Curtiss-Wright Reports Strong Third Quarter 2021 Results and Raises Midpoint of Full-Year 2021 Adjusted EPS Guidance

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

Third quarter 2021 highlights:

• Reported sales of $621 million, operating income of $98 million, operating margin of 15.7%, diluted earnings per share (EPS) of $1.70, and free cash flow (FCF) of $97 million;
• Adjusted sales of $614 million, up 12%;
• Adjusted operating income of $108 million, up 12%;
• Adjusted operating margin of 17.5%, up 10 basis points;
• Adjusted diluted EPS of $1.88, up 6%;
• New orders of $617 million, up 13%; and
• Adjusted FCF of $97 million, up 76%, with 127% free cash flow conversion.

expansion of company's share repurchase authorization:

• In September, the Company’s Board of Directors authorized an additional $400 million for future share repurchases, increasing the total available authorization to $550 million;
• The Company immediately and opportunistically began the repurchase of $200 million in additional shares via a 10b5-1 program, conducted in concurrence with its existing $50 million share repurchase program being executed this calendar year; and
• As of November 3, the Company has completed its $200 million opportunistic share repurchase program, buying back approximately 1.5 million shares, and remains on track to repurchase a total of $250 million in shares in 2021.

full-year 2021 adjusted guidance:

• Raised bottom end of Adjusted diluted EPS guidance to new range of $7.20 to $7.35 (previously $7.15 to $7.35);
• Maintained sales growth of 7% to 9%, Adjusted operating income growth of 9% to 12%, and Adjusted operating margin range of 16.7% to 16.8%, up 40 to 50 basis points compared with the prior year; and
• Maintained Adjusted FCF range of $330 to $360 million, representing a free cash flow conversion rate of approximately 116%.

“We delivered strong third quarter results, with double-digit growth in sales and operating income, despite supply chain headwinds, which produced Adjusted diluted EPS of $1.88 and generated strong free cash flow of approximately $100 million,” said Lynn M. Bamford, President and CEO of Curtiss-Wright Corporation. “Our results reflect the continued execution of our operational excellence initiatives and savings generated by our prior year restructuring actions, which drove operating margin expansion that more than offset the $4 million in incremental year-over-year research and development investments to support our long-term organic growth.”

“In addition, we continued to leverage our strong and healthy balance sheet to implement our balanced capital allocation strategy. We firmly delivered on our commitment to drive solid returns to our shareholders by completing the recently announced $200 million opportunistic share repurchase program, and we remain devoted to supporting our organic growth with high quality, strategic acquisitions to drive long-term shareholder value.”

“Looking ahead to the remainder of 2021, while global supply chain disruption continues to impact many businesses, we will continue to work aggressively to mitigate any negative effects on Curtiss-Wright, leveraging the strength and resilience of our combined portfolio, which has provided us with confidence to raise the midpoint of our Adjusted diluted EPS guidance range.”

Third quarter 2021 operating results

• Adjusted sales of $614 million, up $64 million, or 12%;
• Aerospace & Defense (A&D) market sales increased 15%, led by strong growth in commercial aerospace and naval defense, and the contribution from the PacStar acquisition in ground defense;
• Commercial market sales increased 6%, principally due to continued, strong demand in the general industrial market;
• Adjusted operating income of $108 million, up 12%, while Adjusted operating margin increased 10 basis points to 17.5%, principally reflecting favorable overhead absorption on higher organic revenues in our Aerospace & Industrial segment, as well as the benefits of our prior year restructuring and ongoing company-wide operational excellence initiatives. Those gains were partially offset by $4 million in higher research and development investments, principally within the Defense Electronics segment; and
• Non-segment expenses of $9 million increased by $2 million compared with the prior year, primarily due to higher corporate costs.

free cash flow

• Free cash flow of $97 million increased $48 million, or 98%, principally driven by the timing of tax payments and improvements in working capital;
• Capital expenditures increased $3 million compared with the prior year, primarily due to higher capital investments within the Naval & Power segment; and
• Adjusted free cash flow of $97 million increased $42 million, or 76%.

new orders and backlog

• New orders of $617 million increased 13% compared with the prior year period, generating overall book to bill that exceeded 1.0x, principally driven by solid demand for our commercial aerospace and defense electronics products within our A&D markets, and for industrial vehicle products within our Commercial markets; and
• Backlog of $2.2 billion, up 2% from December 31, 2020, principally reflects the rebound in commercial market demand.

share repurchase and dividends

• During the third quarter, the Company repurchased 540,643 shares of its common stock for approximately $67 million;
• Year-to-date through September 30, 2021, the Company repurchased 746,851 shares for approximately $92 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

• During the fourth quarter of 2020, the Company classified its German valves business (previously within its Commercial/Industrial segment, currently within its Naval & Power 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.

third quarter 2021 segment performance

Aerospace & Industrial

• Reported results reflected sales of $196 million, operating income of $31 million and operating margin of 15.7%;
• Adjusted sales of $196 million, up $24 million, or 14%;
• Higher general industrial market revenue principally reflected the continued strong rebound in industrial vehicle product demand for on- and off-highway platforms in response to the economic recovery;
• Strong commercial aerospace market revenue growth reflected higher sales of sensors products and surface treatment services on narrowbody platforms, partially offset by lower actuation sales on widebody platforms; and
• Adjusted operating income of $31 million, up 34% from the prior year, while Adjusted operating margin increased 240 basis points to 15.7%, reflecting strong absorption on higher sales, and the benefits of our ongoing operational excellence and prior year restructuring initiatives.

Defense Electronics

• Reported results reflected sales of $182 million, operating income of $41 million and operating margin of 22.5%;
• Adjusted sales of $183 million, up $34 million, or 22%, principally driven by the contribution from the PacStar acquisition for tactical battlefield communications equipment within our ground defense market;
• Lower aerospace defense market revenue reflected reduced sales of our embedded computing equipment on various Unmanned Aerial Vehicle (UAV) and fighter jet platforms, partially offset by solid growth on various helicopter platforms;
• Higher commercial aerospace market revenue reflected increased sales of electronic systems and flight test equipment on various domestic and international platforms; and
• Adjusted operating income of $42 million, up 9% from the prior year, while Adjusted operating margin decreased 270 basis points to 23.2%, as favorable mix in defense electronics was more than offset by higher research and development investments and unfavorable foreign currency translation.

Naval & Power

• Reported results reflected sales of $243 million, operating income of $35 million and operating margin of 14.6%;
• Adjusted sales of $235 million, up $7 million, or 3%;
• Strong naval defense market revenue growth primarily reflected higher revenues on the Virginia-class submarine and CVN-81 aircraft carrier programs;
• Reduced power & process market sales reflected timing of production on the China Direct AP1000 program in the nuclear market, partially offset by solid industrial valve demand in the oil and gas market; and
• Adjusted operating income of $44 million, up 4% from the prior year, while Adjusted operating margin increased 20 basis points to 18.6%, driven by solid absorption on higher revenues and the benefits of our prior year restructuring initiatives, partially offset by unfavorable mix in the power & process market.

fulll-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 third quarter 2021 financial results and updates to 2021 guidance at 10:00 a.m. ET on Thursday, November 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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