Curtiss-Wright Corp (CW) 2009 Q4 法說會逐字稿

Welcome to the Curtiss-Wright fourth quarter 2009 financial results conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Chairman and Chief Executive Officer, Mr. Martin Benante, please go ahead, sir.

Thank you. And good morning, everyone. Welcome to our 2009 year-end earnings conference call. Joining me on the call today is Mr. Glenn Tynan, our CFO who will begin our forum today.

Thank you, Marty. Our call today is being webcast and the press release as well as the replay of this call can be found on the Company website. Before we begin, please note today's discussion will include certain projections and statements that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. Forward-looking statements always involve risks and uncertainties and we detail those risks and uncertainties in our public filings with the SEC.

For our agenda today I will provide an overview of Curtiss-Wright's fourth quarter 2009 operating performance and then Marty will discuss our strategic markets and 2010 outlook. And after the formal remarks Marty will open the call for questions. Curtiss-Wright has consolidated sales of $503 million during the fourth quarter of 2009, a decrease of 1% from the fourth quarter of 2008. Our consolidated sales include $7 million of incremental revenues from our 2009 acquisition and favorable foreign currency translation of $6 million. We detail the impact these items have on our segments in the press release so for the purposes of today's discussion all amounts will be organic before the impact of acquisition, divestitures, and foreign currency translation.

Consolidated organic sales declined 3% in the fourth quarter due to lower demand in our Flow Control and Metal Treatment segments which declined 7% and 17% respectively. These declines were partially offset by solid organic growth in our Motion Control segment of 9%. In our Flow Control segment, organic sales of $265 million reflects continued weakness in our oil and gas and general industrial markets. As well as lower volumes for our AP1000 program resulting from timing of work completions and the suspension of one of our domestic orders. This is offset somewhat by strong organic growth in our defense market of 9% mainly due to increased production on the Ford class aircraft carriers including EMALs. In our Motion Control segment organic sales of $174 million reflects strong growth in aerospace defense programs such as the Global Hawk, B22 and Black Hawk helicopters. Organic sales were also higher in our commercial aerospace market due to the Boeing strike which negatively impacted the fourth quarter of 2008.

Organic sales in our Metal Treatment segment of $51 million equate to a 17% decline due to weak demand across all commercial markets. In particular business jets, general industrial, and oil and gas. It is notable that the declines in general industrial market have lessened and we were optimistic that this is indicative of this market stabilizing in 2010. Our consolidated organic operating income was $60 million in the fourth quarter an increase of 3% as compared to the prior year period. In our Flow Control segment, organic operating income decreased 17% from the prior year. Organic operating margin declined 150 basis points mainly due to unabsorbed overhead caused by significantly lower volumes in our oil and gas market extended delays on AP1000 production and cost overruns on the DDG 1000 programs. These declines were partially mitigated by cost reductions generated through our restructuring initiatives implemented earlier in the year. In our Motion Control segment organic operating income increased 101% over the prior year. Organic operating margin improved to nearly 19% and an increase of 860 basis points from the fourth quarter of 2008.

In the fourth quarter of 2008, we had $7 million of charges associated with the Eclipse bankruptcy and a contract cancellation. In 2009, we were benefiting from higher sales volumes, higher margins from early termination claims, and cost savings resulting from our business restructuring initiatives implemented earlier in the year. Metal Treatment organic operating income declined $6 million in the fourth quarter of 2009 as compared to the prior year primarily due to lower sales volume across all of its primary commercial markets. Our segment operating margin increased 90 basis points in the fourth quarter excluding the impact of foreign currency which had a negative impact of 50 basis points. Non-segment costs increased by $1 million as compared to the prior year quarter mainly due to higher pension and legal costs. Net earnings of $35 million or $0.76 per diluted share in the fourth quarter increased 6% from the prior year due to a lower effective rate and decrease in interest expense of $2 million.

New orders received in 2009 were $1.7 billion. A decline of 22% year-over-year due primarily to the milestone AP1000 orders we received in 2008. We ended the year with a solid backlog of $1.6 billion which equates to a book-to-bill ratio of nearly one, 2009 we generated free cash flow, defined as cash flow from operations less capital expenditures of $121 million far exceeding expectations. Our cash flow from operations increased $17 million from the prior year due to improvements of working capital as well as higher advanced payments. We also had lower capital expenditures of approximately $28 million due mainly to the completion of our new manufacturing facility in Cheswick, Pennsylvania. Which a number of you were able to visit earlier this year. In 2010, we were expecting to generate free cash flow of between $75 million and $85 million. Our balance sheet remains strong with $65 million in cash, working capital of $313 million, and a total debt outstanding of $465 million for a debt-to-book capitalization of 31%.

Now return to our pension plan performance in 2009. And after steep declines in 2008, pension plan assets returned 28% in 2009, and improved the plan's funded status by $6 million. Our 2010 expense for the Curtiss-Wright domestic plan is expected to be $19 million. Essentially flat with 2009. In addition, the CW-EMD pension plan is now 82% funded on a financial accounting basis up from 78% at the end of 2008. While we are not required to make a cash contribution to the pension plan in 2010, we do expect to make an estimated $28 million cash contribution in 2011.

I will now turn the call over to Marty to discuss our strategic market performance and our full year guidance.

Thank you, Glenn. We have often cited the importance of our diversified business model to our long-term success. That diversification combined with our focus on innovation and high performance engineering adds stability to our results and supports growth through varying economic conditions; this is again true in 2009. While many actions centered on cost cutting and cash generation, our strong backlog enables us to successfully weather the downturn while maintaining our focus on long-term growth. As the recovery continues in 2010, our portfolio of highly engineered products is well positioned to benefit from increasing demands and strong capitalization enable us to actively pursue our strategic growth plans. I am extremely proud to report that, amid the worst economic recession, since the great depression, 80 years ago we are able to maintain our sales relatively level with the prior year. This is not to say we endured difficulty. Sagging demon for energy, transportation, industrial goods led to significant contractions in our commercial market. While hardships in the general economy provided significant head winds. They were essentially offset by the buildup of our commercial nuclear business and a momentum of defense spending that has led subject to short-term economic impact.

In defense, our 11% organic growth was fueled by increased demand across all branches of the military. In particular, we experienced 14% organic growth and Naval defense that was driven by our strong mostly sole source technologies which are the heart of the Navy's expanding fleet of aircraft carriers, submarines, and destroyers. The current DOD budget proposal and quadrennial defense review supports the long-term stability of Navy's nuclear ship building programs. Maintaining the ramp up and submarine procurement for one to two per year in the upcoming fiscal year and holding the aircraft procurement to a five year cycle. This ensures a fleet of 10 or 11 nuclear powered carriers for their foreseeable future. The budget also requested $670 million for continuation of the development of the Ohio class submarine replacement program on which Curtiss-Wright hopes to secure a significant content position. Beyond the Navy's nuclear program, we continue to expand on non-nuclear technologies with milestone completions on the EMALS and AAG program, the DDG 1000 program as significant production increases for our helicopter marine landing systems for Italy, Japan, and United States Navy and Coast Guard. In 2010 we expect moderate growth of 2% in Naval defense. Including the impact of the one year extension on procurement on CVN-79 program from its original date.

Aerospace defense, 14% organic growth was result of our legacy flight actuation equipment on the F-22, F-35, V-22 programs. As well as our advanced electronic solutions which guide the Global Hawk and support a variety array of current and future programs with next generation and better computing technologies. Now the F-22 enters its final year of production, we will offset declining sales on this program with higher production on the Global Hawk as well as higher electronic content across the board.

In 2010, we expect our solid position of aerospace defense platforms and to the growing demand for our imbedded commuting technologies to generate approximately 7% growth. While demand for the ground programs cooled slightly after substantial growth in prior years, our 6% organic growth is still in excess of the overall defense budget. In 2010, we expect significant declines due to the timing of Bradley orders which should begin to reload in 2011. In addition, the cancellation of the FCS program will also contribute to the decline in 2010; however, we are confident the merits of our technology will prove essential to the revamped programs including the ground combat vehicle and armed robotics vehicle. In the near-term these programs decline pose stiff head winds which we are conservatively estimating at 35% decline in ground defense for 2010.

In our commercial markets we experienced an overall 10% organic decline stemming from the ongoing global recession. Most significantly our automotive demand was cut in half marring the North American automotive production decline over the past two years. Netted with our broader heavy industrial portfolio the general industrial market declined organically 27% in 2009. We are optimistic that we have reached a [trough] in the demand. But we conservatively estimated 6% increase in general industrial sales in 2010 which mostly occurred in the second half of the year.

Oil and gas contracted 18% organically in 2009, as a result of softening demand for energy globally and the correlated narrowing of heavy crude discounts. Less severe was the 10% organic decline in commercial aerospace predominantly related to inventory destocking and a collapse of the business jet market. In both markets we are cautiously optimistic that an economic recovery will gain momentum in the second half of the year and we will therefore conservatively estimate lows single-digit growth in 2010.

Finally, a commercial nuclear power market generated robust gains of 14% organically from strong production of both operating reactors and new construction internationally. We continue to view our unique leverage in this market as valuable differentiator that remains in the early stages of long, multi-year bill cycle; however, the timing of orders can be vary significantly. In particular, the record high outages in 2009 are not expected to reoccur in 2010. In addition, we were steadily progressing on our new construction orders plus postponement of one customer and a delay of new orders have caused us to forecast a 5% decline in this market for 2010.

Deposit of contract, the President has become more supportive of the nuclear industry. Requesting a larger loan guarantee of $54 billion, three times the current amount approved. While regulatory complexity and enormous funding requirements of this project, mandate a deliberate pace, we feel it continues to generate positive momentum globally. In the era of soft demand and program destruction, we continue to make investments throughout the Company including completing the building of our facility in Cheswick, Pennsylvania, to meet the expansion of the AP1000 and Navy development programs, as well as the consolidation of our control business from nine locations to one state of the art manufacturing facility.

In addition, we invested nearly $55 million in research and development for new product innovations across our core markets of defense, energy, and general industrial. And we continue to stay active yet disciplined in the acquisition market spending approximately $65 million for five companies in 2009. Our solid balance sheet and cash flow are primed for more significant opportunities. I am confident the M&A market will continue to be an attractive growth engine for us. Our efforts are best demonstrated by our $1.7 billion in new orders which solidified backlog at $1.6 billion as provided a fundamental foundation for significant momentum as demand rebuilds.

Before we move on to 2010, I would like to put 2009 in perspective. It was certainly one of the most challenging years in most recent history with unprecedented economic and market turmoil. In just two of our businesses, Metal Treatment and gas and oil, we lost $0.75 in earnings per share as compared to 2008. As bad as that has been, the good news is we reacted quickly and recovered over $0.50 of that drop through operational improvement, cost reductions, and business restructuring initiatives. These efforts helped us maintain our profitability while putting us in an excellent position to deliver consistent profitability growth as the economy continues to improve.

To conclude our remarks today, I would like to view our guidance for the full year 2010. We expect revenues in the range of $1.8 billion to $1.85 billion, which is essentially flat from the prior year. Operating income in the range of $176 million to $183 million equates to 4% to 8% growth. And fully diluted earnings per share in the range of $2.15 to $2.25 which equates to 3% and [8%] growth in 2010. Including higher interest expense and share count. This guidance includes $0.08 of expected head winds from foreign currency translation most of which occurs in the first quarter. And $0.05 for additional cost related to the AP1000 program. While we are cautiously optimistic of an economic recovery in 2010, we do not see any early accelerant. Therefore we expect the first quarter to be our lightest quarter followed by subsequently improved -- sequentially improvement throughout the year with the fourth quarter being our strongest. We expect to generate approximately 40% of our annual earnings per share in the first half of the year with the first quarter EPS in line with the first quarter of 2009.

And at this time I would like to open up the conference for questions.

(Operator Instructions) We will take our first question from Ken Herbert with Wedbush.

Just want to see if we can dig deeper in the respective segments and your guidance. Seems like the impact from what you are talked about on the nuclear side of the commercial power side a bit of a surprise in terms of the -- with the lumpiness of the orders and pessimism here. Can you talk little bit about how you see this flowing through and some of the offsets within that and then obviously oil and gas and your outlook there within the flow and Motion Control segments in particular and anything specific you can say about what we might be looking at from an operating margin standpoint in those businesses.

Is that all in one sentence?

One sentence, believe it or not.

Okay. Let's start with the first question. Nuclear. As far as nuclear is concerned, we have a decline of about 5% from last year. As far as the Nuclear business is concerned we have three reactors we are building for China and that is starting to actually -- the revenues are starting to come down a little bit. While our commercial or our United States reactors are starting to build up. It but there is only two sets of reactors there. We are getting some reduction in new build. Also last year we had the most amount of outages ever record in the Nuclear industry. And this year we are down $6 million a sale in that segment. The good news is that even though we are down 5%, our profit is up. So because of our cost cutting efforts. Even though we have some less sales, we are having increased profitability. The next question was on the oil and gas?

Yes, oil and gas.

Okay. Right now oil and gas is up 2% year to year but the profit is up substantially. One of the reasons why is that demand for our delta valve is very strong right now. But we are having some weaknesses and some of the other products that we make for gas and oil which is decrease the demand for valves. But, again, profit is up quite a bit in the segment, again cost reductions.

Ken, to give you guidance break down for margins, specifically for Flow Control estimate being 10%, operating margin that is up from 9.4% this year so 60% basis point. Consider we had the Nu-Torque gain in the 2009. If you take that out to the 80 basis point improvement in margins in Flow Control.

Okay. And if I could one final question, are you seeing anything at all within the general industrial is it safe to say that has bottomed and are you starting to see any pick up or anything that you can say here in the first, obviously six weeks or so give or take in 2010?

Yes, Ken I think we have seen the bottom of the trough of the demand. We are seeing slight improvements but very little.

Mostly improvement there. We are expecting in the second half of the year, really.

Right.

Okay. Excellent. Thank you.

All right, Ken.

Take our next question from Steve Levenson from Stifel Nicolaus.

Thanks, good morning, everybody.

Hi, Steve.

In relation to what you said about the work you are getting on DDG 1000, now it sounds like they are getting serious about canceling the CGX. Could that help you or where you were involved there that it might take you a bit.

No, we are not CGX was the destroyer program, correct?

The cruiser program.

We didn't really have -- we were expecting a good content on that but didn't receive orders. Canceling which is something that they did last year. It doesn't matter to us.

Great. On the reactor coolant pump site and the other components, some of the metals prices have been rising. Do you have pass through on those?

We have escalators in our contracts.

So no pain from that?

No.

And I know there is an order out there floating around. Could you update us a little bit?

Still floating.

A lot of floating. It's been on the float, unfortunately the one customer that we expected to have an order from didn't get their rate increase and right now TBA is looking to convert their [build-a-pump] a plant or restart their [build-a-pump] plant. So a lot of the United States of opportunities are being pushed (inaudible) but there are significant opportunities in India. We still haven't reached a total nuclear accord with them. But they obviously have a very, very active nuclear program which we expect to be part of, Korea not only do they have a plant in Korea that are going to be constructed, but they also have plans to capture 20% of the world market which we have very nice input on. Europe is also looking for additional nuclear capabilities.

Great. Thanks very much.

Okay.

We will take the next question from Chris Donaghey from SunTrust Robinson Humphrey.

Hi, Chris.

Good morning. Just to follow up on the how things are progressing with the AP1000 work in general. So we have 18 pumps under contract for China, 24 pumps from Westinghouse for domestic reactors. Can you walk us through what you are kind of assuming for an annual production rate for that? I thought the last time I think we checked on it was about 12 purposes a year. Are you reducing that until you get better visibility into the domestic market or has Westinghouse said slow down and wait until we have visibility from the customer side before.

It's not a slow down. What it is that the third reactor for the United States is put on hold. And when you look at the buildup eventually you will start coming over the peek of a buildup from the China project. We were still increasing revenues on the commercial side. It's just not as great as the China reduction. Nobody has put anything to slow down by any stretch of the imagination.

Okay.

Just the way it works its way out.

Okay, just to clarify then you said when you said the third reactor, do you mean the third plant, or the third reactor.

The third plant.

That's fine then. Thanks. Then Glen, can you just walk us through the segment revenue outlook and margin outlook?

Sure. On the revenue side in Flow Control, we are looking between $990 million and a $1.20 billion. Motion Control between $600 million and $620 million. And Metal Treatment around $210 million in revenues. From the margin side I think I said before Flow Control, we are looking at around 10%, again, 80% basis point improvement over 2009. Motion Control we are looking at about 13%, which at first flush will appear to be similar to this year. They have about almost $6 million of foreign currency head wind in 2009. So without that head wind it's a 90 basis point improvement on the margin line for Motion Control. And Metal Treatment we are storm system to be between 10% and 10.5% margin.

Great, thanks.

And our next question comes from Myles Walton with Oppenheimer & Company.

Good morning. So really cash performance in the quarter and kind of hoping to look at the 2010 outlook and give us for cash and give us some walk from the 2009 performance, the 2010 performance.

One of the big besides working capital models in . One of the big drivers of our performance were advanced payments which we were able to accelerate. Into 2009 and took a little work on negotiation in terms of whatnot. That was one of the big items. Besides receivables and inventory coming down. As you look to 2010, I mean it's hard to maintain 100 plus cash conversion year after year, but you will see one of the things we have in our CapEx for 2010 is about $25 million, 20, $25 million for additional consolidation and restructuring we have planned. If you took that and without going into the individual plan if you took that out we will be around 100% conversion and our CapEx would be in the area of our maintenance capital expenditures.

So your total CapEx plan is at 100.

About 95 this year. 95 this year. Appreciation amortization estimate is 80. CapEx is 95. And our cash flow from operations will be between 170 and 180. Again, the bigger difference there is we are continuing to invest in plant consolidation and business restructuring and that capital is this there this year.

That makes sense. And I might have missed it. What is your outlook for oil and gas market for 2010?

2% increase in sales, rather large increase in profitability.

Have you started to see pick up in orders in that segment yet? Or is that --

Definitely. In fact, the fourth quarter of last year received $31 million in new orders for our DeltaValve product and that's more than the last five quarters combined. And we expect our first quarter this year to be somewhere in the area of 40. And continue on. And most of the demand is actually outside the United States.

Okay. What is the backlog by segment?

Backlog, Motion Control, 440. Flow Control, 1.2 billion, roughly.

Okay. I see and the tax rate, is that assuming the R&D tax credit or --

The tax rate for 2010 believe it or not excludes the R&D tax credit because right now it expired. So if that goes back into play it will be lower. What's driving the lower rate this year is the increase in manufacturing exemption from 6% to 9% and that's the big driver for our rate. If the tax credit gets extended we could have opportunity to lower our rate further when that happens.

Okay. Is that half a point.

Yes, it might be a half a point that is a good estimate.

A couple others. The ramps to two subs a year with respect to hitting you on your revenue and performance, obviously made move on advance procurement, but, how far along are you within your business within a run rate of two such per year. Halfway there or less than that?

Less than that. As far as the build is concerned?

Yes, exactly.

Up about 14% this year in submarine.

Then as you look to next year and see the 2% decline you are actually seeing an undersea growth offset by significant declines by surface.

We have some declines in surface definitely. Is that's why we have a 2% growth this year. You have to also remember it was a one year extension on the aircraft carrier. Everybody expect that we would have a bigger trough this year and actually we have an increase this year because of the AAG coming in and the [IMA] coming in and the other new programs that we have. We are able to offset that one year stretch.

And I guess the last one for me, the cast , the balance sheet is really good position. Cash flow coming accordingly. Marty, what is your outlook for where your mind is on it, acquisitions, size and relative valuations and markets are targeting.

Well, we are always inquisitive. Obviously we like better continue Embedded Computing Sensors and Nuclear and some general industrial and as far as the size is concerned it's really not that determined by me but, what's out there. We don't expect to make any large plays if that takes off the top end. We have been growing through buying small to relatively mid-sized companies and that's how we continue to see ourselves growing.

Great. Thanks again.

Take the next question from Eric Hugel from Stephens.

Good morning, guys.

Good being back this morning.

Couple of questions on the AP1000 here. I guess first with regards to the suspension of I guess the Florida order, I know you have a large up front payment. I'm assuming that anything that wasn't covered under that upfront payment Westinghouse would be paying you for that?

Yes.

Wanted to make sure of that. Second with regards to China you have that technology transfer contract to help the Chinese build. Can you give us an update as who how things are going there. Because I know the Chinese are talking about three more AP1000 plant starts this year and I was just trying to figure out if it's decided sort of on the Chinese side if they are far enough along in their program to build those domestically?

No, they expect that we would have some portion of that work. So they expect that we will be a part of their program for the foreseeable future. Even though the technology will be transferred, I think we will still participate in those -- not only in the reactant cooling pumps but many other products that will go into the AP1000.

Sure. On the Korean, you given -- I remember historically you given out the charts in your presentation where you talk about your potential content of value for -- and talked about the AP1000 and talked about a number of other plants. You don't talk about the Korean plants. Korea won a large order from the UAE to build three reactors or something like that. Can you give us a ballpark of your content sort of what you are doing on those plants?

Unfortunately I don't have that with me. We have give than out in the past in one of the six different main reactor builders, Korea was one of them. I don't want to say what the number is because I forget it. It's not -- it's a good number.

And would you have that sort of level of content on those UAE orders or are those a different type of reactor?

They are the Korean National Standard. That would be a similar reactor to what we have provided themes in great.

And my last question on Metal Treatment. You're sales when up nicely sequentially from third quarter but margin was flat to down a little bit. Very -- this business should have very high incrementals. What is going on?

We are getting increase sales and we are showing increased margins throughout 2010, except for the third quarter where we have seasonal adjustments there. We are being conservative on the Metal Treatment side and rightfully so.

I'm talking about the fourth quarter. Your sales were up nicely I guess up a $1.5 million to $2 million versus the third quarter yet the margins were flat to down a little bit. Anything that are happening in restructuring charges in there.

Mixed the way it comes out.

Mixed. Okay, thanks a lot, guys.

Take the next question from Michael Ciarmoli with Boenning & Scattergood.

On the AP1000, how has your revenue assumptions changed? I know back on the Investor Day you laid out the road map looking for I guess it was 100 million in revenues this year. Getting up to maybe 140 next year. What should we be thinking now in terms of the AP100 revenues.

Hold on one second, Mike. Right now our AP1000 revenues for 2010 is approximately $80 million for new builds. But we also have the other programs, new programs outside of the -- or the AP1000. I'm sorry, the reactor coolant pumps. That's just the reactor coolant pumps.

And then it's fair to say kind of outlook for 2011 through 2013 is coming a little bit as well?

Yes.

Okay. And then just if I can, back on the last question that was asked on the Metal Treatment margins. And what drives that operating margin increase in 2010? Are you looking for specific volumes or will we see more of an impact from cost cutting and further kind of facility consolidations. Or are you relying on.

We expect an increase in demand. Has to be an increase of as our profitability will go up.

Is it a specific segment that you are looking for or you are assuming --.

Looking for some increase in automotive and also some general industrial.

Okay.

And just about all of our customers indicated they expect to see improvements in 2010, more into the second half of the year.

Okay. That's fair. And then if I can to shift gears on the ground defense, obviously you are looking for pretty good contraction year-over-year. What is given your guys the confidence there will be an uptick around the Bradley programs. SCX is still undecided or undetermined how those platforms evolve. Is there anything that you are hearing from the customers that gives you confidence you will see that uptick?

Yes. Because you are looking at a (inaudible) list Bradley to take the place of the M-113 divestiture. Also there are some additional electronic changes they are looking into Bradley that we had expected to be in 2010 that are getting pushed off to 2011. Actually when you think about one of the changes, the biggest changes we had this year is in ground defense where we actually are down $60 million from last year and most of that is associated with the Bradley, the FCS and the Stryker. And if most of that comes out of Embedding Computer. You look at 210 sales out of the Embedded Computing they are equal to last year. Think about we had a reduction in platforms that were ongoing platforms for us and good profitability and we are trading true on that and receiving $60 million associated with the Global Hawk and also a large increase in our communication electronics, telecommunications and intelligence. One of the biggest drivers is even though we have a large reduction in ground defense our sales in the Embedded Computing is even to last year and our profits only down a little bit, again, that's due to the cost cutting. That ground defense didn't go down like that we would have had one heck of a year.

One follow-up. Is there an opportunity Stryker vehicles do you have content on the survivability and enhancement kits that are looking to deploy to those platforms?

I'm not familiar with that one.

Okay.

We have so many things on so many different vehicles.

Fair enough. And last question, the back log, how much is shippable within the next 12 months in 2010?

Michael, I don't have that at my fingertips.

Fair enough. Thanks a lot.

Sorry about that.

As a reminder if you have a question press star-one at this time. We will take our next question from Jim Foung with Gabelli & Co.

Good morning.

Hi, how you doing?

I want to tighten up on the AP1000, Marty you are saying this year you are looking at $80 million that is just from the new bills on the AP1000?

That's for the rapid coolant pumps.

And then the sales outside the reacting cooling pumps, I guess that would be plant extensions, right?

Yes.

And how much can we expect from that area in this year?

That's about 250 million.

250 million from plant life extension sales this year?

Yes.

So the total would be -- you will book in the nuclear industry about 330 million of revenues this year.

That's correct.

And how is that compared to 2009? I wanted --

It's down by 5%.

In total?

In total, yes.

And all comes from the RCP, right? Pretty much?

No. Well, yes. About 10 there and another six or so in the plant life extension.

And then you had at one time when you laid this out that you were going achieve mid-teens margins around this time. Are you still looking at that from this entire sector?

Not really, no. Because what happens is with the suspension of each order you get more profitable. And because of the suspension of the third unit were in the United States, that's actually dragging our profitability down. But it's close to obtain.

So instead of mid-teens it's low double-digit then?

Yes.

And then who is the customer that is suspended the order?

Progress.

Excuse me.

Progress.

Okay. Right. Progress Energy, okay. Okay, great. And then just switching gears just on the F-22. You indicated this was going to be a final year for the F-22. So what kind of revenues are you from that -- expecting from that aircraft this year? And are you going to have any kind of carry over in 2011?

No. We are going to get about 16 million which is down from our 30 million last year.

Okay.

And then carry over there will probably be a spare as time goes on.

What is the normal run rate for spares.

We don't know. We haven't really received any spares because it's been mostly production.

Right. Okay. Okay, great. Thanks very much.

Thank you, Jimmie.

And we will take a follow-up question with Myles Walton with Oppenheimer & Company.

Two follow-ups. First one on the AP1000, Marty you said $0.05 in 2010. Was that as a result of development costs or the lower?

Yes, development costs, in the last call I indicated we had a failure during the development testing. And then it was very trivial to a bearing situation so there are some increased costs along the development. We currently have put a new bearing in and ran some time and we need to make additional changes so we expect cost not only out of development. Just testing and in general costs increase.

Okay. And when is the first unit delivery transfer to the customer?

Not until December of 2012. We are pretty much on track. You expect development situation that take place.

Okay. And then the $0.08 (inaudible) that anticipating where rates are today or further -- is there cushion in there from where we are today? Or where we are today?

It's actually a forecast where we are expecting to be. I think it's fairly fairly good based on today. We were fairly close when we set our budget guidance that it's fairly close to where we are at today.

Okay. And I believe it. One last one on Black Hawk, what is the content you have on Black Hawk?

About 125,000.

Okay. Great. Thanks a lot.

Thank you.

And we will take a follow-up question from Eric Hugel with Stephens.

Glenn, quick question on the corporate and other. That was a big number this quarter. I know it was only up a bit from last year but last year had a big loss in there from the FX contract from VMETRO. Can you talk about what hit there?

Yes. The big hit this year is the pension error that I think was in the third quarter. That was the big jump up to I think we are reporting 24 million, the bulk is pension. This year in our guidance, 2010 we expect to be around 22 million. And that's 19 million in pension expense and about 3 million in corporate expenses.

Great. And lastly, you talked about potential for additional restructuring. Can you talk about sort of how much and when, what the time frame is?

Sure. We have two restructuring. One is in Flow Control. That's going to be about $1.2 million hit in the first quarter. And regularly to be centralizing our manufacturing in Houston and we also have a $3 million consolidation effort in our sensor group will be consolidating our manufacturing into Arizona, Mexico and China. And the as far as the sensors are concerned it's about 800,000 in the first quarter, about a 1 million the second. Then getting somewhat slowed down in the third and fourth quarter.

Great. Thanks, guys.

You're welcome.

Next question from Tyler Hojo with Sidoti & Company.

Good morning, everyone.

Good morning, Tyler.

Just one quick follow-up that I don't think you commented on. What is the CapEx expectations for 2010.

CapEx is 95 million and I that includes about $25 million for further restructurings and facility consolidation.

And just so I caught it in response to Eric's question, you said 19 million in pension for 2010, is that correct?

That is correct.

Great. Thanks a lot.

You're welcome.

Follow up question with Ken Herbert with Wedbush.

Just quickly, on Motion Control can you talk at all because obviously with the big hit in ground defense in 2010, the margin still seems to be pretty healthy in terms of guidance. Can you talk beyond 2010 when ground defense bounced back, bounces back what kind of with all of the PUs and takes what kind of upside might we be looking for in terms of the margin post 2010. I know it's a ways out. Anything you can say in terms of magnitude of ground defense and when you see that turning a corner?

Not until we know what that increase is.

But you are looking for -- it looks like shifting off to the right, 2011 could be in ground defense anyway at least back to what we have seen in prior years recent history so to speak.

We hope so. That will be nice.

Okay.

And we will take a follow-up question with Michael Ciarmoli with Boenning & Scattergood.

Regarding the USAC program, I am assuming it is still idle for you, how are you managing that program with regards to your expenses? Is that creating a drag on margins given the increased overhead there both in the facility and with employees?

Not really, no. As a matter of fact we are looking at increase profitability based on cost reduction.

Okay, great. Thanks a lot.

And we have no further questions at this time. I would like to turn the call back over to our presenters for additional or closing remark.

I just want to say thank you for joining us today and we look forward to talking to all of you on our first quarter conference call in April. Thank you very much.

Bye-bye, now.

That concludes today's call. Thank you for your participation.