Tuesday, February 16, 2010

Curtiss Wright Cash Flow Alerts

Curtiss Wright (CW) reported Q4 and year end numbers. For the year Net Sales decreased, Operating income decreased, New orders were down (with a good excuse), net earnings were down but cash flow was up. Hmm. Where is the value here? If you look at their guidance free cash flow appears to be headed down to $75 to $85 million.

Conspicuous by its silence is the MD&A discussion about their balance sheet. Short term indebtedness rose from some $3 million last year to some $81 million this year. Long term debt is down some $129 million. So basically the company cannot cash flow cover it’s own indebtedness. The guidance cash flow is equal to the short term debt. Not an encouraging metric. They make a point in their own notes to say free cash flow is before and debt repayments.

Healthy vibrant companies cannot continue on this trajectory. Management is whistling through the grave yard.