Ladies and gentlemen, thank you for standing by, and welcome to the Curtiss-Wright Fourth Quarter 2020 Financial Results. I would now like to hand the conference over to your speaker for today, Jim Ryan, Senior Director of Investor Relations. You may begin.

Thank you, and good morning, everyone. Welcome to Curtiss-Wright's Fourth Quarter 2020 Earnings Conference Call. Joining me on the call today are Executive Chairman, Dave Adams; President and Chief Executive Officer, Lynn Bamford; and Vice President and Chief Financial Officer, Chris Farkas. 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 webcast can also 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. We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC. As a reminder, the company's results include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency into Curtiss-Wright's ongoing operating and financial performance. Reconciliations for current and prior year periods are available in the earnings release at the end of this presentation and on our website. Any references to organic growth exclude the effects of restructuring, foreign currency translation, acquisitions, and divestitures, unless otherwise noted. Now I'd like to turn the call over to Dave to get things started. Dave?

Thanks, Jim. Good morning, everyone. I'll begin with an update on the leadership transition plan announced in early December. Then I'll turn the call over to Lynn and Chris to take you through Curtiss-Wright's financial results and guidance. As I reflect upon my career at Curtiss-Wright, I'm reminded of how fortunate I have been to be a part of this iconic institution. It has truly been a rewarding experience over the last 21 years for me. As CEO for just over the past seven years, I have witnessed firsthand the dedication of our employees who have continued to press forward with their unwavering commitment to the One Curtiss-Wright vision and our march to achieve top quartile financial performance. Thank you to all our employees who have helped us earn this lofty achievement. My time with our investment community has also been extremely rewarding for me personally. I'd like to thank each and every analyst, shareholder, and prospective shareholder for your confidence in our leadership team. Your encouragement over the years has been meaningful and motivating. I will surely miss the interaction. Now I'd like to congratulate Lynn on her new role as Curtiss-Wright's President and Chief Executive Officer. Lynn's appointment to CEO is incredibly well-deserved. Since joining Curtiss-Wright in 2004, she has established herself as a respected leader with a long-standing track record of success. This includes her progression through the organization from the leader of our defense electronics businesses to our most recent role as President of the Defense and Power segments. She is experienced in executing our strategic growth initiatives, driving significant financial performance, and integrating numerous defense acquisitions. Lynn has been a catalyst in driving tremendous value for Curtiss-Wright and our shareholders, which, in turn, solidified her reputation as the ideal choice to lead the company. She has also been actively engaged with our analysts and investors over the past few years, many of whom are dialing in today, and I'm certain that you all will enjoy getting to know Lynn more in the years ahead. Lynn's appointment to CEO, like Chris' appointment before her and the COO transition announced yesterday, is a reflection of our deeply ingrained succession planning process. I would like to congratulate Kevin Rayment, who many of you have met as the President of our Commercial Industrial segment, on being named the next Chief Operating Officer. Kevin is replacing Tom Quinly, who will retire in April. Tom has had a very successful tenure at Curtiss-Wright, leading the company's drive for operational excellence and discipline to achieve top quartile financial performance, particularly in terms of operating margin expansion. We wish Tom well in his retirement. In summary, I'd like to thank you all for your continued interest in Curtiss-Wright over the years. I'm very excited for the opportunities that are ahead for this organization and look forward to serving as Executive Chairman. On behalf of the Board, I'm confident that we are in great hands with Lynn and her management team leading the way. Now I'll turn the call over to Lynn. Lynn?

Thank you, Dave, and good morning, everyone. It is my distinct pleasure to be appointed to the role of President and CEO. I look forward to continuing to advance the One Curtiss-Wright Vision that Dave set out more than seven years ago and build upon the strong track record of top quartile performance. I would like to thank Dave for his leadership and mentorship over the years. I would also like to congratulate Kevin on his appointment to COO this coming April. This is a clear reflection of his effective contribution to our strong operational execution. I look forward to continuing to work closely with Kevin in his new role. Since being named CEO, I've spent considerable time with the leadership team discussing the future of Curtiss-Wright. We have tremendous operational and financial leadership and continue to build upon the company's strong foundation and decades of engineering expertise. In recent years, the team has done a fantastic job enhancing operations and pushing the boundaries of our financial performance beyond what we committed to in 2013. In May, we will host an Investor Day where we will lay out our detailed strategic plan with new long-range targets that will propel us forward in the next stages of our journey. Today, I am pleased to share some initial details of that strategy, including our pivot to growth. In this renewed focus on top line acceleration, we will build upon our core strengths and our position within key markets. We will advance those initiatives through continued internal investments, building upon top quartile performance for the purpose of driving solid growth in EPS and free cash flow. Before we move on to the review of our 2020 performance, I wanted to extend a thank you to our investors and analysts who participated in the recent perception study. The feedback helped to confirm our planned simplification of the segment and end market structure, which we will share with you today. This is the first of many steps that we will begin taking over the next year focused on simplifying the Curtiss-Wright story, enhancing our communication, and strengthening investors' understanding of our long-term value proposition. We look forward to sharing more details at our upcoming Investor Day on May 26th. Turning to Slide 4. Since the onset of the pandemic, our top priority has been protecting our employees' health and ensuring a safe and productive working environment. Thankfully, through our diligence, all of our manufacturing sites remain operational today, and we have been able to largely mitigate the impact on our 8000-plus employees. We committed to controlling our costs to preserve profitability and free cash flow. As you can see on this slide, we took many actions in 2020 to position ourselves for the future. We remain encouraged by the speed of the vaccine distribution and are hopeful that we will return to more normal operating conditions as the vaccinations become more broadly available. On behalf of the entire leadership team, I'd like to thank our employees for their unwavering dedication and commitment to Curtiss-Wright's success through what has been an especially challenging year for all of us. Next, I would like to highlight some of the key drivers of our fourth quarter and full year 2020 results. We had a very strong finish to 2020, where we met or exceeded all of the full year guidance that we reestablished on the second quarter earnings call. Starting with the fourth quarter 2020 adjusted results. Sales increased 2% year-over-year and 17% sequentially relative to our third quarter results. We exhibited strong growth in our Defense markets, which increased 15% organically or 27% overall. We achieved sequentially higher sales across all commercial markets based on improved demand and economic conditions in the fourth quarter. We produced an operating margin of 19.8%, up 100 basis points year-over-year due in large part to the savings generated by our cost containment and restructuring initiatives. We also achieved record reported fourth quarter free cash flow despite the pandemic through our intense focus on collections and working capital. Turning to the full year 2020 highlights. We achieved strong 17% sales growth in our defense market, 10% of which was organic. These gains nearly offset the challenges impacting our commercial markets resulting from the pandemic and subsequent reduction in manufacturing activity. Adjusted operating margin of 16.3% was nearly flat with the prior year as we were able to mitigate the majority of the commercial market challenges through restructuring and cost containment actions. We continue to strengthen our innovation pipeline through sustained, steady investments in R&D, which increased 3% in 2020. Adjusted diluted EPS of $6.87 exceeded our expectations driven by the solid fourth quarter performance as well as the benefit from ongoing share repurchase activity. We completed our second opportunistic share repurchase program of 2020 in the fourth quarter, which raised the full year buyback to $200 million and reduced our shares outstanding by 2.5%. This activity, along with the acquisitions completed in 2020, reflect both our strong free cash flow and commitment to our balanced capital allocation strategy. We generated a record $394 million in adjusted free cash flow, equating to 137% free cash flow conversion. This performance reflects our companywide efforts to reduce working capital and represents our eighth consecutive year of achieving more than 100% free cash flow conversion. Overall, book-to-bill was a solid one-times sales in 2020 with 1.1 times in our defense markets, fueled by our strong orders in naval defense. Additionally, we experienced sequential improvement in commercial market orders as demand continues to recover from the second quarter lows. We remain optimistic for a continued solid rebound in 2021 order activity. Now I would like to turn the call over to Chris to provide a more thorough review of our fourth quarter performance, the outlook for 2021, and the new segment and end market structure. Chris?

Thank you, Lynn, and good morning, everyone. I'll begin today with a review of our fourth quarter operating performance. In the commercial and industrial segment, sales improved sequentially but were lower year-over-year as anticipated, based upon reduced demand in our commercial markets. Despite unfavorable absorption on lower sales, we achieved a 230 basis point improvement in fourth quarter operating margin driven by the benefits of our restructuring actions. In the Defense segment, the strong 26% growth in revenues reflects the contribution from our acquisitions and a 5% increase in organic growth, principally in naval defense. Adjusted operating income increased 20%, while adjusted operating margin was very strong at 24.2%. The year-over-year reduction in margin principally reflects our investment in growth as we increased R&D spending in the fourth quarter. In the Power segment, higher revenues driven by the timing of production on naval defense programs and the benefits of our 2020 restructuring actions resulted in an operating margin increase of 70 basis points to 21.1%. Overall, fourth quarter adjusted operating income increased 8% on a 2% increase in sales, while adjusted operating margin increased 100 basis points to 19.8%. This performance included fourth quarter restructuring savings of $14 million, raising our full year 2020 benefit to $25 million, in line with our expectations. Our swift actions following the pandemic helped us to protect our margins, limiting our full year 2020 decremental margin to approximately 20%, which, as a reminder, exceeded our initial estimates of 25% to 30%. As a result, we are well positioned heading into 2021. Turning to Slide 7. As announced in our earnings release and in an effort to make Curtiss-Wright's diversified portfolio less complex and easier to follow, we've updated and simplified both our segment and end market structures. I'll begin with the transition to our new segment structure, where we have realigned and renamed our three segments. Starting from left to right, there are two changes which I'd like to highlight. First, the division realignment column reflects that we elected to shift all of our valves businesses from both the former Commercial Industrial and Defense segments into a new Naval and Power segment. This change establishes a consistent product alignment across our three segments. The second change reflects our decision to exit certain non-core operations in the fourth quarter. This included our build-to-print actuation product line supporting the Boeing 737 MAX program as well as our German valves business, which is classified as held for sale in the fourth quarter. We acquired the valves business back in 2013; however, we have not been able to achieve expected synergies and leverage its full growth outside of the European market. We are excluding these operations from our adjusted 2020 results and 2021 guidance to provide greater transparency into the growth rates and profitability within our continuing businesses. After these changes, the company will report under the following three segments: Aerospace and Industrial, Defense Electronics, and Naval and Power. I would like to spend the next few minutes walking you through each of these new segments. I'll begin with the transition to the new Defense Electronics segment. Under the realignment, we will shift our valves business into the new Naval and Power segment, removing a portion of this segment's naval defense market exposure while eliminating the power generation market exposure. As the new name suggests, this segment now represents 100% of our defense electronics capabilities serving defense markets as well as the crossover of similar technologies into commercial aerospace. Over the past few years, we have been consistently asked for a deeper dive into our defense electronics portfolio for comparison to other peers in the industry. This new segment provides that clarity. Please note that we are providing key industry drivers and metrics that should help to clarify the growth vectors for each of our segments. Next, I'll review the transition to the new Aerospace and Industrial Segment. Similar to the prior slide, we are moving the segment's valves business into the new Naval and Power segment and eliminating both the naval defense and power generation market exposure in this segment. From a market perspective, this segment now includes all of the aerospace products outside of the Defense Electronics segment, serving both commercial and defense customers. We've also reorganized and created a new general industrial market reduced to two major areas of focus: industrial vehicles and industrial automation and services. Moving forward, all of Curtiss-Wright's general industrial market sales will be concentrated in this segment. Next, I'll review the transition to the new Naval and Power segment. This segment now includes all enabled defense products sold outside of the Defense Electronics segment, and with the shift in valves concentrates all of our nuclear naval equipment revenue into this segment. It also reflects all of our nuclear and process-related revenues where both are similarly and largely focused on a steady aftermarket presence of severe service applications. Through this realignment, we've also created a new power and process market, and all revenues will be concentrated in this segment. Turning to our 2021 end market sales waterfall chart. We've historically provided this information as a supplement to help you better understand our overall end market exposure. Building on the segment updates, we've also greatly simplified the end market structure. Our waterfall now consists of two primary markets with two-thirds of our revenue in Aerospace and Defense and one-third in Commercial. We feel this more accurately reflects our business and product portfolio as well as our A&D focus. As you look across the new waterfall, we have made several changes to align the submarkets to the relevant growth sectors of our business. The new power and process market reflects sales of our Valves, Pumps, and Monitoring & Control Solutions sold into nuclear power and process markets. The new nuclear submarket includes all revenue to the aftermarket and new build reactors. The new process submarket combines all oil and gas, chem, petrochem, and natural gas sales into one larger market. The new general industrial market has been consolidated to two major areas of focus as well. Industrial vehicles focuses solely on the on- and off-highway commercial and specialty vehicle markets, all leveraging similar technologies. Industrial automation and services collectively reflects our most economically sensitive businesses aligned to global GDP and industrial production. All general industrial sales are concentrated in the new Aerospace and Industrial segment. Next, I'll review our 2021 end market sales guidance, then dive into our segment outlook. Overall, we expect sales growth of 6% to 8%, of which 2% to 4% is organic. In the Aerospace and Defense markets, we expect growth of 6% to 8% overall and to grow our defense revenues faster than the base DoD budget. In Aerospace Defense, we expect sales growth to be driven by higher demand for embedded computing equipment on various C5ISR and helicopter programs, partially offset by the timing of production on UAVs. In Ground Defense, strong growth will be principally driven by the contribution from the PacStar acquisition. In Naval Defense, we expect the ramp-up on the CVN-81 aircraft carrier program to be mainly offset by the timing of Virginia-class submarine revenues, following our exceptionally strong 22% growth rate in 2020, which far exceeded typical naval defense growth rates across our industry as our customers stabilized their supply chains and production flow. Overall, our long-term trend and outlook for growth in this market remain strong. In Commercial Aerospace, we expect sales to stabilize as improving demand on narrow-body jets, including the 737 and A320, as well as higher demand for electronics equipment will be offset by lower sales on wide-body jets, notably the 767 and 787. While the short-term outlook for the commercial aerospace industry remains tenuous, we are hopeful that the global deployment of vaccines will begin to accelerate the long-term growth outlook for this industry. Moving to the commercial markets, where we expect growth of 6% to 8% overall. In power and process, we are expecting 3% to 5% growth, mainly due to higher valve sales to process markets. This outlook is based on both the recovery of previously postponed 2020 maintenance activity as well as increased CapEx spending tied to improving our capital markets. In the nuclear submarket, we expect a recovery in domestic aftermarket revenues as well as higher sales to the Department of Energy, which will be partially offset by reduced revenues on the CAP1000 program as we wind down and complete production on this contract. In the general industrial market, which we expect to grow 9% to 11%, we anticipate solid growth across all of our industrial markets based upon improved economic activity and a widespread rebound in manufacturing demand. Continuing with our outlook by segment, I’ll begin with the aerospace and industrial segment, where we expect sales to grow 1% to 3%. We expect the growth in this segment to be led by higher general industrial sales, which will be partially offset by the timing of aerospace defense sales that were accelerated into 2020. The full year segment operating income is projected to grow 14% to 18%, while operating margin is expected to grow 170 to 190 basis points, mainly reflecting the benefits of our prior year restructuring initiatives. Segment profitability is projected to be above 2019 levels despite $140 million in lower revenues and a $3 million increase in R&D investments this year. Next, in the Defense Electronics segment, we're expecting strong sales growth of 21% to 24%, driven by a combination of 3% to 6% organic growth, principally in aerospace defense and the contribution from PacStar. We continue to expect that PacStar will be dilutive for overall Curtiss-Wright margins in year one, but it will also deliver high single-digit sales growth for its tactical battlefield communications equipment. Full year segment operating income is projected to grow 9% to 12%, while operating margin is projected to range from 21.2% to 21.4%. The year-over-year margin impact aside from PacStar is due to two factors: first, a $6 million increase in R&D investments as we continue to position this business for long-term success via organic growth; and second, unfavorable mix due to a ramp-up in lower-margin systems outsourcing from our customers, which typically increases during periods of challenging budget environments. Sales and profitability for this segment will be weighted towards the second half of the year, which is typical for our defense electronics businesses. In the new Naval and Power segment, we're expecting sales and operating income to grow modestly in 2021, led by higher sales to the power and process markets. As previously noted, naval defense sales volumes will be relatively stable year-over-year due to the acceleration of defense revenues into 2020. Full year segment operating margin is projected to improve to a range of 18% to 18.1% as the benefit of our prior year restructuring actions will more than offset the impact of unfavorable mix on lower CAP1000 revenues. Additionally, we've provided two years of quarterly historical segment financials in the new segment structure in the earnings press release and on our website. So summarizing our full year 2021 financial outlook, we expect adjusted operating income to grow 7% to 10% overall on a 6% to 8% increase in sales. Operating margin is expected to improve by 20 to 30 basis points to 16.5% to 16.6% despite a $10 million increase in R&D, which will continue to drive our strategic investments to support our long-term organic growth. I would like to emphasize that we remain committed to achieving our 17% operating margin target in 2022. Continuing with our 2021 adjusted financial outlook, we expect full year 2021 adjusted diluted EPS guidance to range from $7 to $7.20, up 6% to 9%. We expect to achieve these results despite the increase in R&D, which equates to $0.18 per share. We expect our 2021 quarterly EPS to follow a similar cadence to prior years, with the first quarter expected to be our lightest and slightly below Q1 2020. For the remainder of 2021, we expect sequential quarterly improvement, with the fourth quarter being our strongest. Further, we expect approximately 40% of our full year diluted EPS in the first half of the year. Turning to our strong full year free cash flow outlook, we project a range of $330 to $360 million with an expected conversion rate of nearly 120%. Several factors are expected to impact our year-over-year performance, including higher capital expenditures as we return to more normal operating conditions, the timing of advanced payments received late in 2020 related to the accelerated defense revenues, and approximately $20 million associated with non-core operations that we exited in Q4. Despite those impacts, we expect to exceed our long-term free cash flow conversion target of 110% again in 2021, which would also represent our ninth consecutive year exceeding 100% conversion. Now I'd like to turn the call back over to Lynn for some closing remarks. Lynn?

Thank you, Chris. As we've demonstrated today, our organization is well-positioned for profitable growth in 2021 and beyond. We are driving solid execution and leveraging the benefits of our 2020 restructuring actions while continuing to invest in our future through increased R&D funding. We continue to outperform in our defense markets driven by our position as a critical supplier to the defense industry with long-term visibility on key platforms. We also expect to benefit from improved conditions in several of our commercial-facing businesses, especially in industrial markets. We have line of sight to achieve our goal of 17% operating margin, albeit delayed slightly due to the impact of COVID. Following a year in which we closed on the largest transaction in our history, M&A remains core to our capital allocation strategy, and we continue to have an active acquisition pipeline. We remain committed to providing a consistent return to shareholders and a plan to repurchase at least $50 million of stock this year against our $200 million board authorization. We continue to maintain a healthy and balanced capital allocation strategy to support our growth in both top and bottom lines. Regarding our May Investor Day, we look forward to communicating our new vision and strategy while reinforcing Curtiss-Wright's focus on delivering long-term value for shareholders. Please be on the lookout for more details in the coming weeks, and we hope that you can participate. At this time, I would like to open up today's conference call for questions.

Thank you. Our first question comes from the line of Michael Ciarmoli from Truist Securities.

Dave, congrats, been with you the whole way here since I think the stock was maybe below $40. And Lynn, likewise, congrats, looking forward to it. Maybe, Lynn, you've obviously been here for quite some time. What's -- and given you grew up in defense, what's sort of your view on how the new segment realignment positions you guys? I know we're still waiting for the new administration, but you've seen and managed through a budget downturn. You've got some timing pressures this year on defense. But what's the general view on sort of the defense environment, how you guys are positioned? You obviously have a little bit more ground exposure now, which I know might raise some yellow flags for investors. But what are the general thoughts?

I'd say, first, we remain very optimistic about our defense future revenues growth. It's important to reflect on the fact that we've demonstrated a very successful track record in growing our defense markets over the past 20 years through multiple administrations and have continued to be able to grow even in years when the defense budget was down. A lot of what we do, we stay very focused on making sure our investments align well with the priorities of the various branches of the military, and this has protected us during periods of up and down. It's also important to know that we are well positioned with several very high-priority platforms such as CVN-80, 81, and onward, the Columbia class, the Virginia-class, and the F-35, which have strong bipartisan support. We feel our core base business is in a very good spot. As I mentioned, we really do watch the priorities of the branches of the Army and the Defense Department to ensure that our investments are aligned with those. In terms of electronic priorities, we've invested in areas such as operating in a GPS-denied environment and hypersonics, as well as security advancements like commercial systems for classified cyber, and the connected battlefield. PacStar is one of the top six priorities of the Army, and their business is in the beginning of a multiyear build-out of their capabilities, with a very clear line of sight of funding. Additionally, we've always been a leader in promoting open standards, which spur outsourcing. We're at the forefront of the next generation of this, called Modular Open Systems Architecture, or MOSA, and we invested heavily in that area. Even outside R&D investments, we've set ourselves up to service defense acquisition policies regarding other transaction authorities, or OTAs, which also drive a lot of funding. Finally, we see this as our lowest risk business within defense. The Biden administration has confirmed that they see China as the pacing threat, which we believe should indicate strong support for naval build-out plans. Those are the reasons we are optimistic. Thanks.

That's helpful. What about, you mentioned the pivot to growth. You've obviously done some acquisitions here. If I look at the new simplified '21 waterfall, are there needs? Are you looking at certain end markets? We've seen you make some moves in defense. If you're thinking about continuing with margin expansion, are certain areas more attractive? Do you look at something like commercial aerospace, where the aftermarket might be underexposed? Any color you can give around maybe where you're looking to expand into certain end markets?

I think I'd open by saying that our rigor and discipline that we apply before we acquire will not change. We do hope to pivot more of our capital dollars towards M&A, but that won't be at the expense of the type of properties that we target. We prefer non-auctions, and we've built a solid track record of cultivating companies to join Curtiss-Wright as a great place to work. Anything we bring in will be margin accretive, and as it stands right now, defense is our primary focus with various areas of interest. We will continue to look for things that enhance our embedded computing capabilities, both hardware and software, as we’ve made several moves in that area recently. Major naval safety and power propulsion systems are also a focus, and we are closely watching any properties that might be divested due to prime consolidations. There are also non-defense areas we are interested in, such as owning specialized industrial sensors and electronic systems, as well as power electronics or electrification for on- and off-highway vehicles. We see this area as interesting in that it can extend into aviation and the defense market. We're also open to industrial ballast that serves the chemical and energy processing market, but not fully oil and gas oriented, rather looking at specialty markets.

Last one for me, and then I'll jump off here. You mentioned on the defense electronics, more systems seeing more outsourcing during periods of a flattening budget. Is that expected to be a multiyear margin headwind? Do you expect that mix to continue to shift over time here? And any kind of plans to offset some of that mix?

As we look forward to 2021, we will see some mix issues as a result of systems outsourcing. However, we also have a very strong growth across the Defense Electronics business, so that sales volume and absorption will help offset a lot of what we’re seeing. As you look at Defense Electronics in 2021, it’s really a combination of two factors: PacStar, which we said would be dilutive for Curtiss-Wright in year one as we integrate that business and get it up to our standards; and in the next year, we’re investing about $6 million more in research and development in that segment. So as you look at the margin projection for 2021, which is still a very strong 21%, mix is part of the story, but not something that we think is detracting from the overall business.

Our next question comes from the line of Nathan Jones with Stifel.

Maybe you could just give us a little more commentary on the re-segmenting. What are the primary things you want to highlight to investors out of this re-segmenting, and does this in any way change the structure of the business or is this just a change in the way you're reporting it out to investors?

I'll start off and then let Chris add some color. First, with the creation of the A&D market focus, this may feel like a change, but it's really not a change. It is the path we've been on for several years. If you think of our acquisitions since 2017, four of the five acquisitions have been A&D focused. We've been building the business towards this direction, and we believe the new structure provides a better representation of our product portfolio. Additionally, aligning commercial aerospace under the A&D umbrella highlights synergies across our defense and commercial aerospace markets, such as high-temperature sensors, different types of actuation, flight test instruments, and avionics. This focus will also enhance our ability to accelerate growth. Kevin, returning to the role of COO and having all segments report to him, will help maximize collaboration and technology sharing across segments. This change does not immediately shift how we report, but we plan to intensify our focus on supporting growth.

And I would add that the new end market waterfall we've provided has closer alignment with the way we run the business internally. This ensures consistent communication with you all as we discuss the business. There are synergies that we will be able to leverage between products and customers, which we have been working on increasing our focus on technology and innovation sharing across businesses. This new structure will allow us to enhance our ability to capitalize on those opportunities.

So does that imply you're changing some of how you manage the business to generate those kinds of synergies? Are you desiloing to better optimize the synergies across these businesses?

Dave started us on this journey to One Curtiss-Wright seven years ago, and we’ve seen significant benefits from that. Initially focused on back-office capabilities for operational margin achievements, the pivot to growth will move us toward initiatives that accelerate growth. We've launched our innovation operating system to enhance visibility across innovative projects and ideas within the organization. We believe that building on this methodology will help us achieve our growth goals.

Our next question comes from the line of Peter Arment with Baird.

Chris, I wanted to start with you. If I look at the incremental kind of margins on your '21 guidance, we're getting around 20%. I thought it would be higher, but maybe is that just a function of the acquisition and the higher R&D spending? Maybe you could just help me there.

Yes, as you look at 2021, it is a function of sales volume and absorption. There will be about $17 million of restructuring savings carrying over into the year. We are anticipating a $10 million increase in research and development. So we're still seeing a healthy 30 basis point improvement year-over-year, and we will continue to invest in growth to reach our 17% operating margin target.

Can you remind us of what your lead time is, especially regarding submarines? Naval defense revenues will be affected by timing, correct?

Yes, we usually begin our production 18 to 24 months ahead of ship construction start for both aircraft carriers and Columbia class submarines. We've been building Virginia-class submarines for so long that they've stabilized for us. We receive our long-term materials and content ahead of the construction start.

And about M&A priorities? One area that doesn't fit as high-tech is the surface treatment oriented businesses. How do you think about those businesses going forward? Are they part of the vision for Curtiss-Wright?

It's a very stable financial business, subject to GDP pressures that we had in 2020. We are hoping for a rebound. It provides customer access and solid cash generation. From that standpoint, it is an accretive, good part of our business, and there are no current plans for changes in that area.

Our next question comes from the line of Myles Walton with UBS.

Congrats Dave and Lynn. Looking forward to the Analyst Day in May. Maybe to touch on the R&D. You're putting $10 million to work for 13% growth or so on the total R&D spend. Should we expect it to continue on some sort of target percent of sales basis? And also maybe just touch on where specifically it's going and the payback you're looking for from it?

As we continue moving towards our 17% target, we need to grow. The $10 million investment is about 10 basis points on sales and 40 basis points overall. Most of it is focused on defense electronics, including areas like encryption and GPS protection. We’re increasing investments in aerospace and industrial segments as well, particularly in electrification and IoT technologies.

We're not committing to specific annual increases because we need to evaluate R&D investments based on opportunities without imposing arbitrary limits. We continually assess R&D investments relative to growth opportunities. I mentioned some successful products like the Honeywell Fortress recorder, subsea pump investments, and proximity sensors that demonstrate solid lifetime value from R&D investments. We invest in various technologies and aim to fund the best ideas across the organization.

And just to clarify, you mentioned incentives that are tied to growth. That's organic growth, right? No incentives simply are a sales growth metric?

Yes, it’s overall growth. We believe our growth will come from a balance of organic and acquisitions, and we value both.

Back in 2019, we modified long-term plans for the Board to double down on growth, focusing on both sales and EPS assessments. We target both growth avenues aggressively.

And within the power and process, I think you're looking for 3% to 5% growth. I believe that’s all organic. Can you specify within there the nuclear bucket? May have been down mid-teens in 2020. What does it look like in '21?

Looking ahead to 2021, we anticipate a positive ramp in domestic aftermarket revenues as well as increased sales to the DoE. The DoE's new strategic plan presents opportunities for the next three to ten years. However, reductions in CAP1000 revenues will offset some of that growth. The domestic aftermarket is mainly driven by deferred maintenance work from 2020 into 2021. International aftermarket is arguably flat, with work pushed out in Q4 taking more time to stabilize.

I'm showing no further questions in the queue. I will now turn the call back over to Lynn Bamford, President and Chief Executive Officer, for closing remarks.

Thank you for joining us today. We look forward to speaking with you again during our first quarter 2021 earnings call. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.