Good day, ladies and gentlemen, and welcome to the Curtiss-Wright Fourth Quarter and Full Year 2014 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Jim Ryan, Director of Investor Relations. You may begin.

Thank you, Nicole, and good morning, everyone. Welcome to Curtiss-Wright's Fourth Quarter and Full Year 2014 Earnings Conference Call. Joining me on the call today are Dave Adams, our Chairman and Chief Executive Officer; and Glenn Tynan, our Vice President and Chief Financial Officer. Our call today is being webcast, and the press release as well as a copy of today's financial presentation are available for download through the Investor Relations section of our company website at www.curtisswright.com. A replay of this call also can be found on the website. 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. In addition, certain non-GAAP financial measures will be discussed on the call today. A reconciliation is available in the earnings release and at the end of this presentation and will be available on the company's website. Now I'd like to turn the call over to Dave to get things started. Dave?

Thank you, Jim, and good morning, everyone. For our agenda today, I'll begin with a brief update on recent events, followed by Glenn, who will review our fourth quarter and full year 2014 financial performance and our 2015 guidance. Then I'll return to provide some additional color on our margin expansion progress and opportunities before we wrap up and open the call for questions. Just over 1 year ago, we were discussing the numerous changes taking place under the vision of One Curtiss-Wright in order to better position our company for the future. I'm happy to report that we made tremendous strides in 2014, and I'm very proud of the results produced by our various teams. We established a game plan early on and our teams executed on that plan. As a result, we were able to drive efficiencies across every aspect of our company and the result is what we've promised, increasing shareholder and customer value alike. We are, and will continue to be, focused on cost improvement, leveraging the critical mass of One Curtiss-Wright across the enterprise and achieving top quartile metrics. Upon reflection, some of the highlights of our 2014 performance include: operating margin at 12.6%, a greater than 300 basis point improvement over reported 2013 results; full year EPS grew nearly 20%; return on invested capital increased to 10%, up 300 basis points over 2013 reported results; and we generated excellent free cash flow with a conversion rate that exceeded 150%. We are unwavering in our intention to deliver top quartile operational metrics within our peer group, and our results speak for themselves. Our strategies are working and best of all, we see plenty of runway left on this journey. Furthermore, our focus on improving profitability, expanding our margins and driving steady improvements in working capital and free cash flow will drive strong shareholder returns for years to come. Now I'd like turn the call over to Glenn to provide a review of our quarterly and full year performance.

Thank you, Dave, and good morning, everyone. Our discussions today of current and future results, except for cash flow, are on a continuing operations basis, which excludes all divestitures. Our fourth quarter results included solid improvements in operating income, operating margin and especially, free cash flow generation. Operating income rose 5% due to the continued benefit of our operating margin improvement initiatives and lower corporate overhead cost, despite slightly lower sales. This led to an operating margin of 13.1%, up 90 basis points from the prior year, driven by improved organic sales and operating income in our Commercial/Industrial and Energy segments. As a result, diluted earnings per share from continuing operations of $0.94 in the fourth quarter increased modestly compared to the prior-year period. Following strong year-to-date results, new orders were 8% lower in the fourth quarter, primarily due to lower demand within the defense markets. However, new orders for the year were up 12% overall, primarily within the aerospace and naval defense markets. And finally, free cash flow for the fourth quarter was $166 million, exceeding our expectations, and up 86% compared to the prior-year period, with free cash flow conversion coming in very strong at 360%. Moving on to our full year results, we concluded 2014 with a strong overall performance. Sales improved in both overall commercial and defense end markets. Most notably, due to strong growth in our general industrial and oil and gas markets. Our full year operating income and margin benefited from our ongoing operating margin improvement initiatives, specifically, portfolio rationalization as well as lower cost related to our organizational realignment initiatives. Overall, operating income grew 19%, 14% of which was organic, driving operating margin up 140 basis points on a continuing operations basis to 12.6%. However, to further clarify the strength of our 2014…

Thank you, Glenn. As promised, we wanted to give you some specific insight into how we've performed during the first year under the One Curtiss-Wright vision. In short, we had a phenomenal year in 2014. As you can see on this slide, our operating margin improved 330 basis points in 1 year, as it increased from a reported 9.3% in 2013 to 12.6% in 2014. Without a doubt, the key contributor was portfolio rationalization and the divesting of several noncore businesses, which was part of our addition by subtraction strategy aimed at alleviating any management distraction from our primary objectives. Since our last call, we completed the sale of our upstream oil and gas business, as well as the commercial aviation ground support equipment operation, and closed 3 underperforming facilities within our Surface Technologies business. It is worth noting that following the 2014 divestiture of our upstream processing business, we no longer have significant exposure to the upstream market. In addition, we are proceeding with the divestiture of the remaining downstream oil and gas assets that are being held for sale despite the recent difficulties in that marketplace. These remaining businesses are comprised of solid teams of dedicated employees, who provide very technically advanced and robust products. While the timeline has pushed slightly to the right compared to our initial plans, we expect to complete the sale of these assets by mid-year. Our divestiture actions alone resulted in 210 basis points of margin improvement in 2014, enabling us to achieve upper quartile status versus our peer group. The portfolio rationalization actions have helped both strengthen our portfolio and improve Curtiss-Wright's profitability and returns, providing an even better-than-expected benefit. Overall, the divestiture activity that we've put into action encompasses the entirety of the portfolio reshaping that we expect to accomplish at…

[Operator Instructions] Our first question comes from the line of Sam Pearlstein of Wells Fargo.

I just want to make sure I understand that last slide you were just talking about in terms of the cost saves. So the $65 million is what? That's the remainder of the $130 million that you're still targeting?

The $65 million, Sam, is what is remaining in the period 2015 through '18.

Okay. I guess, what I'm trying to understand is if 2/3 of the margin gains that you were hoping to get you've already realized from the portfolio rationalization, I'm trying to just understand what's different now in terms of what you think you could get before that now you can't. I would've expected there to be upward pressure in terms of the 2018 margin outlook, as opposed to what it sounds like is not upward pressure.

Well, I would say -- I wouldn't say we necessarily -- some of the things have taken a little longer than we experienced. I mean, we came out with pretty broad calculations and estimations of what we thought was in front of us. And really, we sharpened the pencil was really what it comes down to. There's nothing really more than that.

And some of these items...

Some things roll out a little slower, like especially supply chain. We've said it, but that one especially seems to roll out -- by the time we -- our forecast now, our call it, rib sticking, it's not I sign the contract and I'm going to save 3%. I'm saying, show it to me in the P&L, and that's what we're including in our projections now. So couple of things like that. Shared services, we thought -- as an example, we thought we'd have a little bit more there. But when we peel the onion back, I mean, our IT transformation was pretty much completed already. And finance has had some laps and HR still has some. So it's fine-tuning. That's all it is. We wanted -- we never gave you transparency as to how and when this occurs, so we're also trying to do that, and so that we can lay it out in how we see it occurring over the next -- the remainder of our 5-year journey.

Okay. And then just looking at the revenue assumptions for 2015. In the segment breakdown, I -- highlighted, I guess, it's -- ground defense and general industrial growth are clearly well above everything else. What are the specific programs? I mean, you mentioned the South African turret. But how much visibility do you have in both, I guess, that industrial piece as well as the defense, that those will come through this year?

Well, on the ground defense, we have that contract. And it's big, so we know that particular increase. And just so when we talk about ground defense, just remember, it doesn't take a lot to get a big percentage increase in that market that has been so low over the years. So that contract -- and actually, we are -- they are reviving the modernization plans. I mean, on the Bradley and the Stryker vehicles, we knew this day would probably come once they canceled the GCV, and we have visibility to that on the defense side. General industrial also has some pretty large programs looming. But whether -- I don't know off the top of my head how much of their 2015 is in backlog or not offhand. But they also have some pretty large programs as well in that market.

Our next question comes from the line of Kristine Liwag of Bank of America.

So when we kind of take a step back, right? I mean, you mentioned that the change in your strategic outlook with the savings is more fine-tuning. But it's a pretty large difference because, right, it's $40 million of change. Can you just walk through maybe how your assumption process is different this time? And why we should feel confident that $130 million is actually the real number we should be looking at?

Well, yes. And as I said, the $170 million was shoot the moon, right? That was a compilation of numbers that Tom threw out as potentials, right? The $100 million was the real calculation. That's our hard -- we just said -- if we stopped after Investor Day and said, "What do I have to do to get to top quartile?" We needed $100 million. Tom presented probably the "shoot the moon" if nothing, because we want to contemplate that things are going to go wrong. I mean, they're not all going to go according to plan, right? You're not going to get every dollar. And part of it is we're starting to see some of the things with timing, like I was just talking about before. But just remember, we're still shooting for top quartile performance. It really -- that -- so we can -- you can put any numbers you want on the paper, but we're going to -- we plan on it and we will achieve top quartile, and probably exceed top quartile performance at some point in the not-too-distant future. So there are -- broader assumptions were made for Investor Day and we fine-tuned them, and we thought it was appropriate to share that with you and the timing. And we said we'd do that after 1 year. This is our scorecard report we said we'd do. Because the middle of the year, there's so many moving pieces. And as you have been asking us, but we didn't -- we said it was probably be more appropriate to wait until we conclude the full year. And the other thing is, again, I used the example supply chain, I mean, we were calculating a percentage of our total spend. One, our total spend's come down right off the bat, so that will bring the number down. And a lot of the things we have planned come down because of the size that -- we reduced our size. But with supply chain, you're thinking 3% of spend, that's going to take a while. And we're -- the way we're looking at now is how's -- when's it going to roll through the P&L? When are we actually see these in our operating income? Not when I negotiated a contract with Office Depot that's going to save me 10% on paper, and that kind of stuff. So hopefully, we're hoping you appreciate that we've done a fair amount of diligence on this. And we're trying to be transparent, and we're going to get top quartile. And I think when you step back and look at what we are presenting to you, I think you -- hopefully, you'll agree with us, but...

Sure. And I guess, just to dig down a little bit deeper there. So should we really think about the $130 million that you're providing now as being compared to more of the $100 million before? Or is the shooting-the-moon number now $130 million instead of $170 million?

It's the shooting-the-moon number is now $130 million. And that's a good question. I mean, we were trying to stick with that because a lot of people had that in their minds that we're trying to stay consistent. And it's the latter. It's the $170 million now has become $130 million.

Sure. And then the -- just a follow-on your revenue outlook for commercial aerospace. You highlighted shot peening as a headwind in 2015. Can you walk through more what the different drivers you're seeing there and why shot peening specifically as the headwind?

I'll talk to that, Glenn. In what we experienced across the globe in all of our locations is a periodic movement of either a plant or -- let's say plant will close down on a particular location and our shot peening services are no longer needed in that location. They may move elsewhere, and we had several things occur, in this case, in the last 12 to 18 months. And that was between the mix in business that we've got and those adjustments that have taken place. And some of the movement that has taken place, in specific, some of the movement out of some of our U.K. facilities have gone to South Korea, and so they have -- no longer require our services in that regard. So that moved away. It is backfilled from a profitability standpoint by other business. And that's typical of the model -- the business model that we run on the services side. We -- as indicated, we also had some mix actions in there as well as some foreign exchange activity that sort of impacted that a little bit.

Kristine, maybe just to clarify that 1 slide again just so we understand and maybe help everybody. The $170 million clearly comes from a compilation of comments made in each of the categories at Investor Day. We've now reset that to $130 million. If we were to do it today at Investor Day, it'd be $130 million. Of that $130 million, $40 million of it was accomplished via the disc ops. So you take that out, and what's left is $90 million. Okay. Of the $90 million, we're saying we accomplished $25 million in 2014. And that leaves $65 million for the years '15 through '18, of which we're saying $25 million is going to reoccur in 2015 as well. That's what we're trying to do, is to bring you through from -- Investor Day through the 5-year span maybe -- hopefully, that clarified.

Our next question comes the line of Stephen Levenson of Stifel. Stephen E. Levenson - Stifel, Nicolaus & Company, Incorporated, Research Division: I know you've talked about the addition by subtraction, and I'm just wondering if you feel there's anything left to subtract. And if you're getting to the point where there are things you feel you need to fill in, where there's some addition ahead, how does that fit with your cash flow and cash deployment?

Yes, that's a great question, Steve. It's always difficult for me, personally, and the organization to part with businesses that are strong in their own regard. And as I indicated in my text there a few minutes ago, the -- what's remaining right now is the downstream side of oil and gas. Great products, great people, great future, just not a core element of our vision going forward. And it will be superb in the hands of the right owner. And so I'm looking forward to that for that group. And in terms of this it for us? Yes. It pretty much is it. We took a long look -- hard look at this 18 months ago, and these were the companies that looked like would not be core to the One Curtiss-Wright vision. And so we have -- we did elect to make those divestitures, most of them have occurred. As indicated, we are in the process of this remaining downstream, and hopefully, we'll have some results of that fairly soon to be able to talk about within the next quarter or so. And in terms of filling back in, I've been always on the lookout for the right properties from bolt-on perspective, because as we talked about, we have a balanced capital allocation strategy that we've deployed. And you can see, if you follow the numbers, we've got some money there to spend in the bolt-on area. And we are looking at some that are very strategic to the company. We continue to move forward in not all of the areas, but most of them. And if I were to just highlight a few, if your next question would be what specific interest, I would tell you that we always like sensors, we like valves, and in particular, the severe service valve industry that we are in. And on the industrial side, we're doing a fantastic job there with the acquisitions we made in the last several years. So we would perpetuate that as well. Nuclear is always Steady Eddie for us, so I like that. So yes, the answer is, yes, I'm looking for some backfill. Nothing huge. Bolt-on, to me, definition is under $100 million. And we've got some things that are in the works and pipeline kind of activity that would help to support some of what I would believe as being very strong opportunities for us to fill in some of the gaps.

[Operator Instructions] Our next question comes from the line of Michael Ciarmoli of KeyBanc Capital Markets.

This is actually Kevin. You touched on a couple of the pieces in commercial aero for next year. I mean, the growth there, kind of flattish, a little bit below kind of what we're seeing for the rest of the group. And you mentioned the shot peening. You mentioned some strength from the 37. Just wondering if there's any other kind of moving pieces within commercial aero next year that you could touch on.

Yes. There is one specific area that I didn't talk to, and that is, as I have indicated in -- for most of the conferences that I attend is that is, I don't mind being a smaller company but with much better operating margin. And we are obviously demonstrating that, and we're demonstrating the move upward on the EPS side and certainly, op margin. And that's of primary importance to me. And as a result of that, some contracts that we look at as opportunities, when we get an opportunity to bid, we may have had contracts for a period of time and/or we may look at new ones that would constitute some of the organic growth that we might have otherwise seen. We'll take a fairly stringent line on where we want to participate. Part of our plan, our overall margin improvement plan, was to include the pricing strategy. And if we cannot accept the contract with a pricing strategy that contributes to this overall op margin improvement vision and goal and direction, then we won't accept it or we won't bid it. So there's some of that in there, and I'm not got quantify how much, but there's a fairly good amount in there in that regard. And I did mention mix. So those things all combined add up to something that we think is a, let's call it, relatively conservative approach. And I anticipate that out of the range that we gave you, that we do have some opportunities that we're chasing that we feel very good about. And we might improve upon that.

Okay. That's great color. I appreciate that. Just looking at the Defense segment in the quarter, revenues, margins both down year-over-year. It looks like that was driven by the AP1000. Just wondering if you could confirm that. And then maybe a deeper dive on the AP1000 in terms of kind of where you're at on cost and orders, both domestically and in China?

I'll do the deeper dive on the AP1000 first, just to give you an update. I'll let Glenn talk to the financials in the quarter relative to that. But on the progress and where we are to date on the program is I feel in a very good place. Obviously, would feel to be a better place if we had an order a year ago or so. But I feel very good with the progress that we've made. We've had some refinement of our design and we've had some very, very recent testing of that refinement in almost the last couple of days. And the results have come back positive for us. We feel very comfortable with that. I'm confident that the team is yielding a product now that is going to meet the parameters that we need to meet. And that's why it's taken so long. We've indicated before, and I'll indicate again, this is a 60-year life pump. It's got to be -- once you plug it in, you walk away and come back 60 years later, it's supposed to be working. So those are extremely complex. But we will be entering the engineering and evaluation test -- endurance and evaluation testing this month. And we expect to come out of that testing, it's a 100-day test, in the June timeframe. And so far, the preliminary test going into that, the EMD test, have been great. And so I expect to come out in June with some positive results. Things occur in between that 100-day period. In other words, we have cycles of this testing that give us better guidance in terms of where we're at technically and how the production outlook would be with production units. And so we're going to be seeing, as this time goes on, how it's performing. We'll get periodic updates. And I look to be positive because of the changes that we've made. So in terms of how it's looking, just in anticipation of probably another question, at least if not from you, someone else, when would we expect an order? We indicated that we expect one by the end of this half, this first half. And we expect to be moving along very nicely, with the completion of the EMD testing. And then we'll start rocking and rolling with this program. Glenn, how about the financial question?

Yes, it's a combination. It's not just AP1000. Obviously, that's a piece of it, but that program continues to be winding down. We're also spending most of our focus right now on the testing and so on and so forth. But the Defense is also down in the quarter. The Defense side, which is primarily naval defense with lower aircraft carrier revenues due to timing and also, lower on the DDG-51 that was partially offset by some higher revenues on the submarines. But net-net, naval defense was down as well. So it's both.

Okay. That's helpful. Just a last one from me. I mean, maybe if you guys can give some more color on the new segments in terms of the end market mix next year. It looks like there's about $35 million of a gap in commercial between the new segments and the old and $60 million in Defense. Just kind of wondering if you can talk a little bit in terms of modeling expectations by end market for next year?

Let me just say one thing. I mean, really, the only change in market reporting is we took those couple of oil and gas valve businesses that was in the Energy segment and moved it to the Commercial/Industrial, and particularly, to the general industrial market. So from a market standpoint, it's really just a shift between Energy and Commercial/Industrial, right? Or Oil & Gas and Commercial/Industrial out of Oil & Gas because we'll no longer report Oil & Gas, and we'll report those sales in general industrial. That's really the only change per se from a market standpoint.

[Operator Instructions] I'm showing no further questions at this time. I'd like to hand the call back to Dave Adams for any closing remarks.

, Thanks, Nicole, and thank you, all, for joining us today. We look forward to speaking with you again during our first quarter 2015 earnings call. Have a great day. Bye-bye now.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's conference. You may all disconnect. Have a great day, everyone.