Curtiss-Wright Reports Second Quarter 2021 Financial Results; Raises Full-year 2021 Financial Guidance

DAVIDSON, N.C.--(BUSINESS WIRE)-- Curtiss-Wright Corporation (NYSE: CW) reports financial results for the second quarter ended June 30, 2021.

second quarter 2021 highlights:

• Reported sales of $621 million, operating income of $95 million, operating margin of 15.2%, diluted earnings per share (EPS) of $1.49, and free cash flow of $66 million;
• Adjusted sales of $609 million, up 14%;
• Adjusted operating income of $95 million, up 24%;
• Adjusted operating margin of 15.6%, up 120 basis points;
• Adjusted diluted EPS of $1.56, up 22%; and
• New orders of $679 million, up 11%, led by strong demand in our Commercial markets.

raised full-year 2021 financial guidance:

• Adjusted sales increased by $15 million due to ongoing recovery in general industrial market demand; Maintaining overall range of 7% to 9% sales growth;
• Adjusted operating income increased to new range of 9% to 12% growth (previously 9% to 11%);
• Adjusted operating margin increased by 10 basis points to new range of 16.7% to 16.8%, up 40 to 50 basis points compared with the prior year; and
• Adjusted diluted EPS increased by $0.05 to new range of $7.15 to $7.35, up 9% to 12%.

“We delivered strong second quarter results, as Adjusted diluted EPS grew by 22%, led by solid sales growth across the majority of our markets, and improved profitability in the Aerospace & Industrial and Naval & Power segments,” said Lynn M. Bamford, President and CEO of Curtiss-Wright Corporation. “We also benefitted from the continued execution of our operational excellence initiatives and savings generated by our prior year restructuring actions to drive continued operating margin expansion. In addition, we continued to direct incrementally higher investments in research and development projects that target the highest growth vectors in our end markets and support our long-term organic growth. Based on our solid year-to-date results and outlook for the remainder of 2021, we have increased our full-year Adjusted guidance for sales, operating income, operating margin and diluted EPS.”

“As we introduced at our recent Investor Day event in May, we are executing with confidence on our new Pivot to Growth strategy to unlock significant value for our shareholders. Through a renewed focus on disciplined, strategic investments and the deployment of our new operational growth platform, we are well-positioned to deliver on our new three-year targets through 2023, which includes a 5% to 10% revenue CAGR, continued operating margin expansion with operating income growth greater than revenue growth, adjusted diluted EPS CAGR at or above 10%, and sustained free cash flow conversion above 110% on average.”

Second quarter 2021 operating results

• Adjusted sales of $609 million, up $77 million, or 14%;
• Aerospace & Defense market sales increased 11%, led by strong growth in naval defense and the contribution of the PacStar acquisition in ground defense, which more than offset lower aerospace defense revenues;
• Commercial market sales increased 21%, principally due to strong demand in the general industrial market, as well as higher power & process market sales;
• Adjusted operating income was $95 million, up 24%, while Adjusted operating margin increased 120 basis points to 15.6%. This improvement was driven by favorable overhead absorption on higher organic revenues in both our Aerospace & Industrial and Naval & Power segments, as well as the benefits of our prior year restructuring and ongoing company-wide operational excellence initiatives, which were partially offset by $5 million in higher research and development investments; and
• Non-segment expenses of $10 million increased by $2 million compared with the prior year, due to higher environmental and other corporate expenses.

free cash flow

• Free cash flow of $66 million, defined as cash flow from operations less capital expenditures, decreased $64 million, or 49%, principally driven by the timing of collections and tax payments, partially offset by higher net earnings;
• Capital expenditures decreased $1 million compared with the prior year, primarily due to lower capital investments as a result of the completion of our new DRG facility within the Naval & Power segment; and
• Adjusted free cash flow of $66 million, down $70 million, or 51%.

new orders and backlog

• New orders of $679 million increased 11% compared with the prior year period, generating overall book to bill of approximately 1.1x, driven by strong demand in our Commercial markets, most notably for industrial vehicle products; and
• Backlog of $2.2 billion improved slightly from December 31, 2020, principally reflecting the rebound in commercial market demand.

Share repurchase and dividends

• During the second quarter, the Company repurchased 100,719 shares of its common stock for approximately $13 million;
• Year-to-date, the Company repurchased 206,208 shares for approximately $25 million; and
• During the quarter, the Board of Directors declared a 6% increase in the quarterly dividend to $0.18 per share.

other items - business held for sale

• During the fourth quarter of 2020, the Company classified its German valves business (previously within its Commercial/Industrial segment) as held for sale and its results have been adjusted from comparisons between our current and prior year results, and full-year financial guidance.

Second quarter 2021 segment performance

Aerospace & Industrial

• Reported results reflected sales of $200 million, operating income of $32 million and operating margin of 16.0%;
• Adjusted sales of $194 million, up $28 million, or 17%;
• General industrial market revenue increased by nearly 40%, led by strong industrial vehicle demand for on- and off-highway platforms, and higher sales of surface treatment services due to improving economic conditions;
• Commercial aerospace market revenues were essentially flat, as higher sales of sensors products on narrowbody platforms were mainly offset by lower actuation sales on widebody platforms; and
• Adjusted operating income was $30 million, up 138% from the prior year, while Adjusted operating margin increased 800 basis points to 15.7%, reflecting strong absorption on higher general industrial market sales, and the benefits of our ongoing operational excellence and prior year restructuring initiatives.

Defense Electronics

• Reported results reflected sales of $162 million, operating income of $29 million and operating margin of 18.0%;
• Adjusted sales of $163 million, up $24 million, or 17%, principally driven by the contribution from the PacStar acquisition for tactical battlefield communications equipment within our ground defense market;
• Aerospace defense market revenue declined due to the timing of sales of our embedded computing equipment on various programs;
• Higher commercial aerospace market revenues reflect increased sales of avionics and flight test equipment on various domestic and international platforms; and
• Adjusted operating income was $31 million, down 8% from the prior year, while Adjusted operating margin decreased 510 basis points to 18.9%, reflecting unfavorable mix in defense electronics and $4 million in higher research and development investments.

Naval & Power

• Reported results reflected sales of $259 million, operating income of $43 million and operating margin of 16.6%;
• Adjusted sales of $252 million, up $25 million, or 11%;
• Strong naval defense market revenue growth primarily reflected higher production revenues on the CVN-80 and CVN-81 aircraft carrier programs;
• Higher power & process market revenues reflected increased nuclear aftermarket maintenance supporting existing operating reactors, as well as higher industrial valve revenues to the oil and gas market; and
• Adjusted operating income was $43 million, up 13% from the prior year, while Adjusted operating margin increased 30 basis points to 17.2%, driven by solid absorption on higher revenues, as well as the benefits of our prior year restructuring initiatives.

full-year 2021 guidance

The Company is updating its full-year 2021 Adjusted financial guidance as follows:

A more detailed breakdown of the Company’s 2021 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 in the new segment structure for 2020 and 2019 periods 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 second quarter 2021 financial results and updates to 2021 guidance at 10:00 a.m. ET on Wednesday, August 4, 2021. 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.

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