Curtiss-Wright(CW) - 2021 Q1 - Quarterly Report

PART I Financial Statements (Unaudited) Unaudited Q1 2021 financial statements report increased net earnings and operating income, with total assets of $3.98 billion and significantly improved operating cash flow Financial Metric | Financial Metric | Q1 2021 (In thousands) | Q1 2020 (In thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Sales | $597,059 | $601,231 | -0.7% | | Gross Profit | $209,757 | $200,579 | +4.6% | | Operating Income | $85,066 | $72,446 | +17.4% | | Net Earnings | $59,469 | $51,761 | +14.9% | | Diluted EPS | $1.45 | $1.21 | +19.8% | Balance Sheet Item | Balance Sheet Item | March 31, 2021 (In thousands) | December 31, 2020 (In thousands) | | :--- | :--- | :--- | | Total Current Assets | $1,286,739 | $1,300,824 | | Total Assets | $3,981,050 | $4,021,334 | | Total Current Liabilities | $734,802 | $810,377 | | Total Liabilities | $2,142,886 | $2,233,760 | | Total Stockholders' Equity | $1,838,164 | $1,787,574 | Cash Flow Activity | Cash Flow Activity | Q1 2021 (In thousands) | Q1 2020 (In thousands) | | :--- | :--- | :--- | | Net cash used for operating activities | $(26,603) | $(192,576) | | Net cash used for investing activities | $(12,855) | $(67,674) | | Net cash (used for) provided by financing activities | $(7,107) | $39,268 | | Net decrease in cash | $(51,179) | $(233,276) | - Effective January 1, 2021, the Corporation reorganized its reportable segments into three new categories: Aerospace & Industrial, Defense Electronics, and Naval & Power to better align product sales with its end market structure; previously reported amounts were recast, but this did not impact consolidated financial statements[31] - Total backlog as of March 31, 2021, was approximately $2.1 billion, with the company expecting to recognize about 88% of this backlog as net sales over the next 36 months[37] Management's Discussion and Analysis (MD&A) MD&A details Q1 2021 performance, showing a 1% sales decrease to $597 million, a 17% operating income rise to $85 million, and improved operating margin and liquidity Results of Operations Q1 2021 results show total sales decreased 1% to $597 million, operating income increased 17% to $85 million, and operating margin expanded to 14.2% Performance Component | Performance Component | Sales Change | Operating Income Change | | :--- | :--- | :--- | | Organic | (8%) | 15% | | Acquisitions | 6% | 5% | | Foreign currency | 1% | (3%) | | Total | (1%) | 17% | - Operating income growth was driven by favorable overhead absorption and mix in Defense Electronics, and restructuring savings and favorable mix in Naval & Power, partially offset by unfavorable absorption on lower sales in the Aerospace & Industrial segment[114] - Interest expense increased by 33% to $10 million, primarily due to the issuance of $300 million in Senior Notes in August 2020[115] Results by Business Segment Q1 2021 segment performance shows Aerospace & Industrial sales down 20%, Defense Electronics sales up 30%, and Naval & Power sales remaining flat Segment Performance | Segment | Q1 2021 Sales (Millions) | YoY Change | Q1 2021 Op. Income (Millions) | YoY Change | Q1 2021 Op. Margin | | :--- | :--- | :--- | :--- | :--- | :--- | | Aerospace & Industrial | $180.3 | (20%) | $19.0 | (41%) | 10.6% | | Defense Electronics | $181.2 | 30% | $36.6 | 52% | 20.2% | | Naval & Power | $235.5 | 0% | $38.1 | 35% | 16.2% | - The Aerospace & Industrial segment's $46 million sales decline was primarily due to the ongoing impact of the COVID-19 pandemic on the commercial aerospace market, leading to lower sales of actuation, sensors, and surface treatment services[123] - The Defense Electronics segment's $42 million sales growth was driven by the incremental impact of the PacStar acquisition and higher demand for embedded computing equipment on helicopter and UAV platforms[130] - The Naval & Power segment's flat sales resulted from an $18 million increase in naval defense (Virginia-class submarine and CVN-81 aircraft carrier programs) being offset by a $17 million decrease in the power & process market[134] Liquidity and Capital Resources Liquidity remains strong, with net cash used in operating activities significantly decreasing to $26.6 million due to a prior-year pension contribution, and $480 million available under its credit facility - Net cash used for operating activities improved by $166 million from the prior year, primarily because Q1 2020 included a $150 million voluntary pension contribution[147] - Net cash used in investing activities decreased by $55 million, mainly due to a $60 million acquisition in the prior-year period and lower capital expenditures in the current period ($9 million vs. $19 million)[148] - The company repurchased approximately 0.1 million shares for $12 million in Q1 2021, a significant reduction from the 1.1 million shares repurchased for $112 million in Q1 2020[151] - As of March 31, 2021, the company had no outstanding borrowings under its credit facility, with $480 million of unused credit available[150] Quantitative and Qualitative Disclosures about Market Risk No material changes in market risk were reported during Q1 2021, with detailed disclosures referenced in the 2020 Annual Report on Form 10-K - The company reported no material changes in its market risk during the three months ended March 31, 2021[161] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures are effective[162] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[163] PART II – OTHER INFORMATION Legal Proceedings The company faces various legal proceedings, including asbestos-related lawsuits, but anticipates no material adverse effect due to adequate insurance and indemnification - The company is named in asbestos-related lawsuits but has not paid any material sums and believes it is unlikely to face material liability due to minimal asbestos use in its past operations and adequate insurance coverage[167][88] Risk Factors No material changes to the company's risk factors were reported during Q1 2021, with detailed discussion available in the 2020 Annual Report on Form 10-K - There have been no material changes in the company's Risk Factors during the three months ended March 31, 2021[168] Share Repurchases and Use of Proceeds Q1 2021 saw the company repurchase 102,135 shares for $11.8 million at $115.53 per share, with $188.3 million remaining authorized for future repurchases Share Repurchase Activity | Period | Total Shares Purchased | Average Price Paid per Share | Remaining Authorization (in millions) | | :--- | :--- | :--- | :--- | | Jan 2021 | 29,471 | $115.36 | $196.7 | | Feb 2021 | 33,590 | $113.13 | $192.9 | | Mar 2021 | 39,074 | $117.71 | $188.3 | | Q1 Total | 102,135 | $115.53 | $188.3 | - In October 2020, the Board of Directors authorized an additional $200 million for share repurchases, with plans to repurchase at least $50 million of its common stock during the 2021 calendar year[170] Other Information (Items 3, 4, 5, 6) This section confirms no defaults on senior securities, notes mine safety disclosures are not applicable, no material changes to director nomination procedures, and lists the report's exhibits - The company reported no defaults upon senior securities for the period[171] - The report lists required certifications from the CEO and CFO, as well as XBRL data files, as exhibits[175][176][178]