Curtiss-Wright Reports Fourth Quarter and Full-Year 2021 Financial Results; Full-Year 2022 Guidance Reflects Higher Sales, Operating Margin and EPS

Company Achieves Record Full-Year Adjusted Operating Margin of 17.0% and Completes Record $350 Million in Annual Share Repurchases

Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2021.

Fourth Quarter 2021 Highlights:

• Reported sales of $667 million, diluted earnings per share (EPS) of $1.94, and free cash flow (FCF) of $219 million;
• Adjusted sales of $655 million, up 2%;
• Adjusted diluted EPS of $2.40, up 6%;
• New orders of $676 million, up 19%;
• Adjusted FCF of $219 million, with 230% FCF conversion; and
• Record share repurchases of approximately $258 million.

Full-Year 2021 Highlights:

• Reported sales of $2.5 billion, operating income of $383 million, operating margin of 15.3%, diluted EPS of $6.58, and FCF of $347 million;
• Adjusted sales of $2.5 billion, up 7%;
• Adjusted operating income of $420 million, up 12%;
• Record Adjusted operating margin of 17.0%, up 70 basis points;
• Adjusted diluted EPS of $7.34, up 11%;
• New orders of $2.5 billion, up 11%; Backlog up 3%;
• Adjusted FCF of $347 million, with 116% FCF conversion; and
• Record annual share repurchases of $350 million.

“Curtiss-Wright delivered strong fourth quarter results with better-than-expected profitability, strong free cash flow and tremendous order growth,” said Lynn M. Bamford, President and CEO of Curtiss-Wright Corporation. “For the full year, we grew sales by 7% to nearly $2.5 billion, in line with our expectations, as we leveraged the strength and resilience of our combined portfolio to minimize the impact of the challenging supply chain environment. I’m proud of the team’s focus and continued strong execution of our operational excellence initiatives, which enabled us to generate 70 basis points in full-year operating margin expansion and meet our 17% operating margin objective one full year ahead of schedule.”

“We continue to utilize our strong and healthy balance sheet to implement a disciplined capital deployment strategy. Throughout the past year, we delivered on our commitment to drive returns to our shareholders by executing record annual share repurchases of $350 million. We also recently announced our pending acquisition of Safran’s aerospace arresting systems business for $240 million, which will increase the breadth of our global defense portfolio and is expected to yield significant opportunities for revenue growth”

“Over the past few weeks, we resolved two significant legacy matters. First, we have reached an agreement with Westinghouse to settle all outstanding legal matters covering both the U.S. and China AP1000 Reactor Coolant Pump (RCP) contracts dating back to 2007. As a result, we have secured Westinghouse’s commitment to Curtiss-Wright’s RCP technology in future AP1000 power plants globally, including their next multi-unit project in Eastern Europe. We now have a clear path moving forward and the potential to generate new RCP orders within the next three to five years. Second, we recently completed the divestiture of the German valves business which had been classified as held for sale since the fourth quarter of 2020. We are pleased to move past these matters with a well-defined focus on advancing our strategic priorities to generate long-term profitable growth.”

“Looking to 2022, we are projecting total sales growth of 3% to 5% driven by growth in all of our A&D and Commercial markets, continued operating margin expansion, and double-digit Adjusted diluted EPS growth of 10% to 12%. We remain on track to achieve our 3-year financial targets for 2023 that we communicated at last year’s investor day and successfully execute on our Pivot to Growth strategy to drive long-term shareholder value.”

Fourth Quarter 2021 Operating Results

• Adjusted sales of $655 million, up $14 million, or 2%;
• Total Aerospace & Defense (A&D) market sales were flat, while total Commercial market sales increased 6%;
• In our A&D markets, strong double-digit growth in commercial aerospace and the contribution from the PacStar acquisition in ground defense were offset by reductions in the aerospace defense and naval defense markets due to the timing of sales and ongoing supply chain headwinds;
• In our Commercial markets, we experienced continued strong demand in the general industrial market, as well as higher sales within the power & process markets, despite the wind down on the China Direct AP1000 program;
• Adjusted operating income of $129 million improved 2%, while Adjusted operating margin remained flat at 19.7%. Higher operating income was driven by favorable overhead absorption on higher revenues in our Aerospace & Industrial and Defense Electronics segments, as well as the benefits of our ongoing company-wide operational excellence initiatives. These improvements were partially offset by lower revenues and unfavorable mix in the Naval & Power segment; and
• Non-segment expenses of $12 million, up $2 million, primarily due to higher environmental costs.

Fourth Quarter 2021 Segment Performance

Aerospace & Industrial

• Adjusted sales of $208 million, up approximately $15 million, or 8%;
• Higher general industrial market revenue was principally driven by the continued strong rebound in demand for industrial vehicle products for on- and off-highway platforms;
• Higher commercial aerospace market revenue reflected higher sales of sensors products and surface treatment services on narrowbody platforms, partially offset by lower actuation sales on widebody platforms;
• Aerospace defense market revenue increased primarily due to higher sales of actuation products and surface treatment services on the F-35 program; and
• Adjusted operating income of $40 million, up 20% from the prior year, while Adjusted operating margin increased 200 basis points to 19.5%, reflecting strong absorption on higher sales and the benefits of our ongoing operational excellence initiatives. 

Defense Electronics

• Adjusted sales of $200 million, up approximately $17 million, or 10%;
• Lower aerospace defense market revenues reflected the timing of sales of our embedded computing equipment on various programs, as certain revenues shifted into 2022 due to ongoing supply chain headwinds. This decrease was partially offset by higher production revenues on the F-35 program;
• Higher ground defense market revenue was principally driven by the contribution from the PacStar acquisition for tactical battlefield communications equipment;
• Higher commercial aerospace market revenue reflected increased sales of avionics and electronic systems on various domestic and international platforms; and
• Adjusted operating income of $53 million, up 17% from the prior year, while Adjusted operating margin increased 160 basis points to 26.5%, as solid absorption on higher sales and favorable mix in defense electronics more than offset unfavorable foreign currency translation.

Naval & Power

• Adjusted sales of $248 million, down $19 million, or 7%;
• Naval defense market revenue declines primarily reflected lower revenues on the Virginia-class submarine program, partially offset by higher revenues on the CVN-81 aircraft carrier program;
• Higher power & process market sales reflected solid industrial valve demand in the oil and gas market and higher domestic nuclear aftermarket revenues, partially offset by the timing of production on the China Direct AP1000 program; and
• Adjusted operating income of $48 million, down 16% from the prior year, while Adjusted operating margin decreased 210 basis points to 19.3%, driven by unfavorable absorption on lower revenues and unfavorable mix in the power & process market.

Free Cash Flow

• Reported free cash flow of $219 million decreased approximately $28 million, or 11%, primarily due to higher working capital and higher taxes;
• Capital expenditures increased $2 million compared with the prior year, primarily due to higher capital investments within the Naval & Power segment; and
• Adjusted free cash flow of $219 million decreased $37 million, or approximately 15%, compared with record free cash flow achieved in the prior year period.

New Orders and Backlog

• New orders of $676 million increased 19% and generated an overall book-to-bill that exceeded 1.0x, principally driven by solid demand within our A&D markets for our commercial aerospace and naval defense products; and
• Backlog of $2.2 billion, up 3% from December 31, 2020, reflects higher demand in both our A&D and commercial markets.

Share Repurchase and Dividends

• During the fourth quarter, the Company repurchased 1.96 million shares of its common stock for approximately $258 million;
• During full-year 2021, the Company repurchased 2.70 million shares for a record $350 million; and
• The Company also declared a quarterly dividend of $0.18 a share, unchanged from the previous quarter.

Other Items – Business Held for Sale

• In January 2022, the Company completed the sale of its German valves business.

Other Items – Westinghouse Legal Settlement

• In February 2022, the Company and Westinghouse reached an agreement to settle all open claims and counterclaims under the AP1000 U.S. and China contracts. Based on the terms of the settlement, the Company recorded full-year charges of approximately $13 million related to this matter for the year ended December 31, 2021; and
• The Company’s 2021 non-GAAP results have been adjusted for this legal matter.

Full-Year 2022 Guidance

The Company’s full-year 2022 Adjusted financial guidance⁽¹⁾ is as follows:

A more detailed breakdown of the Company’s 2022 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 fourth quarter and full-year 2021 financial results and expectations for 2022 guidance at 10:00 a.m. ET on Thursday, February 24, 2022. A live webcast of the call and the accompanying financial presentation, as well as a 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)

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 “As 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) one-time transition and IT security costs associated with the relocation of a business in the prior year period; (iii) the non-cash impairment of capitalized development costs in the prior year period; (iv) significant restructuring costs in 2020 associated with its operations; (v) the sale or divestiture of a business or product line; (vi) pension settlement charges; and (vii) significant legal settlements and impairment costs.

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 the impact of restructuring costs, impairment of assets held for sale, foreign currency fluctuations and contributions from acquisitions made during the last twelve months.