8-K
Curtiss Wright Corp (CW)
| UNITED STATES |
|---|
| SECURITIES AND EXCHANGE COMMISSION |
| Washington,<br><br><br><br> D.C. 20549 |
| FORM 8-K |
| CURRENT<br> REPORT |
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 3, 2023
CURTISS-WRIGHT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 001-00134 | 13-0612970 |
|---|---|---|
| (State or Other<br><br> <br>Jurisdiction of<br><br> <br>Incorporation) | (Commission File<br><br> <br>Number) | (IRS Employer<br><br> <br>Identification No.) |
| 130 Harbour Place Drive, Suite 300 | ||
| --- | --- | |
| Davidson, NC | 28036 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (704) 869-4600
__________
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | CW | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
SECTION 2 – FINANCIAL INFORMATION
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On Wednesday, May 3, 2023, the Company issued a press release announcing financial results for the first quarter ended March 31, 2023. A conference call and webcast presentation will be held on Thursday, May 4, 2023 at 10:00 am ET for management to discuss the Company’s first quarter 2023 financial performance as well as expectations for 2023 financial performance. Lynn M. Bamford, Chair and Chief Executive Officer, and K. Christopher Farkas, Vice President and Chief Financial Officer, will host the call. A copy of the press release and the webcast slide presentation are attached hereto as Exhibits 99.1 and 99.2.
The financial press release, access to the webcast, and the accompanying financial presentation will be posted on Curtiss-Wright's website at www.curtisswright.com. In addition, the dial-in number for domestic callers is (800) 274-8461, while international callers can dial (203) 518-9843. The PIN code for all participants is CWQ123. For those unable to join the live presentation, a webcast replay will be available within the Investor Relations section on the Company’s website beginning one hour after the call takes place.
The information contained in this Current Report, including Exhibits 99.1 and 99.2, are being
furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 or otherwise subject
to the liabilities of that Section. The information in this report shall not be incorporated by reference into any filing of the registrant with the SEC, whether made before or after the date hereof, regardless of any general incorporation language
in such filings.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
99.1 Press Release dated May 3, 2023
99.2 Presentation shown during
investor and securities analyst webcast on May 4, 2023
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CURTISS-WRIGHT CORPORATION | |
|---|---|
| By: | /s/ K. Christopher Farkas |
| K. Christopher Farkas<br><br> <br>Vice-President and<br><br> <br>Chief Financial Officer |
Date: May 4, 2023
EXHIBIT INDEX
| Exhibit<br><br> Number | Description |
|---|---|
| 99.1 | Press Release dated May 3, 2023 |
| 99.2 | Presentation shown during investor and securities analyst<br> webcast on May 4, 2023 |
| Exhibit 99.1 | |
| --- |
Curtiss-Wright Reports First Quarter 2023 Financial Results and Reaffirms Full-year 2023 Guidance
DAVIDSON, N.C.--(BUSINESS WIRE)--May 3, 2023--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights:
- Reported and Adjusted sales of $631 million, up 13% year-over-year;
- Reported operating income of $79 million, operating margin of 12.5%, and diluted earnings per share (EPS) of $1.48;
- Adjusted operating income of $81 million, up 15%;
- Adjusted operating margin of 12.9%, up 20 basis points;
- Adjusted diluted EPS of $1.53, up 17%; and
- New orders of $718 million, up 13%, reflected strong demand within our Aerospace & Defense (A&D) and Commercial markets, and a book-to-bill that exceeded 1.1x.
"Curtiss-Wright delivered strong first quarter 2023 results, highlighted by double-digit growth in new orders, sales, operating income and diluted EPS," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. "Higher sales in each of our end markets and our continued drive for commercial excellence enabled us to generate 20 basis points in operating margin expansion and achieve 17% growth in Adjusted diluted EPS. Sales in our Aerospace & Defense markets increased 13% during the quarter reflecting some stabilization within the defense electronics supply chain and another solid quarter for our engineered arresting systems business, while sales in our Commercial markets increased 12%, as we continue to benefit from strong demand in our commercial nuclear, process and general industrial markets."
“We are maintaining our full-year 2023 outlook and anticipate steady, sequential improvement in sales, operating margin, diluted EPS and free cash flow as we move through the year. Overall, we continue to successfully execute on our Pivot to Growth strategy, which will enable us to deliver significant long-term value for our stakeholders.”
First Quarter 2023 Operating Results
| (In millions) | Q1-2023 | Q1-2022 | Change | |||||
|---|---|---|---|---|---|---|---|---|
| Reported | ||||||||
| Sales | $ | 631 | $ | 559 | 13 | % | ||
| Operating income | $ | 79 | $ | 61 | 30 | % | ||
| Operating margin | 12.5 | % | 10.8 | % | 170 bps | |||
| Adjusted ^(1)^ | ||||||||
| Sales | $ | 631 | $ | 559 | 13 | % | ||
| Operating income | $ | 81 | $ | 71 | 15 | % | ||
| Operating margin | 12.9 | % | 12.7 | % | 20 bps | |||
| ^(1)^ | Reconciliations of Reported to Adjusted operating results are available in the Appendix. | |||||||
| --- | --- |
- Sales of $631 million, up $71 million, or 13% compared with the prior year, and included a $5 million or 1% headwind from unfavorable foreign currency translation, mainly within our Aerospace & Industrial segment;
- Total A&D market sales increased 13%, while total Commercial market sales increased 12%;
- In our A&D markets, our results reflected strong sales growth in our defense markets driven by some moderate easing of defense electronics supply chain headwinds, particularly in ground defense, and the contribution from the acquisition of our engineered arresting systems business, as well as strong mid-teens sales growth in the commercial aerospace market;
- In our Commercial markets, we experienced strong growth in the power & process markets and higher sales in the general industrial market; and
- Adjusted operating income of $81 million increased 15%, while Adjusted operating margin increased 20 basis points to 12.9%, principally driven by favorable overhead absorption on higher revenues in our Aerospace & Industrial and Naval & Power segments. These increases were partially offset by unfavorable mix on higher revenues in the Defense Electronics segment.
First Quarter 2023 Segment Performance
Aerospace & Industrial
| (In millions) | Q1-2023 | Q1-2022 | Change | |||||
|---|---|---|---|---|---|---|---|---|
| Reported | ||||||||
| Sales | $ | 202 | $ | 191 | 6 | % | ||
| Operating income | $ | 27 | $ | 25 | 7 | % | ||
| Operating margin | 13.1 | % | 13.0 | % | 10 bps | |||
| Adjusted ^(1)^ | ||||||||
| Sales | $ | 202 | $ | 191 | 6 | % | ||
| Operating income | $ | 27 | $ | 25 | 7 | % | ||
| Operating margin | 13.1 | % | 13.0 | % | 10 bps | |||
| ^(1)^ | Note: There were no adjustments to segment operating results. | |||||||
| --- | --- |
- Sales of $202 million, up $11 million, or 6% overall, and included a $4 million or 2% headwind from unfavorable foreign currency translation;
- Higher commercial aerospace market revenue reflected strong demand for sensors products and surface treatment services on narrowbody and widebody platforms;
- Higher general industrial market revenue was principally driven by increased sales of industrial vehicle products serving on- and off-highway platforms, as well as higher sales of surface treatment services;
- Aerospace defense market revenue declines reflected lower sales of actuation equipment on various fighter jet programs; and
- Operating income was $27 million, up 7% from the prior year, while operating margin increased 10 basis points to 13.1%, mainly reflecting solid absorption on higher sales.
Defense Electronics
| (In millions) | Q1-2023 | Q1-2022 | Change | |||||
|---|---|---|---|---|---|---|---|---|
| Reported | ||||||||
| Sales | $ | 162 | $ | 143 | 13 | % | ||
| Operating income | $ | 23 | $ | 23 | 0 | % | ||
| Operating margin | 14.4 | % | 16.3 | % | (190 bps) | |||
| Adjusted ^(1)^ | ||||||||
| Sales | $ | 162 | $ | 143 | 13 | % | ||
| Operating income | $ | 23 | $ | 23 | 0 | % | ||
| Operating margin | 14.4 | % | 16.3 | % | (190 bps) | |||
| ^(1)^ | Note: There were no adjustments to segment operating results. | |||||||
| --- | --- |
- Sales of $162 million, up $19 million, or 13%;
- Aerospace defense market revenue declines principally reflected the timing of sales of our embedded computing equipment on various helicopter and unmanned aerial vehicle programs;
- Strong revenue growth in the ground defense market reflected higher sales of tactical battlefield communications equipment; and
- Operating income was $23 million, essentially flat compared with the prior year, while operating margin decreased 190 basis points to 14.4%, as favorable absorption on higher revenues was offset by unfavorable mix on defense electronics products and higher investment in research and development.
Naval & Power
| (In millions) | Q1-2023 | Q1-2022 | Change | |||||
|---|---|---|---|---|---|---|---|---|
| Reported | ||||||||
| Sales | $ | 266 | $ | 225 | 18 | % | ||
| Operating income | $ | 38 | $ | 27 | 39 | % | ||
| Operating margin | 14.3 | % | 12.1 | % | 220 bps | |||
| Adjusted ^(1)^ | ||||||||
| Sales | $ | 266 | $ | 225 | 18 | % | ||
| Operating income | $ | 41 | $ | 33 | 24 | % | ||
| Operating margin | 15.3 | % | 14.5 | % | 80 bps | |||
| ^(1)^ | Reconciliations of Reported to Adjusted operating results are available in the Appendix. | |||||||
| --- | --- |
- Adjusted sales of $266 million, up $41 million, or 18%;
- Higher aerospace defense market revenues reflected a solid contribution from the arresting systems acquisition, including increased sales to international customers;
- Naval defense market revenue increases principally reflected higher revenues on the Columbia-class submarine and CVN-81 aircraft carrier programs, partially offset by timing of revenues on the CVN-80 aircraft carrier program;
- Strong double-digit revenue growth in the power & process market reflected solid growth in nuclear aftermarket revenues supporting the maintenance of existing operating reactors and higher industrial valve sales in the process market; and
- Adjusted operating income was $41 million, up 24% from the prior year, while adjusted operating margin increased 80 basis points to 15.3%, driven by favorable absorption on higher organic revenues and a solid contribution from the arresting systems acquisition.
Free Cash Flow
| (In millions) | Q1-2023 | Q1-2022 | Change | |||||
|---|---|---|---|---|---|---|---|---|
| Net cash used for operating activities | $ | (92 | ) | $ | (124 | ) | 26 | % |
| Capital expenditures | (11 | ) | (11 | ) | 2 | % | ||
| Reported free cash flow | $ | (102 | ) | $ | (135 | ) | 24 | % |
| Adjusted free cash flow ^(1)^ | $ | (92 | ) | $ | (112 | ) | 18 | % |
| ^(1)^ | A reconciliation of Reported to Adjusted free cash flow is available in the Appendix. | |||||||
| --- | --- |
- Reported free cash flow of ($102) million increased $33 million, primarily due to higher cash earnings and improved working capital in part due to the collection of the remaining $20 million cash payment on the China Direct AP1000 program; Those increases were partially offset by higher tax payments;
- Adjusted free cash flow of ($92) million increased $20 million; and
- Capital expenditures were essentially flat compared with the prior year.
New Orders and Backlog
- New orders of $718 million increased 13% compared with the prior year and generated an overall book-to-bill that exceeded 1.1x, principally driven by strong demand for defense electronics and actuation products within our A&D markets, and for industrial valve and commercial nuclear products within our Commercial markets; and
- Backlog of $2.7 billion, up 3% from December 31, 2022, reflects higher demand in both our A&D and Commercial markets.
Share Repurchase and Dividends
- During the first quarter, the Company repurchased 73,152 shares of its common stock for approximately $12 million; and
- The Company declared a quarterly dividend of $0.19 a share.
Full-Year 2023 Guidance
The Company is maintaining its full-year 2023 Adjusted financial guidance ^(1)^ as follows:
| (In millions, except EPS) | 2023 Adjusted<br><br> <br>Non-GAAP Guidance | % Chg vs 2022 |
|---|---|---|
| Total Sales | $2,655 - $2,710 | Up 4% - 6% |
| Operating Income | $463 - $477 | Up 5% - 8% |
| Operating Margin | 17.4% - 17.6% | Up 10 - 30 bps |
| Diluted EPS | $8.65 - $8.90 | Up 6% - 10% |
| Free Cash Flow | $360 - $400 | Up 22% - 36% |
| ^(1)^ | Reconciliations of Reported to Adjusted 2022 operating results and 2023 financial guidance are available in the Appendix, and exclude first year purchase accounting costs in both periods associated with acquisitions. | |
| --- | --- |
A more detailed breakdown of the Company’s 2023 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted non-GAAP amounts, can be found in the accompanying schedules. Historical financial results are available in the Investor Relations section of Curtiss-Wright’s website.
Conference Call & Webcast Information
The Company will host a conference call to discuss its first quarter 2023 financial results and business outlook at 10:00 a.m. ET on Thursday, May 4, 2023. A live webcast of the call and the accompanying financial presentation, as well as a webcast replay of the call, will be made available on the internet by visiting the Investor Relations section of the Company’s website at www.curtisswright.com.
(Tables to Follow)
| CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | |||||
|---|---|---|---|---|---|
| CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) | |||||
| ('s in thousands, except per share data) | |||||
| 2023 | 2022 | ||||
| Product sales | 524,881 | $ | 453,421 | ||
| Service sales | 105,979 | 106,040 | |||
| Total net sales | 630,860 | 559,461 | |||
| Cost of product sales | 343,757 | 294,527 | |||
| Cost of service sales | 65,695 | 63,532 | |||
| Total cost of sales | 409,452 | 358,059 | |||
| Gross profit | 221,408 | 201,402 | |||
| Research and development expenses | 22,024 | 20,549 | |||
| Selling expenses | 32,425 | 28,092 | |||
| General and administrative expenses | 88,344 | 87,600 | |||
| Loss on divestiture | — | 4,651 | |||
| Operating income | 78,615 | 60,510 | |||
| Interest expense | 12,944 | 9,530 | |||
| Other income, net | 7,767 | 2,997 | |||
| Earnings before income taxes | 73,438 | 53,977 | |||
| Provision for income taxes | (16,592 | ) | (13,292 | ) | |
| Net earnings | 56,846 | $ | 40,685 | ||
| Net earnings per share: | |||||
| Basic earnings per share | 1.48 | $ | 1.06 | ||
| Diluted earnings per share | 1.48 | $ | 1.05 | ||
| Dividends per share | 0.19 | $ | 0.18 | ||
| Weighted average shares outstanding: | |||||
| Basic | 38,303 | 38,456 | |||
| Diluted | 38,516 | 38,668 |
All values are in US Dollars.
| CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | |||||
|---|---|---|---|---|---|
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||
| ('s in thousands, except par value) | |||||
| December 31, | |||||
| 2023 | 2022 | ||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | 130,659 | $ | 256,974 | ||
| Receivables, net | 720,248 | 724,603 | |||
| Inventories, net | 527,937 | 483,113 | |||
| Other current assets | 67,415 | 52,623 | |||
| Total current assets | 1,446,259 | 1,517,313 | |||
| Property, plant, and equipment, net | 340,313 | 342,708 | |||
| Goodwill | 1,549,148 | 1,544,635 | |||
| Other intangible assets, net | 605,217 | 620,897 | |||
| Operating lease right-of-use assets, net | 145,017 | 153,855 | |||
| Prepaid pension asset | 227,547 | 222,627 | |||
| Other assets | 48,624 | 47,567 | |||
| Total assets | 4,362,125 | $ | 4,449,602 | ||
| Liabilities | |||||
| Current liabilities: | |||||
| Current portion of long-term and short term debt | — | $ | 202,500 | ||
| Accounts payable | 207,573 | 266,525 | |||
| Accrued expenses | 153,678 | 177,536 | |||
| Deferred revenue | 234,487 | 242,483 | |||
| Other current liabilities | 76,452 | 82,395 | |||
| Total current liabilities | 672,190 | 971,439 | |||
| Long-term debt, net | 1,229,619 | 1,051,900 | |||
| Deferred tax liabilities | 122,607 | 123,001 | |||
| Accrued pension and other postretirement benefit costs | 58,062 | 58,348 | |||
| Long-term operating lease liability | 124,025 | 132,275 | |||
| Long-term portion of environmental reserves | 13,171 | 12,547 | |||
| Other liabilities | 88,292 | 107,973 | |||
| Total liabilities | 2,307,966 | $ | 2,457,483 | ||
| Stockholders' equity | |||||
| Common stock, 1 par value | 49,187 | $ | 49,187 | ||
| Additional paid in capital | 126,909 | 134,553 | |||
| Retained earnings | 3,223,944 | 3,174,396 | |||
| Accumulated other comprehensive loss | (244,442 | ) | (258,916 | ) | |
| Less: cost of treasury stock | (1,101,439 | ) | (1,107,101 | ) | |
| Total stockholders' equity | 2,054,159 | 1,992,119 | |||
| Total liabilities and stockholders' equity | 4,362,125 | $ | 4,449,602 |
All values are in US Dollars.
Use and Definitions of Non-GAAP Financial Information (Unaudited)
The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these Adjusted (non-GAAP) measures provide investors with improved transparency in order to better measure Curtiss-Wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within this release.
The following definitions are provided:
Adjusted Sales, Operating Income, Operating Margin, Net Earnings and Diluted EPS
These Adjusted financials are defined as Reported Sales, Operating Income, Operating Margin, Net Earnings and Diluted Earnings per Share under GAAP excluding: (i) the impact of first year purchase accounting costs associated with acquisitions, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) the sale or divestiture of a business or product line; (iii) pension settlement charges; and (iv) significant legal settlements, impairment costs, and costs associated with shareholder activism, as applicable.
| CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| RECONCILIATION OF AS REPORTED TO ADJUSTED (UNAUDITED) | |||||||||||||||||||
| ('s in thousands) | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| March 31, 2022 | % Change | ||||||||||||||||||
| Adjustments | Adjusted | As<br><br> <br>Reported | Adjustments | Adjusted | Reported | Adjusted | |||||||||||||
| Sales: | |||||||||||||||||||
| Aerospace & Industrial | 202,447 | $ | — | $ | 202,447 | $ | 191,112 | $ | — | $ | 191,112 | 6 | % | 6 | % | ||||
| Defense Electronics | 162,154 | — | 162,154 | 143,069 | — | 143,069 | 13 | % | 13 | % | |||||||||
| Naval & Power | 266,259 | — | 266,259 | 225,280 | — | 225,280 | 18 | % | 18 | % | |||||||||
| Total sales | 630,860 | $ | — | $ | 630,860 | $ | 559,461 | $ | — | $ | 559,461 | 13 | % | 13 | % | ||||
| Operating income (expense): | |||||||||||||||||||
| Aerospace & Industrial | 26,545 | $ | — | $ | 26,545 | $ | 24,853 | $ | — | $ | 24,853 | 7 | % | 7 | % | ||||
| Defense Electronics | 23,368 | — | 23,368 | 23,290 | — | 23,290 | — | % | — | % | |||||||||
| Naval & Power (1)(2) | 37,937 | 2,676 | 40,613 | 27,288 | 5,427 | 32,715 | 39 | % | 24 | % | |||||||||
| Total segments | 87,850 | $ | 2,676 | $ | 90,526 | $ | 75,431 | $ | 5,427 | $ | 80,858 | 16 | % | 12 | % | ||||
| Corporate and other (3) | (9,235 | ) | — | (9,235 | ) | (14,921 | ) | 4,876 | (10,045 | ) | 38 | % | 8 | % | |||||
| Total operating income | 78,615 | $ | 2,676 | $ | 81,291 | $ | 60,510 | $ | 10,303 | $ | 70,813 | 30 | % | 15 | % | ||||
| Operating margins: | Adjusted | As<br><br> <br>Reported | Adjusted | Reported | Adjusted | ||||||||||||||
| Aerospace & Industrial | 13.1 | % | 13.1 | % | 13.0 | % | 13.0 | % | 10 bps | 10 bps | |||||||||
| Defense Electronics | 14.4 | % | 14.4 | % | 16.3 | % | 16.3 | % | (190 bps) | (190 bps) | |||||||||
| Naval & Power | 14.3 | % | 15.3 | % | 12.1 | % | 14.5 | % | 220 bps | 80 bps | |||||||||
| Total Curtiss-Wright | 12.5 | % | 12.9 | % | 10.8 | % | 12.7 | % | 170 bps | 20 bps | |||||||||
| Segment margins | 13.9 | % | 14.3 | % | 13.5 | % | 14.5 | % | 40 bps | (20 bps) | |||||||||
| (1) Excludes first year purchase accounting adjustments in the current period. | |||||||||||||||||||
| (2) Excludes the results of operations from our German valves business, which was sold in January 2022, and the loss on divestiture in the prior year period. | |||||||||||||||||||
| (3) Excludes costs associated with shareholder activism in the prior year period. |
All values are in US Dollars.
| CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| RECONCILIATION OF AS REPORTED SALES TO ADJUSTED SALES BY END MARKET (UNAUDITED) | |||||||||||||||
| ('s in thousands) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| March 31, 2022 | 2023 vs. 2022 | ||||||||||||||
| Adjustments | Adjusted Sales | Reported Sales | Adjustments | Adjusted Sales | Change in Reported Sales | Change in Adjusted Sales | |||||||||
| Aerospace & Defense markets: | |||||||||||||||
| Aerospace Defense | 99,879 | $ | — | $ | 99,879 | $ | 98,004 | $ | — | $ | 98,004 | 2 | % | 2 | % |
| Ground Defense | 66,256 | — | 66,256 | 39,108 | — | 39,108 | 69 | % | 69 | % | |||||
| Naval Defense | 171,956 | — | 171,956 | 162,967 | — | 162,967 | 6 | % | 6 | % | |||||
| Commercial Aerospace | 70,490 | — | 70,490 | 60,892 | — | 60,892 | 16 | % | 16 | % | |||||
| Total Aerospace & Defense | 408,581 | $ | — | $ | 408,581 | $ | 360,971 | $ | — | $ | 360,971 | 13 | % | 13 | % |
| Commercial markets: | |||||||||||||||
| Power & Process | 120,339 | — | 120,339 | 104,788 | — | 104,788 | 15 | % | 15 | % | |||||
| General Industrial | 101,940 | — | 101,940 | 93,702 | — | 93,702 | 9 | % | 9 | % | |||||
| Total Commercial | 222,279 | $ | — | $ | 222,279 | $ | 198,490 | $ | — | $ | 198,490 | 12 | % | 12 | % |
| Total Curtiss-Wright | 630,860 | $ | — | $ | 630,860 | $ | 559,461 | $ | — | $ | 559,461 | 13 | % | 13 | % |
All values are in US Dollars.
| CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | ||||
|---|---|---|---|---|
| RECONCILIATION OF AS REPORTED TO ADJUSTED DILUTED EARNINGS PER SHARE (UNAUDITED) | ||||
| Three Months Ended | ||||
| March 31, | ||||
| 2023 | 2022 | |||
| Diluted earnings per share - As Reported | $ | 1.48 | $ | 1.05 |
| First year purchase accounting adjustments | 0.05 | — | ||
| Divested German valves business | — | 0.11 | ||
| Costs associated with shareholder activism | — | 0.10 | ||
| Former executive pension settlement expense | — | 0.05 | ||
| Diluted earnings per share - Adjusted ^(1)^ | $ | 1.53 | $ | 1.31 |
| ^(1)^ All adjustments are presented net of income taxes. |
Organic Sales and Organic Operating Income
The Corporation discloses organic sales and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic sales and organic operating income are defined as sales and operating income, excluding contributions from acquisitions and results of operations from divested businesses or product lines during the last twelve months, loss from sale of our industrial valves business in Germany, and foreign currency fluctuations.
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, | ||||||||
| 2023 vs. 2022 | ||||||||
| Aerospace & Industrial | Defense Electronics | Naval & Power | Total Curtiss-Wright | |||||
| Sales | Operating<br><br> <br>income | Sales | Operating<br><br> <br>income | Sales | Operating<br><br> <br>income | Sales | Operating<br><br> <br>income | |
| As Reported | 6% | 7% | 13% | 0% | 18% | 39% | 13% | 30% |
| Less: Acquisitions | 0% | 0% | 0% | 0% | (7%) | 0% | (3%) | 0% |
| Loss on divestiture | 0% | 0% | 0% | 0% | 0% | (20%) | 0% | (9%) |
| Foreign Currency | 2% | (3%) | 1% | (7%) | 0% | (1%) | 1% | (5%) |
| Organic | 8% | 4% | 14% | (7%) | 11% | 18% | 11% | 16% |
Free Cash Flow and Free Cash Flow Conversion
The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as net cash provided by operating activities less capital expenditures. Adjusted free cash flow excludes: (i) payments associated with the Westinghouse legal settlement in both the current and prior year periods and (ii) executive pension payments in the prior year period. The Corporation discloses adjusted free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as adjusted free cash flow divided by adjusted net earnings.
| CURTISS-WRIGHT CORPORATION and SUBSIDIARIES | |||||
|---|---|---|---|---|---|
| NON-GAAP FINANCIAL DATA (UNAUDITED) | |||||
| ('s in thousands) | |||||
| 2022 | |||||
| Net cash used for operating activities | (91,599 | ) | $ | (124,315 | ) |
| Capital expenditures | (10,661 | ) | (10,896 | ) | |
| Free cash flow | (102,260 | ) | $ | (135,211 | ) |
| Westinghouse legal settlement | 10,000 | 15,000 | |||
| Pension payment to former executive | — | 8,214 | |||
| Adjusted free cash flow | (92,260 | ) | $ | (111,997 | ) |
| Adjusted free cash flow conversion | (157 | %) | (221 | %) |
All values are in US Dollars.
| CURTISS-WRIGHT CORPORATION | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 Guidance | ||||||||||||||||||||||||
| As of May 3, 2023 | ||||||||||||||||||||||||
| ('s in millions, except per share data) | ||||||||||||||||||||||||
| 2022<br><br> <br>Adjustments<br><br> <br>(Non-GAAP)^(1,3)^ | 2022<br><br> <br>Adjusted<br><br> <br>(Non-GAAP)^(1,3)^ | 2023<br><br> <br>Reported Guidance<br><br> <br>(GAAP) | 2023<br><br> <br>Adjustments<br><br> <br>(Non-GAAP)^(2,3)^ | 2023<br><br> <br>Adjusted Guidance<br><br> <br>(Non-GAAP)^(2,3)^ | ||||||||||||||||||||
| Low | High | Low | High | Chg<br><br> <br>vs 2022<br><br> <br>Adjusted | ||||||||||||||||||||
| Sales: | ||||||||||||||||||||||||
| Aerospace & Industrial | 836 | $ | — | $ | 836 | $ | 845 | $ | 860 | $ | — | $ | 845 | $ | 860 | 1 - 3% | ||||||||
| Defense Electronics | 690 | — | 690 | 725 | 750 | — | 725 | 750 | 5 - 9% | |||||||||||||||
| Naval & Power | 1,031 | — | 1,031 | 1,085 | 1,100 | — | 1,085 | 1,100 | 5 - 7% | |||||||||||||||
| Total sales | 2,557 | $ | — | $ | 2,557 | $ | 2,655 | $ | 2,710 | $ | — | $ | 2,655 | $ | 2,710 | 4 to 6% | ||||||||
| Operating income: | ||||||||||||||||||||||||
| Aerospace & Industrial | 137 | $ | 1 | $ | 138 | $ | 143 | $ | 148 | $ | — | $ | 143 | $ | 148 | 4 - 7% | ||||||||
| Defense Electronics | 155 | — | 155 | 165 | 172 | — | 165 | 172 | 7 - 11% | |||||||||||||||
| Naval & Power | 178 | 14 | 192 | 182 | 186 | 8 | 190 | 194 | (1) - 1% | |||||||||||||||
| Total segments | 469 | 15 | 484 | 490 | 506 | 8 | 498 | 514 | ||||||||||||||||
| Corporate and other | (46 | ) | 5 | (41 | ) | (35 | ) | (38 | ) | — | (35 | ) | (38 | ) | ||||||||||
| Total operating income | 423 | $ | 20 | $ | 443 | $ | 455 | $ | 469 | $ | 8 | $ | 463 | $ | 477 | 5 to 8% | ||||||||
| Interest expense | (47 | ) | $ | — | $ | (47 | ) | $ | (52 | ) | $ | (54 | ) | $ | — | $ | (52 | ) | $ | (54 | ) | |||
| Other income, net | 13 | 4 | 17 | 27 | 28 | — | 27 | 28 | ||||||||||||||||
| Earnings before income taxes | 389 | 24 | 413 | 430 | 443 | 8 | 438 | 451 | ||||||||||||||||
| Provision for income taxes | (95 | ) | (4 | ) | (99 | ) | (103 | ) | (106 | ) | (2 | ) | (105 | ) | (108 | ) | ||||||||
| Net earnings | 294 | $ | 20 | $ | 314 | $ | 327 | $ | 336 | $ | 6 | $ | 333 | $ | 343 | |||||||||
| Diluted earnings per share | 7.62 | $ | 0.51 | $ | 8.13 | $ | 8.49 | $ | 8.74 | $ | 0.16 | $ | 8.65 | $ | 8.90 | 6 to 10% | ||||||||
| Diluted shares outstanding | 38.6 | 38.6 | 38.5 | 38.5 | 38.5 | 38.5 | ||||||||||||||||||
| Effective tax rate | 24.4 | % | 24.0 | % | 24.0 | % | 24.0 | % | 24.0 | % | 24.0 | % | ||||||||||||
| Operating margins: | ||||||||||||||||||||||||
| Aerospace & Industrial | 16.4 | % | 16.5 | % | 17.0 | % | 17.2 | % | 17.0 | % | 17.2 | % | 50 to 70 bps | |||||||||||
| Defense Electronics | 22.4 | % | 22.4 | % | 22.7 | % | 22.9 | % | 22.7 | % | 22.9 | % | 30 to 50 bps | |||||||||||
| Naval & Power | 17.2 | % | 18.6 | % | 16.7 | % | 16.9 | % | 17.5 | % | 17.7 | % | (110) to (90) bps | |||||||||||
| Total operating margin | 16.6 | % | 17.3 | % | 17.1 | % | 17.3 | % | 17.4 | % | 17.6 | % | 10 to 30 bps | |||||||||||
| Free cash flow | 257 | $ | 39 | $ | 296 | $ | 350 | $ | 390 | $ | 10 | $ | 360 | $ | 400 | |||||||||
| Notes: Full year amounts may not add due to rounding. | ||||||||||||||||||||||||
| (1) 2022 Adjusted financials exclude the impact of first year purchase accounting adjustments, the loss on sale of our German valves business, costs associated with<br> shareholder activism and pension settlement charges related to the retirement of two former executives. | ||||||||||||||||||||||||
| (2) 2023 Adjusted financials exclude the impact of first year purchase accounting adjustments. | ||||||||||||||||||||||||
| (3) Free Cash Flow is defined as cash flow from operations less capital expenditures. 2022 Adjusted Free Cash Flow excluded one-time pension settlement payments of 24<br> million and a legal settlement payment of 15 million. 2023 Adjusted Free Cash Flow guidance excludes a legal settlement payment of 10 million. |
All values are in US Dollars.
| CURTISS-WRIGHT CORPORATION | ||
|---|---|---|
| 2023 Sales Growth Guidance by End Market | ||
| As of May 3, 2023 | ||
| 2023 % Change | ||
| vs 2022 Adjusted^(1)^ | % Total Sales | |
| Aerospace & Defense Markets | ||
| Aerospace Defense | 9 - 11% | 20% |
| Ground Defense | 4 - 6% | 9% |
| Naval Defense | 4 - 6% | 27% |
| Commercial Aerospace | 5 - 7% | 11% |
| Total Aerospace & Defense | 6 - 8% | 67% |
| Commercial Markets | ||
| Power & Process | Flat | 18% |
| General Industrial | 2 - 4% | 16% |
| Total Commercial | 0 - 2% | 33% |
| Total Curtiss-Wright Sales | 4 - 6% | 100% |
| Note: Sales percentages may not add due to rounding. | ||
| ^(1)^ 2023 and 2022 Sales include the contribution from the engineered arresting systems business, acquired on June 30, 2022, to the Aerospace Defense market. |
About Curtiss-Wright Corporation
Curtiss-Wright Corporation (NYSE:CW) is a global integrated business that provides highly engineered products, solutions and services mainly to Aerospace & Defense markets, as well as critical technologies in demanding Commercial Power, Process and Industrial markets. We leverage a workforce of approximately 8,100 highly skilled employees who develop, design and build what we believe are the best engineered solutions to the markets we serve. Building on the heritage of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of providing innovative solutions through trusted customer relationships. For more information, visit www.curtisswright.com.
Certain statements made in this press release, including statements about future revenue, financial performance guidance, quarterly and annual revenue, net income, operating income growth, future business opportunities, cost saving initiatives, the successful integration of the Company’s acquisitions, and future cash flow from operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments, and uncertainties. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include but are not limited to: a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information are available at www.curtisswright.com.
Contacts
Jim Ryan
\(704\) 869-4621
**Jim.Ryan@curtisswright.com**
| Exhibit 99.2 |
|---|
May 4, 2023 Q1 2023 EARNINGS CONFERENCE CALL Conference Call Dial-in numbers: (800) 274-8461 (domestic) (203) 518-9843 (international) Conference code: CWQ123
SAFE HARBOR STATEMENT Please note that the information provided in this presentation is accurate as of the date of the original presentation. The presentation will remain posted on this website from one to twelve months following the initial presentation, but content will not be updated to reflect new information that may become available after the original presentation posting. The presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and Curtiss-Wright Corporation assumes no obligation to update the information included in this report. Such forward-looking statements include, among other things, management's estimates of future performance, revenue and earnings, our management's growth objectives, our management’s ability to integrate our acquisition, and our management's ability to produce consistent operating improvements. These forward-looking statements are based on expectations as of the time the statements were made only, and are subject to a number of risks and uncertainties which could cause us to fail to achieve our then-current financial projections and other expectations, including the impact of a global pandemic or national epidemic. This presentation also includes certain non-GAAP financial measures with reconciliations to GAAP financial measures being made available in the earnings release and this presentation that are posted to our website and furnished with the SEC. We undertake no duty to update this information. More information about potential factors that could affect our business and financial results is included in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, including, among other sections, under the captions, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is on file with the SEC and available at the SEC's website at www.sec.gov. 2
Sales of $631M, up 13% overall, including 11% organic growth A&D markets up 13%, reflecting some easing in defense electronics supply chain and mid-teens growth in Commercial Aerospace Commercial markets up 12%, reflecting strong growth in Commercial Nuclear, Process and General Industrial end markets Operating Income up 15%, driving continued Operating Margin expansion Higher profitability in A&I and Naval & Power segments; Successful integration of arresting systems acquisition Diluted EPS of $1.53, up 17% Adjusted Free Cash Flow up 18% New Orders of $718M, up 13%, reflecting 1.1x Book-to-Bill Continued strong demand for defense electronics, commercial aerospace, valves and commercial nuclear products STRONG FIRST QUARTER PERFORMANCE SUPPORTS FULL-YEAR 2023 OUTLOOK Strong backlog and supply chain management driving expectations for MSD Sales growth and 6% - 10% EPS growth Maintained Adj. FCF guidance range of $360 - $400M; Adj. FCF conversion >110% 3 First Quarter 2023 Highlights Note: 2023 guidance and comparisons to 2022 results presented on an Adjusted (Non-GAAP) basis, unless noted Full-Year 2023 Guidance Reaffirmed
FIRST QUARTER 2023 FINANCIAL REVIEW ($ in millions) Q1’23 Adjusted Q1’22 Adjusted Change Key Drivers Aerospace & Industrial $202 $191 6% Double-digit growth in Commercial Aerospace and HSD growth in General Industrial (industrial vehicles and surface treatment services); Partially offset by timing in Aerospace Defense and FX (2%) Defense Electronics $162 $143 13% Strong growth in Ground Defense (tactical communications equipment) partially offset by timing in Aerospace Defense (C5/ISR programs) Naval & Power $266 $225 18% Contribution from arresting systems acquisition and solid growth in Naval Defense (higher Columbia-class submarine and CVN-81 aircraft carrier revenues) Strong growth in Commercial Nuclear aftermarket and Process Total Sales $631 $559 13% Higher sales across all A&D and Commercial markets Aerospace & Industrial Margin $27 13.1% $25 13.0% 7% 10 bps Favorable absorption on solid sales growth Defense Electronics Margin $23 14.4% $23 16.3% 0% (190) bps Favorable absorption on higher A&D revenues offset by unfavorable mix and investment in R&D Naval & Power Margin $41 15.3% $33 14.5% 24% 80 bps Favorable absorption on higher revenues and strong contribution from arresting systems acquisition Corporate and Other ($9) ($10) 8% Total Op. Income CW Margin $81 12.9% $71 12.7% 15% 20 bps Operating Income Growth > Sales Growth 4 Notes: Amounts may not add due to rounding. 2022 results included partial year sales contribution from engineered arresting systems acquisition.
2023 END MARKET SALES GROWTH GUIDANCE (As of May 3, 2023) 2023E Growth vs 2022 2023E % Sales Aerospace Defense 9% - 11% 20% Solid organic growth in defense electronics revenues on various C5/ISR programs; Contribution from arresting systems acquisition Ground Defense 4% - 6% 9% Higher tactical communications equipment revenues Naval Defense 4% - 6% 27% Solid revenue growth on Columbia-class and CVN-81 aircraft carrier programs, partially offset by lower CVN-80 aircraft carrier revenues Commercial Aerospace 5% - 7% 11% Solid growth in OEM (narrowbody and widebody); Up 7% - 9% excl. FX impact Total Aerospace & Defense 6% - 8% 67% Strong backlog driving steady growth in Defense markets Power & Process Flat [Up >5% excl CAP1000] 18% Solid MSD growth in both Commercial Nuclear (U.S. aftermarket and Gen IV SMRs) and Process (valves and subsea pump development to oil & gas market) Growth offset by lower CAP1000 program revenues (wind down) General Industrial 2% - 4% 16% Solid growth in industrial vehicles and surface treatment services; Up 3% - 5% excl. FX Total Commercial 0% - 2% 33% Continued solid demand, up 3% - 5% excl. CAP1000 Total Curtiss-Wright 4% - 6% 100% Organic sales of 3% - 5% 5 Note: Amounts shown for % of Total Sales may not add due to rounding. 2022 results included partial year sales contribution from engineered arresting systems acquisition.
($ in millions) 2023E Adjusted Change vs 2022 Adjusted Aerospace & Industrial $845 - 860 1% - 3% Solid demand in Commercial Aerospace mainly offset by reduced Defense (timing of programs) and FX (1%) Defense Electronics $725 - 750 5% - 9% Strong Defense market growth driven by record backlog; Expecting supply chain improvement in H2’23 Higher Aerospace Defense (embedded computing) and Ground Defense (tactical communications) Naval & Power $1,085 - 1,100 5% - 7% LSD Naval Defense growth driven by Columbia-class submarine and CVN-81 aircraft carrier programs MSD growth in Commercial Nuclear and Process, partially offset by wind down on CAP1000 program MSD sales growth contribution from arresting systems acquisition Total Sales $2,655 - 2,710 4% - 6% Organic sales of 3% - 5%, driven by strong growth in A&D markets Aerospace & Industrial Margin $143 - 148 17.0% - 17.2% 4% - 7% 50 - 70 bps Favorable absorption on Commercial Aerospace and General Industrial sales, partially offset by timing of defense revenues Benefit of ongoing commercial and operational excellence initiatives Defense Electronics Margin $165 - 172 22.7% - 22.9% 7% - 11% 30 - 50 bps Strong absorption on higher A&D revenues Naval & Power Margin $190 - 194 17.5% - 17.7% (1)% - 1% (90 - 110) bps Favorable absorption on organic sales (Defense, Commercial Nuclear and Process) Solid contribution from acquisition (Expected to be in-line with overall CW operating margin) Profitability offset by wind down on CAP1000 program and shift to development contracts (subsea pump) Corporate and Other ($35 - 38) 8% - 15% Principally due to lower pension and FX Total Op. Income CW Margin $463 - 477 17.4% - 17.6% 5% - 8% +10 - 30 bps Delivering Operating Margin expansion while continuing to grow engineering spend 2023 FINANCIAL GUIDANCE (As of May 3, 2023) 6 Note: 2022 results included partial year sales contribution from engineered arresting systems acquisition.
2023 FINANCIAL GUIDANCE (As of May 3, 2023) ($ in millions, except EPS) 2022 Adjusted 2023E Adjusted Change vs 2022 Total Sales $2,557 $2,655 - 2,710 4% - 6% Operating Income Growth > Sales Growth (aligns w/ Investor Day) Total Operating Income $443 $463 - 477 5% - 8% Growth in operating income exceeds sales (aligned w/ Investor Day) Other Income $17 $27 - 28 Higher pension income Interest Expense ($47) ($52 - 54) Impact of higher interest rates Diluted EPS $8.13 $8.65 - 8.90 6% - 10% Line of sight to achieve 3-year target of double-digit growth Diluted Shares Outstanding 38.6 ~38.5 Min. $50M share repurchase in ’23 Free Cash Flow $296 $360 - 400 22% - 36% Strong FCF from Operations, incl. Supply Chain Management FCF Conversion 94% >110% (at midpt) Continued solid FCF conversion Capital Expenditures $38 $50 - 60 Expect return to more normalized levels Average ~2% of Sales (over time) Depreciation & Amortization $112 $110 - 115 7 Note: 2022 results included partial year sales contribution from engineered arresting systems acquisition.
CURTISS-WRIGHT REMAINS WELL POSITIONED TO DELIVER LONG-TERM PROFITABLE GROWTH 8 FY23 outlook reflects continued execution of Pivot to Growth strategy Sales growth of 4% - 6%, driven by strength in A&D markets Benefiting from multi-year growth in Defense markets Anticipate continued ramp up in Commercial Aerospace production Strong alignment to favorable long-term secular growth trends in Commercial markets Strong backlog exiting 2022 provides visibility and confidence in long-term outlook Continued Operating Margin expansion, Expect 10 - 30 bps increase to 17.4% - 17.6% Solid foundation in Operational Excellence and the advancement of our Commercial Excellence initiatives Strong balance sheet and long-term FCF outlook support our commitment to a disciplined capital allocation strategy Maintain line of sight to Investor Day financial targets for 2023 Note: 2022 results included partial year sales contribution from engineered arresting systems acquisition.
Appendix 9
NON-GAAP FINANCIAL INFORMATION The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these Adjusted (non-GAAP) measures provide investors with improved transparency in order to better measure Curtiss-Wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within the Company’s earnings press release. The following definitions are provided: Adjusted Sales, Operating Income, Operating Margin, Net Earnings and Diluted EPS These Adjusted financials are defined as Reported Sales, Operating Income, Operating Margin, Net Earnings and Diluted Earnings per Share under GAAP excluding: (i) the impact of first year purchase accounting costs associated with acquisitions in the prior year, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) the sale or divestiture of a business or product line; (iii) pension settlement charges; and (iv) significant legal settlements, impairment costs, and costs associated with shareholder activism, as applicable. Organic Sales and Organic Operating Income The Corporation discloses organic sales and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic sales and organic operating income are defined as sales and operating income, excluding contributions from acquisitions made during the last twelve months, loss on divestiture of the German valves business, and foreign currency fluctuations. Free Cash Flow and Free Cash Flow Conversion The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as net cash provided by operating activities less capital expenditures. Adjusted free cash flow excludes: (i) payments associated with the Westinghouse legal settlement in both the current and prior year periods and (ii) executive pension payments in the prior year period. The Corporation discloses adjusted free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as adjusted free cash flow divided by adjusted net earnings. 10
FIRST QUARTER 2023: END MARKET SALES GROWTH ($ in millions) Q1’23 Adjusted Q1’22 Adjusted Change Key Drivers Aerospace Defense $100 $98 2% Higher revenues of arresting systems equipment (acquisition) mainly offset by timing in Aerospace Defense (actuation and embedded computing products) Ground Defense $66 $39 69% Higher tactical communications equipment revenues Naval Defense $172 $163 6% Higher Columbia-class submarine and CVN-81 aircraft carrier revenues Commercial Aerospace $70 $61 16% Strong OEM demand for sensors and services on narrowbody and widebody platforms Total A&D Markets $409 $361 13% Power & Process $120 $105 15% Strong growth in commercial nuclear and process markets General Industrial $102 $94 9% Higher sales of surface treatment services and industrial vehicles products Total Commercial Markets $222 $198 12% Total Curtiss-Wright $631 $559 13% 11 Note: Amounts may not add down due to rounding.
2023E END MARKET SALES WATERFALL (as of May 3, 2023) FY’23 Adjusted Guidance: Overall UP 4 - 6% A&D Markets UP 6 - 8% Comm’l Markets UP 0 - 2% Note: Amounts shown for % of Total Sales may not add due to rounding. Power & Process market sales concentrated in Naval & Power segment General Industrial sales concentrated in Aerospace & Industrial segment 12