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

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-Year2022 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

• 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

• 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

• 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

• 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

• 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:

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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.

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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.

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, impairment of assets held for sale and corresponding loss from sale of our industrial valves business in Germany, and foreign currency fluctuations.