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Curtiss-Wright Reports Third Quarter 2023 Financial Results and Raises Full-Year 2023 Guidance

News Details

CURTISS-WRIGHT REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS AND RAISES FULL-YEAR 2023 GUIDANCE

November 01, 2023

 

Curtiss-Wright Corporation (NYSE: CW) reports financial results for the third quarter ended September 30, 2023.

Third Quarter 2023 Highlights:

  • Reported sales of $724 million, up 15%;
  • Reported operating income of $133 million, operating margin of 18.3%, and diluted earnings per share (EPS) of $2.51;
  • Adjusted operating income of $134 million, up 17%;
  • Adjusted operating margin of 18.5%, up 30 basis points;
  • Adjusted diluted EPS of $2.54, up 23%;
  • New orders of $846 million, up 3%, reflecting solid Aerospace & Defense (A&D) and Commercial market demand, and book-to-bill of 1.2;
  • Backlog of $2.9 billion, up 12% year-to-date; and
  • Free cash flow (FCF) of $137 million, generating 140% Adjusted FCF conversion.

Raised Full-Year 2023 Adjusted Financial Guidance:

  • Sales increased to new range of 8% to 10% growth (previously 7% to 9%), reflecting growth in all A&D and Commercial end markets;
  • Maintained operating income range of 8% to 11% growth, and operating margin range of 17.4% to 17.6%, up 10 to 30 basis points compared with the prior year;
  • Diluted EPS increased to new range of $9.00 to $9.20, up 11% to 13% (previously $8.90 to $9.15); and
  • Free cash flow increased to new range of $380 to $400 million (previously $370 to $400 million) and continues to reflect greater than 110% FCF conversion.

"Curtiss-Wright delivered strong third quarter results, as Adjusted diluted EPS of $2.54 exceeded our expectations driven by sales growth in all of our A&D and Commercial end markets and a better-than-expected operational performance in our Defense Electronics segment," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. "We also demonstrated solid order activity and grew our already strong backlog, yielding a book-to-bill of 1.2x in the quarter, highlighted by record quarterly orders within our Defense Electronics segment and continued solid demand for commercial nuclear products."

"Based on the strong year-to-date performance, we have increased our full-year sales, operating income, diluted EPS and free cash flow guidance as we continue to successfully execute on our Pivot to Growth strategy and maintain strong alignment with the near- and long-term favorable secular growth trends driving our business."

 

Third Quarter 2023 Operating Results

(In millions)

Q3-2023

Q3-2022

Change

Reported

 

 

 

Sales

$

724

 

$

631

 

15

%

Operating income

$

133

 

$

108

 

23

%

Operating margin

 

18.3

%

 

17.1

%

120 bps

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

724

 

$

631

 

15

%

Operating income

$

134

 

$

114

 

17

%

Operating margin

 

18.5

%

 

18.2

%

30 bps

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

  • Sales of $724 million increased 15% compared with the prior year;
  • Total A&D market sales increased 18%, while total Commercial market sales increased 8%;
  • In our A&D markets, we experienced higher sales in the defense markets driven by continued strong demand for our defense electronics products and higher sales of arresting systems equipment, as well as strong growth in OEM sales in the commercial aerospace market, and
  • In our Commercial markets, we experienced strong growth in the power & process markets, despite the wind down on the China Direct AP1000 program, and higher sales in the general industrial market; and
  • Adjusted operating income of $134 million increased 17%, while Adjusted operating margin increased 30 basis points to 18.5%, principally driven by favorable overhead absorption on higher revenues in the Defense Electronics segment.
 

Third Quarter 2023 Segment Performance

Aerospace & Industrial

(In millions)

Q3-2023

Q3-2022

Change

Reported

 

 

 

Sales

$

220

 

$

213

 

3

%

Operating income

$

39

 

$

39

 

0

%

Operating margin

 

17.7

%

 

18.3

%

(60 bps)

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

220

 

$

213

 

3

%

Operating income

$

39

 

$

39

 

0

%

Operating margin

 

17.7

%

 

18.3

%

(60 bps)

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

  • Sales of $220 million, up $7 million, or 3%;
  • Commercial aerospace market revenue increases reflected higher OEM sales of actuation and sensors products, as well as surface treatment services, on narrowbody and widebody platforms;
  • Higher general industrial market revenue was principally driven by increased sales of industrial automation products and surface treatment services;
  • Lower revenue in the aerospace and ground defense markets reflected the timing of sales for our actuation equipment supporting various programs; and
  • Adjusted operating income was $39 million, flat compared with the prior year, while Adjusted operating margin decreased 60 basis points to 17.7%, as favorable absorption on higher sales was offset by unfavorable mix in actuation products.
 

Defense Electronics

(In millions)

Q3-2023

Q3-2022

Change

Reported

 

 

 

Sales

$

216

 

$

161

 

34

%

Operating income

$

56

 

$

37

 

54

%

Operating margin

 

26.0

%

 

22.7

%

330 bps

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

216

 

$

161

 

34

%

Operating income

$

56

 

$

37

 

54

%

Operating margin

 

26.0

%

 

22.7

%

330 bps

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

  • Sales of $216 million, up $55 million, or 34%;
  • Higher revenue in the aerospace defense market was primarily driven by increased sales of our embedded computing and flight test instrumentation equipment on various domestic and international platforms;
  • Strong revenue growth in the ground defense market principally reflected the robust demand and timing of sales of tactical battlefield communications equipment;
  • Higher commercial aerospace market revenue reflected increased OEM sales of avionics and flight test instrumentation equipment on various domestic and international platforms; and
  • Adjusted operating income was $56 million, up 54% from the prior year, while adjusted operating margin increased 330 basis points to 26.0%, primarily due to favorable absorption on higher A&D revenues.
 

Naval & Power

(In millions)

Q3-2023

Q3-2022

Change

Reported

 

 

 

Sales

$

288

 

$

256

 

12

%

Operating income

$

48

 

$

42

 

15

%

Operating margin

 

16.6

%

 

16.2

%

40 bps

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

288

 

$

256

 

12

%

Operating income

$

49

 

$

48

 

1

%

Operating margin

 

17.0

%

 

18.9

%

(190 bps)

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

  • Sales of $288 million, up $31 million, or 12%;
  • Higher revenue in the aerospace defense market was primarily driven by increased sales of our arresting systems equipment supporting various domestic and international customers;
  • Naval defense market revenue increases principally reflected higher revenues on Columbia-class and Virginia-class submarines, partially offset by the timing of revenues on the CVN-81 aircraft carrier program;
  • Higher power & process market revenues reflected strong growth in industrial valve sales in the process market, and solid growth in the commercial nuclear market supporting both increased maintenance of existing operating reactors as well as increased development on advanced small modular reactors; Those increases were partially offset by lower China Direct AP1000 program revenues; and
  • Adjusted operating income was $49 million, up 1% from the prior year, while adjusted operating margin decreased 190 basis points to 17.0%, as favorable absorption on higher revenues was offset by unfavorable naval contract adjustments as well as unfavorable mix of products.
 

Free Cash Flow

(In millions)

Q3-2023

Q3-2022

Change

Net cash provided by operating activities

$

146

 

$

96

 

53

%

Capital expenditures

 

(9

)

 

(9

)

1

%

Reported free cash flow

$

137

 

$

86

 

59

%

Adjusted free cash flow (1)

$

137

 

$

86

 

59

%

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

  • Reported free cash flow of $137 million increased $51 million year over year, primarily driven by higher cash earnings due to the timing of defense revenues;
  • Adjusted free cash flow of $137 million; and
  • Capital expenditures were nearly flat compared with the prior year.

New Orders and Backlog

  • New orders of $846 million increased 3% compared with the prior year and generated an overall book-to-bill of approximately 1.2x, principally driven by strong demand for defense electronics products within our A&D markets, and for nuclear products within our Commercial markets; and
  • Backlog of $2.9 billion, up 12% from December 31, 2022, reflects higher demand in both our A&D and Commercial markets.

Share Repurchase and Dividends

  • During the third quarter, the Company repurchased 63,614 shares of its common stock for approximately $13 million; and
  • The Company also declared a quarterly dividend of $0.20 a share.
 

Full-Year 2023 Guidance

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

($ in millions, except EPS)

2023 Adjusted Non-GAAP Guidance (Prior)

2023 Adjusted Non-GAAP Guidance (Current)

Change vs 2022 Adjusted (Current)

Total Sales

$2,730 - $2,790

$2,765 - $2,815

Up 8% - 10%

Operating Income

$476 - $490

$480 - $494

Up 8% - 11%

Operating Margin

17.4% - 17.6%

17.4% - 17.6%

Up 10 - 30 bps

Diluted EPS

$8.90 - $9.15

$9.00 - $9.20

Up 11% - 13%

Free Cash Flow

$370 - $400

$380 - $400

Up 29% - 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 third quarter 2023 financial results and updates to 2023 guidance at 10:00 a.m. ET on Thursday, November 2, 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)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Product sales

$

613,915

 

 

$

530,782

 

 

$

1,721,832

 

 

$

1,489,619

 

Service sales

 

110,411

 

 

 

99,760

 

 

 

337,750

 

 

 

309,741

 

Total net sales

 

724,326

 

 

 

630,542

 

 

 

2,059,582

 

 

 

1,799,360

 

 

 

 

 

 

 

 

 

Cost of product sales

 

380,163

 

 

 

338,264

 

 

 

1,093,469

 

 

 

949,180

 

Cost of service sales

 

62,695

 

 

 

60,069

 

 

 

203,664

 

 

 

188,055

 

Total cost of sales

 

442,858

 

 

 

398,333

 

 

 

1,297,133

 

 

 

1,137,235

 

 

 

 

 

 

 

 

 

Gross profit

 

281,468

 

 

 

232,209

 

 

 

762,449

 

 

 

662,125

 

 

 

 

 

 

 

 

 

Research and development expenses

 

23,464

 

 

 

17,387

 

 

 

65,698

 

 

 

61,804

 

Selling expenses

 

34,084

 

 

 

31,888

 

 

 

100,782

 

 

 

90,387

 

General and administrative expenses

 

91,401

 

 

 

75,351

 

 

 

272,060

 

 

 

239,085

 

Loss on divestiture

 

 

 

 

 

 

 

 

 

 

4,651

 

 

 

 

 

 

 

 

 

Operating income

 

132,519

 

 

 

107,583

 

 

 

323,909

 

 

 

266,198

 

 

 

 

 

 

 

 

 

Interest expense

 

12,496

 

 

 

13,997

 

 

 

40,432

 

 

 

33,315

 

Other income, net

 

7,023

 

 

 

3,746

 

 

 

22,744

 

 

 

11,298

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

127,046

 

 

 

97,332

 

 

 

306,221

 

 

 

244,181

 

Provision for income taxes

 

(30,268

)

 

 

(23,564

)

 

 

(71,598

)

 

 

(58,856

)

Net earnings

$

96,778

 

 

$

73,768

 

 

$

234,623

 

 

$

185,325

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

Basic earnings per share

$

2.53

 

 

$

1.92

 

 

$

6.13

 

 

$

4.82

 

Diluted earnings per share

$

2.51

 

 

$

1.91

 

 

$

6.09

 

 

$

4.79

 

 

 

 

 

 

 

 

 

Dividends per share

$

0.20

 

 

$

0.19

 

 

$

0.59

 

 

$

0.56

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic

 

38,285

 

 

 

38,368

 

 

 

38,301

 

 

 

38,416

 

Diluted

 

38,558

 

 

 

38,647

 

 

 

38,538

 

 

 

38,655

 

 

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

 

 

 

 

 

September 30,

 

December 31,

 

 

2023

 

 

 

2022

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

148,809

 

 

$

256,974

 

Receivables, net

 

790,334

 

 

 

723,304

 

Inventories, net

 

540,180

 

 

 

483,113

 

Other current assets

 

65,794

 

 

 

52,623

 

Total current assets

 

1,545,117

 

 

 

1,516,014

 

Property, plant, and equipment, net

 

334,864

 

 

 

342,708

 

Goodwill

 

1,546,669

 

 

 

1,544,635

 

Other intangible assets, net

 

572,348

 

 

 

620,897

 

Operating lease right-of-use assets, net

 

138,809

 

 

 

153,855

 

Prepaid pension asset

 

236,089

 

 

 

222,627

 

Other assets

 

40,059

 

 

 

47,567

 

Total assets

$

4,413,955

 

 

$

4,448,303

 

 

 

 

 

Liabilities

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

 

 

$

202,500

 

Accounts payable

 

213,662

 

 

 

266,525

 

Accrued expenses

 

188,504

 

 

 

174,440

 

Deferred revenue

 

292,514

 

 

 

254,801

 

Other current liabilities

 

80,699

 

 

 

82,779

 

Total current liabilities

 

775,379

 

 

 

981,045

 

Long-term debt

 

1,050,713

 

 

 

1,051,900

 

Deferred tax liabilities, net

 

117,113

 

 

 

123,001

 

Accrued pension and other postretirement benefit costs

 

57,808

 

 

 

58,348

 

Long-term operating lease liability

 

117,320

 

 

 

132,275

 

Long-term portion of environmental reserves

 

14,031

 

 

 

12,547

 

Other liabilities

 

96,436

 

 

 

107,973

 

Total liabilities

$

2,228,800

 

 

$

2,467,089

 

 

 

 

 

Stockholders' equity

 

 

 

Common stock, $1 par value

$

49,187

 

 

$

49,187

 

Additional paid in capital

 

136,610

 

 

 

134,553

 

Retained earnings

 

3,375,502

 

 

 

3,163,491

 

Accumulated other comprehensive loss

 

(253,416

)

 

 

(258,916

)

Less: cost of treasury stock

 

(1,122,728

)

 

 

(1,107,101

)

Total stockholders' equity

$

2,185,155

 

 

$

1,981,214

 

 

 

 

 

Total liabilities and stockholders' equity

$

4,413,955

 

 

$

4,448,303

 

 

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

 

Three Months Ended

 

 

 

 

 

September 30, 2023

 

September 30, 2022

 

% Change

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjusted

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

$

220,297

 

 

$

 

 

$

220,297

 

 

$

213,093

 

 

$

 

 

$

213,093

 

 

3

%

 

3

%

Defense Electronics

 

216,285

 

 

 

 

 

 

216,285

 

 

 

161,188

 

 

 

 

 

 

161,188

 

 

34

%

 

34

%

Naval & Power

 

287,744

 

 

 

 

 

 

287,744

 

 

 

256,261

 

 

 

 

 

 

256,261

 

 

12

%

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

$

724,326

 

 

$

 

 

$

724,326

 

 

$

630,542

 

 

$

 

 

$

630,542

 

 

15

%

 

15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

$

39,014

 

 

$

 

 

$

39,014

 

 

$

39,080

 

 

$

 

 

$

39,080

 

 

%

 

%

Defense Electronics

 

56,212

 

 

 

 

 

 

56,212

 

 

 

36,588

 

 

 

 

 

 

36,588

 

 

54

%

 

54

%

Naval & Power(1)

 

47,663

 

 

 

1,333

 

 

 

48,996

 

 

 

41,576

 

 

 

6,905

 

 

 

48,481

 

 

15

%

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segments

$

142,889

 

 

$

1,333

 

 

$

144,222

 

 

$

117,244

 

 

$

6,905

 

 

$

124,149

 

 

22

%

 

16

%

Corporate and other

 

(10,370

)

 

 

 

 

 

(10,370

)

 

 

(9,661

)

 

 

 

 

 

(9,661

)

 

(7

)%

 

(7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating income

$

132,519

 

 

$

1,333

 

 

$

133,852

 

 

$

107,583

 

 

$

6,905

 

 

$

114,488

 

 

23

%

 

17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margins:

As Reported

 

 

 

Adjusted

 

As Reported

 

 

 

Adjusted

 

As Reported

 

Adjusted

Aerospace & Industrial

 

17.7

%

 

 

 

 

17.7

%

 

 

18.3

%

 

 

 

 

18.3

%

 

(60 bps)

 

(60 bps)

Defense Electronics

 

26.0

%

 

 

 

 

26.0

%

 

 

22.7

%

 

 

 

 

22.7

%

 

330 bps

 

330 bps

Naval & Power

 

16.6

%

 

 

 

 

17.0

%

 

 

16.2

%

 

 

 

 

18.9

%

 

40 bps

 

(190 bps)

Total Curtiss-Wright

 

18.3

%

 

 

 

 

18.5

%

 

 

17.1

%

 

 

 

 

18.2

%

 

120 bps

 

30 bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment margins

 

19.7

%

 

 

 

 

19.9

%

 

 

18.6

%

 

 

 

 

19.7

%

 

110 bps

 

20 bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes first year purchase accounting adjustments in the current period and prior year period.

 

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

RECONCILIATION OF AS REPORTED TO ADJUSTED (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

Nine Months Ended

 

 

 

 

 

September 30, 2023

 

September 30, 2022

 

% Change

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjusted

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

$

649,004

 

 

$

 

 

$

649,004

 

 

$

612,777

 

 

$

 

 

$

612,777

 

 

6

%

 

6

%

Defense Electronics

 

576,161

 

 

 

 

 

 

576,161

 

 

 

453,806

 

 

 

 

 

 

453,806

 

 

27

%

 

27

%

Naval & Power

 

834,417

 

 

 

 

 

 

834,417

 

 

 

732,777

 

 

 

 

 

 

732,777

 

 

14

%

 

14

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

$

2,059,582

 

 

$

 

 

$

2,059,582

 

 

$

1,799,360

 

 

$

 

 

$

1,799,360

 

 

14

%

 

14

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

$

101,224

 

 

$

 

 

$

101,224

 

 

$

96,397

 

 

$

 

 

$

96,397

 

 

5

%

 

5

%

Defense Electronics

 

122,760

 

 

 

 

 

 

122,760

 

 

 

84,338

 

 

 

 

 

 

84,338

 

 

46

%

 

46

%

Naval & Power (1)(2)

 

132,382