Curtiss-Wright Reports Fourth Quarter and Full-Year 2022 Financial Results; Issues Full-Year 2023 Guidance Reflecting Higher Sales, Operating Margin, EPS and Free Cash Flow

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Strong Q4 Results Drive Record FY22 Sales, Profitability and Orders

DAVIDSON, N.C., February 21, 2023--(BUSINESS WIRE)--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2022.

Fourth Quarter 2022 Highlights:

  • Reported sales of $758 million, operating income of $157 million, operating margin of 20.8%, diluted earnings per share (EPS) of $2.82, and free cash flow (FCF) of $283 million;

  • Adjusted sales of $758 million, up 16% year-over-year;

  • Adjusted operating income of $160 million, up 24%;

  • Adjusted operating margin of 21.1%, up 140 basis points;

  • Adjusted diluted EPS of $2.92, up 21%;

  • Adjusted FCF of $299 million, with 265% FCF conversion; and

  • New orders of $714 million, up 5%, reflecting solid demand in Aerospace & Defense (A&D) and Commercial markets.

Full-Year 2022 Highlights:

  • Reported sales of $2.6 billion, operating income of $423 million, operating margin of 16.6%, diluted EPS of $7.62, and FCF of $257 million;

  • Adjusted sales of $2.6 billion, up 4% year-over-year;

  • Adjusted operating income of $443 million, up 5%;

  • Adjusted operating margin of 17.3%, up 30 basis points;

  • Adjusted diluted EPS of $8.13, up 11%;

  • Adjusted FCF of $296 million, with 94% FCF conversion;

  • Total share repurchases of $50 million; and

  • New orders of $2.9 billion, up 15%; Backlog up 19%.

"Curtiss-Wright delivered record financial performance in the fourth quarter, driven by double-digit organic sales growth in our Aerospace & Defense and Commercial markets, and a strong performance from the recent acquisition of our engineered arresting systems business," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. "In addition, we achieved record quarterly Adjusted free cash flow of nearly $300 million, which generated robust free cash flow conversion of 265%."

"Our full-year 2022 results were highlighted by a strong operational performance, as we produced higher sales and operating income in our Aerospace & Industrial and Naval & Power segments. Further, the strength and resilience of our combined portfolio enabled us to minimize the impact of the challenging supply chain environment, as we generated 30 basis points in full-year operating margin expansion to 17.3%, and delivered double-digit EPS growth. Our results also reflected record orders of $2.9 billion and a book-to-bill of 1.15x, driven by strong demand across the portfolio."

"Looking to 2023, we anticipate total sales growth of 4% to 6% principally driven by strong growth in our A&D markets, continued operating margin expansion while maintaining steady investments in our technology, and strong Adjusted free cash flow generation ranging from $360 to $400 million. As a result, we remain well-positioned with line of sight to the 3-year financial targets that we communicated at our 2021 Investor Day."

Fourth Quarter 2022 Operating Results

(In millions)

Q4-2022

Q4-2021

Change

Reported

Sales

$

758

$

667

14

%

Operating income

$

157

$

105

49

%

Operating margin

20.8

%

15.8

%

500 bps

Adjusted (1)

Sales

$

758

$

655

16

%

Operating income

$

160

$

129

24

%

Operating margin

21.1

%

19.7

%

140 bps

(1)

Reconciliations of Reported to Adjusted operating results are available in the Appendix.

  • Adjusted sales of $758 million increased 16% compared with the prior year, and included a $9 million or 1% headwind from unfavorable foreign currency translation, mainly within our Aerospace & Industrial segment;

  • Total A&D market sales increased 18%, while total Commercial market sales increased 10%;

  • In our A&D markets, our results reflected strong growth of 20% in our defense markets, driven by higher defense electronics revenues, the contribution from the acquisition of our engineered arresting systems business and double-digit sales growth in commercial aerospace;

  • In our Commercial markets, we experienced double-digit sales growth in the general industrial market, as well as high-single digit sales growth within the power & process market, despite the wind down on the China Direct AP1000 program; and

  • Adjusted operating income of $160 million increased 24%, while Adjusted operating margin increased 140 basis points to 21.1%, principally driven by favorable overhead absorption on higher revenues in all three segments, as well as the benefits of our prior year restructuring and ongoing company-wide operational excellence initiatives.

Fourth Quarter 2022 Segment Performance

Aerospace & Industrial

(In millions)

Q4-2022

Q4-2021

Change

Reported

Sales

$

223

$

210

6

%

Operating income

$

41

$

40

2

%

Operating margin

18.2

%

19.0

%

(80 bps)

Adjusted (1)

Sales

$

223

$

208

8

%

Operating income

$

41

$

40

2

%

Operating margin

18.5

%

19.5

%

(100 bps)

(1)

Reconciliations of Reported to Adjusted operating results are available in the Appendix.

  • Adjusted sales of $223 million, up $16 million, or 8% overall, and included a $6 million or 4% headwind from unfavorable foreign currency translation;

  • Higher commercial aerospace market revenue was driven by higher sales of actuation and sensors products on numerous narrowbody and widebody platforms;

  • Lower aerospace defense market revenue reflected the timing of defense market sales of our actuation and sensors products;

  • Strong double-digit revenue growth in the general industrial market reflected continued strong demand for industrial vehicle products serving on-highway, off-highway and specialty platforms, and increased sales of surface treatment services; and

  • Adjusted operating income was $41 million, up 2% from the prior year, while Adjusted operating margin decreased 100 basis points to 18.5%, as favorable absorption on higher sales and the benefits of our ongoing operational excellence initiatives were partially offset by unfavorable mix on actuation products.

Defense Electronics

(In millions)

Q4-2022

Q4-2021

Change

Reported

Sales

$

236

$

199

19

%

Operating income

$

70

$

52

34

%

Operating margin

29.7

%

26.3

%

340 bps

Adjusted (1)

Sales

$

236

$

200

18

%

Operating income

$

70

$

53

33

%

Operating margin

29.7

%

26.5

%

320 bps

(1)

Reconciliations of Reported to Adjusted operating results are available in the Appendix.

  • Adjusted sales of $236 million, up $37 million, or 18%, principally reflected strong growth in defense market sales, despite ongoing supply chain headwinds related to the availability of electronic components;

  • Higher aerospace defense market revenues reflected increased sales of our embedded computing equipment on various fighter jet and helicopter programs;

  • Ground defense market revenue increases reflected higher sales of our tactical communications equipment; and

  • Adjusted operating income was $70 million, up 33% from the prior year, while adjusted operating margin increased 320 basis points to 29.7%, primarily driven by strong absorption on higher defense revenues.

Naval & Power

(In millions)

Q4-2022

Q4-2021

Change

Reported

Sales

$

298

$

258

16

%

Operating income

$

59

$

25

135

%

Operating margin

19.7

%

9.7

%

1,000 bps

Adjusted (1)

Sales

$

298

$

248

20

%

Operating income

$

60

$

48

26

%

Operating margin

20.3

%

19.3

%

100 bps

(1)

Reconciliations of Reported to Adjusted operating results are available in the Appendix.

  • Adjusted sales of $298 million, up $50 million, or 20%;

  • Higher aerospace defense market revenues reflected the contribution from the arresting systems acquisition for arresting systems equipment, principally to international customers;

  • Naval defense market revenue increases reflected the strong ramp up on the Columbia-class submarine program partially offset by timing of revenues on the CVN-80 aircraft carrier program;

  • Higher power & process market revenues reflected strong growth in nuclear aftermarket sales supporting existing operating reactors as well as increased industrial valve sales in the process market. Those increases were partially offset by the wind down of production on the China Direct AP1000 program; and

  • Adjusted operating income was $60 million, up 26% from the prior year, while adjusted operating margin increased 100 basis points to 20.3%, driven by favorable absorption on higher organic revenues, a solid contribution from the arresting systems acquisition and the benefits of our restructuring initiatives.

Free Cash Flow

(In millions)

Q4-2022

Q4-2021

Change

Net cash provided by operating activities

$

292

$

232

26

%

Capital expenditures

(9

)

(13

)

(29

%)

Reported free cash flow

$

283

$

219

29

%

Adjusted free cash flow (1)

$

299

$

219

37

%

(1)

A reconciliation of Reported to Adjusted free cash flow is available in the Appendix.

  • Reported free cash flow of $283 million increased $64 million, primarily due to higher cash earnings and lower taxes;

  • Adjusted free cash flow of $299 million increased $80 million; and

  • Capital expenditures decreased $4 million compared with the prior year.

New Orders and Backlog

  • New orders of $714 million increased 5% in the fourth quarter driven by strong demand for defense electronics products and the contribution from our arresting systems acquisition within our A&D markets, and for nuclear aftermarket products within our Commercial markets;

  • Full-year 2022 new orders of $2.9 billion increased 15% and generated an overall book-to-bill of 1.15x, reflecting growth in our A&D and Commercial markets; and

  • Backlog of $2.6 billion, up 19% from December 31, 2021, reflects strong demand in our Defense and Commercial Aerospace markets.

Share Repurchase and Dividends

  • During the fourth quarter, the Company repurchased 74,816 shares of its common stock for approximately $12 million;

  • During full-year 2022, the Company repurchased 0.3 million shares for $50 million; and

  • The Company also declared a quarterly dividend of $0.19 a share.

Other Items – Completion of Financing of $300 Million in Senior Notes

  • On October 27, 2022, the Company announced the successful completion of a private placement debt offering of $300 million for senior notes, consisting of $200 million 4.49% notes due 2032 and $100 million 4.64% notes due 2034.

Full-Year 2023 Guidance

The Company's full-year 2023 Adjusted financial guidance(1) is as follows:

($ in millions, except EPS)

2023 Adjusted
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 fourth quarter and full-year 2022 financial results and expectations for 2023 guidance at 9:00 a.m. ET on Wednesday, February 22, 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

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

($'s in thousands, except per share data)

Three Months Ended

Year Ended

December 31,

December 31,

2022

2021

2022

2021

Product sales

$

646,263

$

556,911

$

2,135,882

$

2,109,617

Service sales

111,402

109,847

421,143

396,314

Total net sales

757,665

666,758

2,557,025

2,505,931

Cost of product sales

399,389

340,432

1,348,569

1,330,191

Cost of service sales

65,792

64,454

253,847

242,384

Total cost of sales

465,181

404,886

1,602,416

1,572,575

Gross profit

292,484

261,872

954,609

933,356

Research and development expenses

19,032

21,814

80,836

88,489

Selling expenses

31,199

27,729

121,586

116,956

General and administrative expenses

85,008

96,532

324,093

326,140

Loss on divestiture

—

—

4,651

—

Impairment of assets held for sale

—

10,432

—

19,088

Operating income

157,245

105,365

423,443

382,683

Interest expense

13,665

10,146

46,980

40,240

Other income, net

1,434

3,157

12,732

12,067

Earnings before income taxes

145,014

98,376

389,195

354,510

Provision for income taxes

(35,991

)

(21,797

)

(94,847

)

(87,351

)

Net earnings

$

109,023

$

76,579

$

294,348

$

267,159

Net earnings per share:

Basic earnings per share

$

2.85

$

1.95

$

7.67

$

6.61

Diluted earnings per share

$

2.82

$

1.94

$

7.62

$

6.58

Dividends per share

$

0.19

$

0.18

$

0.75

$

0.71

Weighted average shares outstanding:

Basic

38,296

39,309

38,386

40,417

Diluted

38,633

39,524

38,649

40,602

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

December 31,

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

$

256,974

$

171,004

Receivables, net

724,603

647,148

Inventories, net

483,113

411,567

Assets held for sale

—

10,988

Other current assets

52,623

67,101

Total current assets

1,517,313

1,307,808

Property, plant, and equipment, net

342,708

360,031

Goodwill

1,544,635

1,463,026

Other intangible assets, net

620,897

538,077

Operating lease right-of-use assets, net

153,855

143,613

Prepaid pension asset

222,627

256,422

Other assets

47,567

34,568

Total assets

$

4,449,602

$

4,103,545

Liabilities

Current liabilities:

Current portion of long-term and short-term debt

$

202,500

$

—

Accounts payable

266,525

211,640

Accrued expenses

177,536

147,701

Deferred revenue

242,483

260,157

Liabilities held for sale

—

12,655

Other current liabilities

82,395

102,714

Total current liabilities

971,439

734,867

Long-term debt

1,051,900

1,050,610

Deferred tax liabilities

123,001

147,349

Accrued pension and other postretirement benefit costs

58,348

91,329

Long-term operating lease liability

132,275

127,152

Long-term portion of environmental reserves

12,547

13,656

Other liabilities

107,973

112,092

Total liabilities

2,457,483

...