News Details

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

November 03, 2021

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

(In millions)

Q3-2021

Q3-2020

Change

Reported sales

$

620.6

 

$

571.6

 

9

%

Adjustments (1)

 

(6.8

)

 

(21.7

)

 

Adjusted sales (1)

$

613.8

 

$

549.9

 

12

%

 

 

 

 

Reported operating income

$

97.7

 

$

84.6

 

15

%

Adjustments (1)

 

9.9

 

 

11.2

 

 

Adjusted operating income (1)

$

107.5

 

$

95.8

 

12

%

Adjusted operating margin (1)

 

17.5

%

 

17.4

%

10 bps

Amounts may not add due to rounding.

(1)

Adjusted results exclude (i) our build-to-print actuation product line supporting the Boeing 737 MAX program which we exited and our German valves business, which was classified as held for sale, both in the fourth quarter of 2020 impacting both periods; (ii) first year purchase accounting costs in both periods associated with acquisitions; and (iii) one-time costs associated with the relocation of our DRG business in the Naval & Power segment, and restructuring costs in all segments, which impacted the prior year period.

  • 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

(In millions)

Q3-2021

Q3-2020

Change

Net cash provided by operating activities

$

107.3

 

$

56.0

 

92

%

Capital expenditures

 

(10.1

)

 

(7.0

)

(44

%)

Free cash flow (1)

$

97.2

 

$

49.0

 

98

%

Adjustment to capital expenditures (DRG facility investment) (2)

 

-

 

 

0.4

 

-

 

Restructuring (2)

 

-

 

 

5.9

 

-

 

Adjusted free cash flow (2)

$

97.2

 

$

55.3

 

76

%

Amounts may not add due to rounding.

(1)

Free cash flow defined as net cash provided by operating activities less capital expenditures

(2)

Adjusted free cash flow excludes a capital investment related to the new state-of-the-art naval facility in the Naval & Power segment and the cash impact from restructuring in the prior year period.

  • 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

(In millions)

Q3-2021

Q3-2020

Change

Reported sales

$

196.3

 

$

188.8

 

4

%

Adjustments (1)

 

(0.4

)

 

(16.5

)

 

Adjusted sales (1)

$

195.9

 

$

172.2

 

14

%

 

 

 

 

Reported operating income

$

30.9

 

$

23.9

 

29

%

Adjustments (1)

 

(0.1

)

 

(1.0

)

 

Adjusted operating income (1)

$

30.8

 

$

22.9

 

34

%

Adjusted operating margin (1)

 

15.7

%

 

13.3

%

240 bps

Amounts may not add due to rounding.

(1)

Adjusted results exclude our build-to-print actuation product line supporting the Boeing 737 MAX program which we exited in the fourth quarter of 2020 impacting both periods and restructuring costs in the prior year period.

  • 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

(In millions)

Q3-2021

Q3-2020

Change

Reported sales

$

181.5

 

$

148.3

 

22

%

Adjustments (1)

 

1.1

 

 

0.7

 

 

Adjusted sales (1)

$

182.6

 

$

149.1

 

22

%

 

 

 

 

Reported operating income

$

40.8

 

$

35.1

 

16

%

Adjustments (1)

 

1.6

 

 

3.5

 

 

Adjusted operating income (1)

$

42.3

 

$

38.7

 

9

%

Adjusted operating margin (1)

 

23.2

%

 

25.9

%

(270 bps)

Amounts may not add due to rounding.

(1)

Adjusted results exclude first year purchase accounting costs in both periods associated with acquisitions, and restructuring costs in the prior year period.

  • 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

(In millions)

Q3-2021

Q3-2020

Change

Reported sales

$

242.8

 

$

234.5

 

4

%

Adjustments (1)

 

(7.5

)

 

(5.9

)

 

Adjusted sales (1)

$

235.3

 

$

228.6

 

3

%

 

 

 

 

Reported operating income

$

35.5

 

$

33.4

 

6

%

Adjustments (1)

 

8.4

 

 

8.6

 

 

Adjusted operating income (1)

$

43.9

 

$

42.0

 

4

%

Adjusted operating margin (1)

 

18.6

%

 

18.4

%

20 bps

Amounts may not add due to rounding.

(1)

Adjusted results exclude our German valves business which was classified as held for sale in the fourth quarter of 2020 impacting both periods; and first year purchase accounting costs associated with acquisitions, one-time costs associated with the relocation of our DRG business and restructuring costs, all impacting the prior year period.

  • 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.

Full-Year 2021 Guidance

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

(In millions, except EPS)

2021 Adjusted
Non-GAAP
Guidance
(Prior)

2021 Adjusted
Non-GAAP
Guidance
(Current)

2021 Adjusted Chg
vs 2020 Restated

Total Sales

$2,465 - $2,515

$2,465 - $2,515

Up 7% - 9%

Operating Income

$411 - $421

$411 - $421

Up 9% - 12%

Operating Margin

16.7% - 16.8%

16.7% - 16.8%

Up 40 - 50 bps

Interest Expense

$41

$40 - $41

 

Diluted EPS

$7.15 - $7.35

$7.20 - $7.35

Up 9% - 12%

Diluted Shares Outstanding

41.1

41.0

 

Free Cash Flow

$330 - $360

$330 - $360

 

Avg. FCF Conversion

~116%

~116%

 

(1)

2021 Adjusted financial guidance used in comparisons to 2020 financial results excludes first year purchase accounting costs associated with acquisitions, as well as our build-to-print actuation product line supporting the Boeing 737 MAX program which we exited and our German valves business which was classified as held for sale, both in the fourth quarter of 2020.

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.

(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,

 

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

528,339

 

 

$

493,398

 

 

$

1,552,706

 

 

$

1,457,772

 

 

Service sales

 

92,280

 

 

78,216

 

 

286,467

 

 

265,120

 

 

Total net sales

 

620,619

 

 

571,614

 

 

1,839,173

 

 

1,722,892

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

328,424

 

 

305,921

 

 

989,759

 

 

945,886

 

 

Cost of service sales

 

55,187

 

 

52,872

 

 

177,930

 

 

177,580

 

 

Total cost of sales

 

383,611

 

 

358,793

 

 

1,167,689

 

 

1,123,466

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

237,008

 

 

212,821

 

 

671,484

 

 

599,426

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

21,618

 

 

17,587

 

 

66,675

 

 

54,163

 

 

Selling expenses

 

30,067

 

 

24,869

 

 

89,227

 

 

81,650

 

 

General and administrative expenses

 

78,998

 

 

77,251

 

 

229,608

 

 

230,515

 

 

Impairment of assets held for sale

 

8,656

 

 

 

 

8,656

 

 

 

 

Restructuring expenses

 

 

 

8,541

 

 

 

 

20,730

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

97,669

 

 

84,573

 

 

277,318

 

 

212,368

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

9,955

 

 

9,055

 

 

30,094

 

 

25,059

 

 

Other income, net

 

3,627

 

 

5,417

 

 

8,910

 

 

6,844

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

91,341

 

 

80,935

 

 

256,134

 

 

194,153

 

 

Provision for income taxes

 

(21,638

)

 

(16,315

)

 

(65,554

)

 

(46,754

)

 

Net earnings

 

$

69,703

 

 

$

64,620

 

 

$

190,580

 

 

$

147,399

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.71

 

 

$

1.56

 

 

$

4.66

 

 

$

3.52

 

 

Diluted earnings per share

 

$

1.70

 

 

$

1.55

 

 

$

4.64

 

 

$

3.49

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share

 

$

0.18

 

 

$

0.17

 

 

$

0.53

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

40,769

 

 

41,545

 

 

40,865

 

 

41,926

 

 

Diluted

 

40,950

 

 

41,797

 

 

41,040

 

 

42,190

 

 

 

 

 

 

 

 

 

 

 

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

2021

 

2020

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

234,416

 

 

$

198,248

 

 

Receivables, net

 

670,867

 

 

588,718

 

 

Inventories, net

 

433,140

 

 

428,879

 

 

Assets held for sale

 

20,215

 

 

27,584

 

 

Other current assets

 

65,171

 

 

57,395

 

 

Total current assets

 

1,423,809

 

 

1,300,824

 

 

Property, plant, and equipment, net

 

360,314

 

 

378,200

 

 

Goodwill

 

1,461,313

 

 

1,455,137

 

 

Other intangible assets, net

 

552,514

 

 

609,630

 

 

Operating lease right-of-use assets, net

 

140,524

 

 

150,898

 

 

Prepaid pension asset

 

111,906

 

 

92,531

 

 

Other assets

 

32,921

 

 

34,114

 

 

Total assets

 

$

4,083,301

 

 

$

4,021,334

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term and short-term debt

 

100,000

 

 

100,000

 

 

Accounts payable

 

158,196

 

 

201,237

 

 

Accrued expenses

 

142,169

 

 

146,833

 

 

Deferred revenue

 

249,671

 

 

253,411

 

 

Liabilities held for sale

 

13,215

 

 

10,141

 

 

Other current liabilities

 

101,892

 

 

98,755

 

 

Total current liabilities

 

765,143

 

 

810,377

 

 

Long-term debt

 

957,101

 

 

958,292

 

 

Deferred tax liabilities, net

 

121,491

 

 

115,007

 

 

Accrued pension and other postretirement benefit costs

 

98,122

 

 

98,345

 

 

Long-term operating lease liability

 

124,362

 

 

133,069

 

 

Long-term portion of environmental reserves

 

15,096

 

 

15,422

 

 

Other liabilities

 

101,926

 

 

103,248

 

 

Total liabilities

 

2,183,241

 

 

2,233,760

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $1 par value

 

49,187

 

 

49,187

 

 

Additional paid in capital

 

124,532

 

 

122,535

 

 

Retained earnings

 

2,839,294

 

 

2,670,328

 

 

Accumulated other comprehensive loss

 

(308,810

)

 

(310,856

)

 

Less: cost of treasury stock

 

(804,143

)

 

(743,620

)

 

Total stockholders' equity

 

1,900,060

 

 

1,787,574

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

4,083,301

 

 

$

4,021,334

 

 

 

 

 

 

 

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

SEGMENT INFORMATION (UNAUDITED)(1)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

 

 

 

Change

 

 

 

 

 

Change

 

 

 

2021

 

 

 

2020

 

 

%

 

 

2021

 

 

 

2020

 

 

%

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

 

$

196,296

 

 

$

188,768

 

 

4

%

 

$

576,340

 

 

$

592,907

 

 

(3

%)

Defense Electronics

 

 

181,504

 

 

 

148,324

 

 

22

%

 

 

525,067

 

 

 

427,518

 

 

23

%

Naval & Power

 

 

242,819

 

 

 

234,522

 

 

4

%

 

 

737,766

 

 

 

702,467

 

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

620,619

 

 

$

571,614

 

 

9

%

 

$

1,839,173

 

 

$

1,722,892

 

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

 

$

30,872

 

 

$

23,880

 

 

29

%

 

$

81,874

 

 

$

65,635

 

 

25

%

Defense Electronics

 

 

40,762

 

 

 

35,103

 

 

16

%

 

 

106,656

 

 

 

83,902

 

 

27

%

Naval & Power

 

 

35,483

 

 

 

33,367

 

 

6

%

 

 

116,635

 

 

 

90,623

 

 

29

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segments

 

$

107,117

 

 

$

92,350

 

 

16

%

 

$

305,165

 

 

$

240,160

 

 

27

%

Corporate and other

 

 

(9,448

)

 

 

(7,777

)

 

(21

%)

 

 

(27,847

)

 

 

(27,792

)

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating income

 

$

97,669

 

 

$

84,573

 

 

15

%

 

$

277,318

 

 

$

212,368

 

 

31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margins:

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

 

 

15.7

%

 

 

12.7

%

 

300 bps

 

 

14.2

%

 

 

11.1

%

 

310 bps

Defense Electronics

 

 

22.5

%

 

 

23.7

%

 

(120 bps)

 

 

20.3

%

 

 

19.6

%

 

70 bps

Naval & Power

 

 

14.6

%

 

 

14.2

%

 

40 bps

 

 

15.8

%

 

 

12.9

%

 

290 bps

Total Curtiss-Wright

 

 

15.7

%

 

 

14.8

%

 

90 bps

 

 

15.1

%

 

 

12.3

%

 

280 bps

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment margins

 

 

17.3

%

 

 

16.2

%

 

110 bps

 

 

16.6

%

 

 

13.9

%

 

270 bps

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts reported under realigned segment reporting structure.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

RECONCILIATION OF REPORTED SALES TO ADJUSTED SALES BY END MARKET (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

 

 

September 30, 2021

 

September 30, 2020

 

2021 vs. 2020

 

 

 

Reported
Sales

 

Adjustments

 

Adjusted
Sales

 

Reported
Sales

 

Adjustments

 

Adjusted
Sales

 

Change in
Adjusted Sales

 

Aerospace & Defense markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace Defense (1)

 

$

116,853

 

 

$

 

 

$

116,853

 

 

$

121,987

 

 

$

748

 

 

$

122,735

 

 

(5

%)

 

Ground Defense (1)

 

55,124