1)

 

2.9

 

0.5

 

Adjusted operating income (1)

$

31.6

$

21.2

49%

Adjusted operating margin (1)

 

19.0%

 

15.8%

320 bps

(1)

Adjusted results exclude restructuring costs in current period, and one-time backlog amortization and transaction costs for current and prior year acquisitions.

 
  • Sales of $166 million, up $32 million, or 24%, compared to the prior year (13% organic, 11% acquisition);
  • Higher aerospace defense market revenues principally reflect increased sales of embedded computing equipment on unmanned aerial vehicles (UAVs), helicopter platforms and various Intelligence, Surveillance and Reconnaissance (ISR) programs;
  • Naval defense market revenue growth was primarily due to higher sales of embedded computing equipment and valves on the Virginia class submarine and CVN-80 aircraft carrier programs, as well as the contribution from the 901D acquisition;
  • Lower commercial aerospace market revenues principally reflect lower sales of flight test instrumentation equipment;
  • Reported operating income was $29 million, with Reported operating margin of 17.3%; and
  • Adjusted operating income was $32 million, up 49% from the prior year, while Adjusted operating margin increased 320 basis points to 19.0%, primarily reflecting favorable overhead absorption on higher defense revenues and a gain on sale of a product line, partially offset by higher research and development expenses.

Power

(In millions)

1Q-2020

1Q-2019

Change

Sales

$

170.8

$

174.7

(2%)

Reported operating income

$

20.6

$

25.4

(19%)

Adjustments (1)

 

3.8

 

-

 

Adjusted operating income (1)

$

24.4

$

25.4

(4%)

Adjusted operating margin (1)

 

14.3%

 

14.5%

(20 bps)

(1)

Adjusted results exclude restructuring costs and one-time transition and IT security costs associated with the relocation of our DRG business.

 
  • Sales of $171 million, down $4 million, or 2%, compared to the prior year;
  • Higher naval defense market sales primarily reflect higher CVN-80 and CVN-81 aircraft carrier program revenues;
  • Reduced power generation market sales reflect lower international aftermarket revenues and the timing of production on the China Direct AP1000 program, while domestic aftermarket sales were flat; and
  • Reported operating income was $21 million, with Reported operating margin of 12.1%; and
  • Adjusted operating income was $24 million, down 4%, while Adjusted operating margin decreased 20 basis points to 14.3%, primarily reflecting unfavorable overhead absorption on lower power generation revenues.

**********

Conference Call & Webcast Information

The Company will host a conference call to discuss its first quarter financial results and business outlook at 10:00 a.m. ET on Thursday, May 7, 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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

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

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

 

Change

 

2020

 

2019

 

$

 

%

 

 

 

 

 

 

 

 

Product sales

$

497,929

 

 

$

471,599

 

 

$

26,330

 

 

6%

Service sales

103,302

 

 

106,715

 

 

(3,413)

 

 

(3%)

Total net sales

601,231

 

 

578,314

 

 

22,917

 

 

4%

 

 

 

 

 

 

 

 

Cost of product sales

330,813

 

 

311,956

 

 

18,857

 

 

6%

Cost of service sales

69,839

 

 

69,485

 

 

354

 

 

1%

Total cost of sales

400,652

 

 

381,441

 

 

19,211

 

 

5%

 

 

 

 

 

 

 

 

Gross profit

200,579

 

 

196,873

 

 

3,706

 

 

2%

 

 

 

 

 

 

 

 

Research and development expenses

18,307

 

 

17,241

 

 

1,066

 

 

6%

Selling expenses

31,588

 

 

31,477

 

 

111

 

 

0%

General and administrative expenses

76,658

 

 

76,110

 

 

548

 

 

1%

Restructuring expenses

1,580

 

 

 

 

1,580

 

 

NM

 

 

 

 

 

 

 

 

Operating income

72,446

 

 

72,045

 

 

401

 

 

1%

 

 

 

 

 

 

 

 

Interest expense

7,489

 

 

7,272

 

 

217

 

 

3%

Other income, net

5,532

 

 

5,478

 

 

54

 

 

1%

 

 

 

 

 

 

 

 

Earnings before income taxes

70,489

 

 

70,251

 

 

238

 

 

0%

Provision for income taxes

(18,728)

 

 

(14,658)

 

 

(4,070)

 

 

28%

Net earnings

$

51,761

 

 

$

55,593

 

 

$

(3,832)

 

 

(7%)

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

Basic earnings per share

$

1.22

 

 

$

1.30

 

 

 

 

 

Diluted earnings per share

$

1.21

 

 

$

1.29

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share

$

0.17

 

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

42,456

 

 

42,799

 

 

 

 

 

Diluted

42,770

 

 

43,058

 

 

 

 

 

 

 

 

 

 

 

 

 

NM - not meaningful

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

 

 

 

 

 

 

 

March 31,

 

December 31,

 

Change

 

2020

 

2019

 

%

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

157,757

 

 

$

391,033

 

 

(60%)

Receivables, net

630,626

 

 

632,194

 

 

0%

Inventories, net

449,254

 

 

424,835

 

 

6%

Other current assets

45,298

 

 

81,729

 

 

(45%)

Total current assets

1,282,935

 

 

1,529,791

 

 

(16%)

Property, plant, and equipment, net

384,175

 

 

385,593

 

 

0%

Goodwill

1,175,685

 

 

1,166,680

 

 

1%

Other intangible assets, net

487,097

 

 

479,907

 

 

1%

Operating lease right-of-use assets, net

161,429

 

 

165,490

 

 

(2%)

Prepaid pension asset

117,253

 

 

 

 

NM

Other assets

22,820

 

 

36,800

 

 

(38%)

Total assets

$

3,631,394

 

 

$

3,764,261

 

 

(4%)

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term and short-term debt

$

427

 

 

$

 

 

NM

Accounts payable

171,200

 

 

222,000

 

 

(23%)

Accrued expenses

112,532

 

 

164,744

 

 

(32%)

Income taxes payable

3,918

 

 

7,670

 

 

(49%)

Deferred revenue

251,512

 

 

276,115

 

 

(9%)

Other current liabilities

89,468

 

 

74,202

 

 

21%

Total current liabilities

629,057

 

 

744,731

 

 

(16%)

Long-term debt

906,220

 

 

760,639

 

 

19%

Deferred tax liabilities, net

88,792

 

 

80,159

 

 

11%

Accrued pension and other postretirement benefit costs

89,600

 

 

138,635

 

 

(35%)

Long-term operating lease liability

140,519

 

 

145,124

 

 

(3%)

Long-term portion of environmental reserves

14,854

 

 

15,026

 

 

(1%)

Other liabilities

92,515

 

 

105,575

 

 

(12%)

Total liabilities

1,961,557

 

 

1,989,889

 

 

(1%)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $1 par value

49,187

 

 

49,187

 

 

0%

Additional paid in capital

114,911

 

 

116,070

 

 

(1%)

Retained earnings

2,541,777

 

 

2,497,111

 

 

2%

Accumulated other comprehensive loss

(370,868

)

 

(325,274

)

 

(14%)

Less: cost of treasury stock

(665,170

)

 

(562,722

)

 

(18%)

Total stockholders' equity

1,669,837

 

 

1,774,372

 

 

(6%)

 

 

 

 

 

 

Total liabilities and stockholders' equity

$

3,631,394

 

 

$

3,764,261

 

 

(4%)

 

 

 

 

 

 

NM - not meaningful

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

SEGMENT INFORMATION (UNAUDITED)(1)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

 

 

 

 

 

Change

 

2020

 

2019

 

%

Sales:

 

 

 

 

 

Commercial/Industrial

$

264,368

 

 

$

269,858

 

 

(2%)

Defense

 

166,111

 

 

 

133,783

 

 

24%

Power

 

170,752

 

 

 

174,673

 

 

(2%)

 

 

 

 

 

 

Total sales

$

601,231

 

 

$

578,314

 

 

4%

 

 

 

 

 

 

Operating income (expense):

 

 

 

 

 

Commercial/Industrial

$

34,987

 

 

$

35,205

 

 

(1%)

Defense

 

28,704

 

 

 

20,732

 

 

38%

Power

 

20,622

 

 

 

25,381

 

 

(19%)

 

 

 

 

 

 

Total segments

$

84,313

 

 

$

81,318

 

 

4%

Corporate and other

 

(11,867

)

 

 

(9,273

)

 

(28%)

 

 

 

 

 

 

Total operating income

$

72,446

 

 

$

72,045

 

 

1%

 

 

 

 

 

 

 

 

 

 

 

 

Operating margins:

 

 

 

 

 

Commercial/Industrial

 

13.2

%

 

 

13.0

%

 

20 bps

Defense

 

17.3

%

 

 

15.5

%

 

180 bps

Power

 

12.1

%

 

 

14.5

%

 

(240 bps)

Total Curtiss-Wright

 

12.0

%

 

 

12.5

%

 

(50 bps)

 

 

 

 

 

 

Segment margins

 

14.0

%

 

 

14.1

%

 

(10 bps)

 

 

 

 

 

 

(1) Amounts reported under realigned segment reporting structure.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

SALES BY END MARKET (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

 

 

 

 

 

Change

 

2020

 

2019

 

%

Defense markets:

 

 

 

 

 

Aerospace

$

101,828

 

 

$

78,787

 

 

29

%

Ground

22,657

 

 

20,758

 

 

9

%

Naval

165,693

 

 

131,088

 

 

26

%

Total Defense

$

290,178

 

 

$

230,633

 

 

26

%

 

 

 

 

 

 

Commercial markets:

 

 

 

 

 

Aerospace

$

100,680

 

 

$

103,221

 

 

(2

%)

Power Generation

84,348

 

 

96,480

 

 

(13

%)

General Industrial

126,025

 

 

147,980

 

 

(15

%)

Total Commercial

$

311,053

 

 

$

347,681

 

 

(11

%)

 

 

 

 

 

 

Total Curtiss-Wright

$

601,231

 

 

$

578,314

 

 

4

%

 

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 Earnings and Diluted EPS

These Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Earnings and Diluted EPS under GAAP excluding: (i) 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; (ii) one-time transition and IT security costs associated with the relocation of a business in the current year period; and (iii) 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

 

March 31,

 

2020 vs. 2019

 

Commercial/Industrial

 

Defense

 

Power

 

Total Curtiss-Wright

 

Sales

 

Operating
income

 

Sales

 

Operating
income

 

Sales

 

Operating
income

 

Sales

 

Operating
income

Organic

(2%)

 

(1%)

 

13%

 

38%

 

(2%)

 

(19%)

 

1%

 

1%

Acquisitions

1%

 

0%

 

11%

 

0%

 

0%

 

0%

 

3%

 

0%

Foreign Currency

(1%)

 

0%

 

0%

 

0%

 

0%

 

0%

 

0%

 

0%

Total

(2%)

 

(1%)

 

24%

 

38%

 

(2%)

 

(19%)

 

4%

 

1%

 

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: (i) a capital investment in the Power segment related to the new, state-of-the-art naval facility principally for DRG; (ii) voluntary contributions to the Company’s corporate defined benefit pension plan made in the first quarters of 2018 and 2020; and (iii) 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. Adjusted free cash flow conversion is defined as Adjusted free cash flow divided by Adjusted net earnings.

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NON-GAAP FINANCIAL DATA (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

 

2020

 

2019

 

 

 

 

Net cash provided by operating activities

$

(192,576)

 

 

$

(51,858)

 

Capital expenditures

(18,637)

 

 

(17,034)

 

Free cash flow

$

(211,213)

 

 

$

(68,892)

 

Voluntary pension contribution

150,000

 

 

 

Adjustment to capital expenditures (DRG facility investment)

7,677

 

 

5,123

 

Restructuring

665

 

 

 

Adjusted free cash flow

$

(52,871)

 

 

$

(63,769)

 

Adjusted free cash flow conversion

(92

%)

 

(115

%)

 

Adjusted Debt and Adjusted Net Debt

The Corporation discloses Adjusted Debt and Adjusted Net Debt as it believes that these measures provide useful information regarding contractual amounts of borrowed capital to be repaid, net of cash available to repay such obligations. Adjusted Debt is defined as consolidated short-term and long-term debt (reported in accordance with GAAP), adjusted to exclude unamortized interest rate swap proceeds and debt issuance costs. Adjusted Net Debt is defined as Adjusted Debt less cash and cash equivalents.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

Adjusted Debt and Adjusted Net Debt

(Unaudited, in thousands)

 

 

 

 

 

As of

 

 

March 31, 2020

 

 

 

Current portion of long-term and short-term debt

 

$

427

 

Long-term debt

 

906,220

 

Total debt

 

$

906,647

 

Less: Unamortized interest rate swap proceeds

 

10,784

 

Less: debt issuance costs, net

 

(564)

 

Adjusted Debt

 

$

896,427

 

Less: Cash and cash equivalents

 

157,757

 

Adjusted Net Debt

 

$

738,670

 

 

EBITDA

The Corporation discloses EBITDA as it believes that this measure is useful in evaluating the Corporation’s operating performance. EBITDA is defined as net earnings before interest, income taxes, depreciation, and amortization for the trailing twelve month period ended March 31, 2020.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

EBITDA

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

For the trailing 12 months
ended 3/31/2020

Net Earnings

 

$

303,750

Add back: Interest

 

31,565

Add back: Income Taxes

 

92,949

Add back: Depreciation and Amortization

 

104,761

EBITDA

 

$

533,025

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

(Unaudited, in thousands, except ratios)

 

 

Adjusted Net Debt-to-Net Capitalization

As of
March 31, 2020

Adjusted Net Debt

$

738,670

 

Total Stockholders' equity

1,669,837

 

Net Capitalization

2,408,507

 

 

30.7

%

 

 

Adjusted Debt-to-EBITDA

As of
March 31, 2020

Adjusted Debt

$

896,427

 

EBITDA

533,025

 

 

1.7

 

 

 

Adjusted Net Debt-to-EBITDA

As of
March 31, 2020

Adjusted Net Debt

$

738,670

 

EBITDA

533,025

 

 

1.4

 

 

 

Interest Coverage Ratio

As of
March 31, 2020

EBITDA

$

533,025

 

Interest Expense

31,565

 

 

16.9

 

 

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, future cash flow from operations, and potential impacts of the COVID-19 pandemic are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act") and 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; the impact of a global pandemic or national epidemic, 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, 2019, and subsequent reports filed with the Securities and Exchange Commission.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20200506006100/en/

Contacts

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