Curtiss-Wright Reports 2008 Second Quarter and Six Month Financial

Tag : Oil Control Valves

"We are pleased to report strong sales and operating income growthfor the second quarter of 2008," commented Martin R. Benante,Chairman and CEO of Curtiss-Wright Corporation. "Overall ourperformance was driven by strong organic growth in sales, operatingincome and operating margin. Our operating margin was partiallyoffset by lower margins from our 2007 acquisitions, as previouslyindicated. Our strong operating income performance in the secondquarter was led by our Flow Control segment, which experienced a112% increase in operating income, the majority of which wasorganic, as compared to the prior year. From a market perspective,sales in our commercial markets grew 36%, led by strong salesgrowth of 48% in our commercial power market and 38% in the oil andgas market. Our record backlog is a clear indication of thecontinuing success of our products and programs and provides greatmomentum for the rest of this year and heading into 2009. We havemade significant progress with our facility expansion and contractto build reactor coolant pumps for the AP1000 reactor design. Thiseffort solidifies our leadership in this advanced nuclear plantdesign, and we remain optimistic about new nuclear power plantconstruction domestically and internationally. Finally, we continueto invest in a number of military and commercial developmentprograms anticipating these investments will provide future growthopportunities and improved profitability."
Sales growth in the second quarter of 2008 was generated by doubledigit organic growth in all of our segments and contributions fromour 2007 acquisitions, which provided $52.7 million in incrementalsales in the second quarter of 2008. The base businesses generatedan organic sales growth of 11%, with our Flow Control, MetalTreatment, and Motion Control segments generating an increase of11%, 11%, and 10%, respectively, as compared to the prior yearperiod.
In our base businesses, higher sales from our Flow Control segmentto the commercial power and oil and gas markets, higher sales fromour Metal Treatment segment to the commercial aerospace, generalindustrial and commercial power markets, and higher sales from ourMotion Control segment to the aerospace and ground defense markets,all contributed to the second quarter organic sales growth. Inaddition, foreign currency translation positively impacted sales inthe second quarter of 2008 by $4.4 million as compared to the prioryear period.
Operating income in the second quarter of 2008 increased 29% overthe comparable prior year period. Organic operating income growthwas 25% for the second quarter of 2008 as compared to the prioryear period. Our 2007 acquisitions contributed $2.2 million(approximately 4% operating margin) of incremental operating incomein the second quarter of 2008. The organic operating income growthin the second quarter was led by our Flow Control segment, whichexperienced strong organic growth of 95% over the prior yearperiod. The prior year quarter included non-recurring cost overrunson a development contract for the U.S. Navy and businessconsolidation costs. Organic operating income for our MetalTreatment and Motion Control segments increased 14% and 2%,respectively, mainly due to higher volume.
Our consolidated operating margin is 50 basis points higher in thesecond quarter of 2008 as compared to the prior year period. Thehigher operating margin was mainly driven by improvement at ourFlow Control segment. Intangible asset amortization increased $3.1million in the second quarter 2008 as compared to the prior year asa result of our 2007 acquisitions, which were primarily in the FlowControl segment. In the second quarter of 2008, our base businessesgenerated operating margin of approximately 12% while our 2007acquisitions were approximately 4%. Non-segment operating expenseincreased over the prior year period due to higher pension andlegal costs. Foreign currency translation unfavorably impactedoperating income by $0.8 million in the second quarter of 2008 andoperating margin by 30 basis points as compared to the prior yearperiod, primarily in our Motion Control segment.
Net earnings for the second quarter of 2008 increased 27% from thecomparable prior year period. The improvement was achieved bystrong segment operating income, partially offset by higherinterest and pension expense. The higher interest expense for thesecond quarter of 2008 was mainly due to higher average debt levelsresulting from our 2007 acquisitions, partially offset by lowerinterest rates, as compared to the prior year period. Our effectivetax rate for the second quarter of 2008 was 36.6% versus 35.5% forthe second quarter of 2007.
Cash Flow
Our free cash flow, defined as cash flow from operations lesscapital expenditures, was $54.7 million for the second quarter of2008 as compared to $48.9 million in the prior year period. Netcash provided by operating activities in the second quarter was$77.7 million, an increase of $16.9 million as compared to theprior year period, due to higher net earnings and overallimprovements in working capital, specifically accounts receivableand inventory. Capital expenditures were $23.1 million in thesecond quarter of 2008 versus $11.9 million in the comparable prioryear period. The majority of this increase is due to the facilityexpansion at our Cheswick, PA. location for our AP1000 nuclearpower program.