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Curtiss-Wright Reports Fourth Quarter and Full-Year 2021 Financial Results; Full-Year 2022 Guidance Reflects Higher Sales, Operating Margin and EPS

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Company Achieves Record Full-Year Adjusted Operating Margin of 17.0% and Completes Record $350 Million in Annual Share Repurchases

DAVIDSON, N.C., February 23, 2022--(BUSINESS WIRE)--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2021.

Fourth Quarter 2021 Highlights:

  • Reported sales of $667 million, diluted earnings per share (EPS) of $1.94, and free cash flow (FCF) of $219 million;

  • Adjusted sales of $655 million, up 2%;

  • Adjusted diluted EPS of $2.40, up 6%;

  • New orders of $676 million, up 19%;

  • Adjusted FCF of $219 million, with 230% FCF conversion; and

  • Record share repurchases of approximately $258 million.

Full-Year 2021 Highlights:

  • Reported sales of $2.5 billion, operating income of $383 million, operating margin of 15.3%, diluted EPS of $6.58, and FCF of $347 million;

  • Adjusted sales of $2.5 billion, up 7%;

  • Adjusted operating income of $420 million, up 12%;

  • Record Adjusted operating margin of 17.0%, up 70 basis points;

  • Adjusted diluted EPS of $7.34, up 11%;

  • New orders of $2.5 billion, up 11%; Backlog up 3%;

  • Adjusted FCF of $347 million, with 116% FCF conversion; and

  • Record annual share repurchases of $350 million.

"Curtiss-Wright delivered strong fourth quarter results with better-than-expected profitability, strong free cash flow and tremendous order growth," said Lynn M. Bamford, President and CEO of Curtiss-Wright Corporation. "For the full year, we grew sales by 7% to nearly $2.5 billion, in line with our expectations, as we leveraged the strength and resilience of our combined portfolio to minimize the impact of the challenging supply chain environment. I’m proud of the team’s focus and continued strong execution of our operational excellence initiatives, which enabled us to generate 70 basis points in full-year operating margin expansion and meet our 17% operating margin objective one full year ahead of schedule."

"We continue to utilize our strong and healthy balance sheet to implement a disciplined capital deployment strategy. Throughout the past year, we delivered on our commitment to drive returns to our shareholders by executing record annual share repurchases of $350 million. We also recently announced our pending acquisition of Safran’s aerospace arresting systems business for $240 million, which will increase the breadth of our global defense portfolio and is expected to yield significant opportunities for revenue growth"

"Over the past few weeks, we resolved two significant legacy matters. First, we have reached an agreement with Westinghouse to settle all outstanding legal matters covering both the U.S. and China AP1000 Reactor Coolant Pump (RCP) contracts dating back to 2007. As a result, we have secured Westinghouse’s commitment to Curtiss-Wright’s RCP technology in future AP1000 power plants globally, including their next multi-unit project in Eastern Europe. We now have a clear path moving forward and the potential to generate new RCP orders within the next three to five years. Second, we recently completed the divestiture of the German valves business which had been classified as held for sale since the fourth quarter of 2020. We are pleased to move past these matters with a well-defined focus on advancing our strategic priorities to generate long-term profitable growth."

"Looking to 2022, we are projecting total sales growth of 3% to 5% driven by growth in all of our A&D and Commercial markets, continued operating margin expansion, and double-digit Adjusted diluted EPS growth of 10% to 12%. We remain on track to achieve our 3-year financial targets for 2023 that we communicated at last year’s investor day and successfully execute on our Pivot to Growth strategy to drive long-term shareholder value."

Fourth Quarter 2021 Operating Results

(In millions)

Q4-2021

Q4-2020

Change

Reported

Sales

$

667

$

668

0%

Operating income

$

105

$

76

38%

Operating margin

15.8%

11.4%

440 bps

Adjusted (1)

Sales

$

655

$

641

2%

Operating income

$

129

$

126

2%

Operating margin

19.7%

19.7%

-

(1)

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

  • Adjusted sales of $655 million, up $14 million, or 2%;

  • Total Aerospace & Defense (A&D) market sales were flat, while total Commercial market sales increased 6%;

  • In our A&D markets, strong double-digit growth in commercial aerospace and the contribution from the PacStar acquisition in ground defense were offset by reductions in the aerospace defense and naval defense markets due to the timing of sales and ongoing supply chain headwinds;

  • In our Commercial markets, we experienced continued strong demand in the general industrial market, as well as higher sales within the power & process markets, despite the wind down on the China Direct AP1000 program;

  • Adjusted operating income of $129 million improved 2%, while Adjusted operating margin remained flat at 19.7%. Higher operating income was driven by favorable overhead absorption on higher revenues in our Aerospace & Industrial and Defense Electronics segments, as well as the benefits of our ongoing company-wide operational excellence initiatives. These improvements were partially offset by lower revenues and unfavorable mix in the Naval & Power segment; and

  • Non-segment expenses of $12 million, up $2 million, primarily due to higher environmental costs.

Fourth Quarter 2021 Segment Performance

Aerospace & Industrial

(In millions)

Q4-2021

Q4-2020

Change

Reported

Sales

$

210

$

213

(1%)

Operating income

$

40

$

34

17%

Operating margin

19.0%

16.0%

300 bps

Adjusted (1)

Sales

$

208

$

192

8%

Operating income

$

40

$

34

20%

Operating margin

19.5%

17.5%

200 bps

(1)

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

  • Adjusted sales of $208 million, up approximately $15 million, or 8%;

  • Higher general industrial market revenue was principally driven by the continued strong rebound in demand for industrial vehicle products for on- and off-highway platforms;

  • Higher commercial aerospace market revenue reflected higher sales of sensors products and surface treatment services on narrowbody platforms, partially offset by lower actuation sales on widebody platforms;

  • Aerospace defense market revenue increased primarily due to higher sales of actuation products and surface treatment services on the F-35 program; and

  • Adjusted operating income of $40 million, up 20% from the prior year, while Adjusted operating margin increased 200 basis points to 19.5%, reflecting strong absorption on higher sales and the benefits of our ongoing operational excellence initiatives.

Defense Electronics

(In millions)

Q4-2021

Q4-2020

Change

Reported

Sales

$

199

$

181

10%

Operating income

$

52

$

35

50%

Operating margin

26.3%

19.2%

710 bps

Adjusted (1)

Sales

$

200

$

182

10%

Operating income

$

53

$

45

17%

Operating margin

26.5%

24.9%

160 bps

(1)

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

  • Adjusted sales of $200 million, up approximately $17 million, or 10%;

  • Lower aerospace defense market revenues reflected the timing of sales of our embedded computing equipment on various programs, as certain revenues shifted into 2022 due to ongoing supply chain headwinds. This decrease was partially offset by higher production revenues on the F-35 program;

  • Higher ground defense market revenue was principally driven by the contribution from the PacStar acquisition for tactical battlefield communications equipment;

  • Higher commercial aerospace market revenue reflected increased sales of avionics and electronic systems on various domestic and international platforms; and

  • Adjusted operating income of $53 million, up 17% from the prior year, while Adjusted operating margin increased 160 basis points to 26.5%, as solid absorption on higher sales and favorable mix in defense electronics more than offset unfavorable foreign currency translation.

Naval & Power

(In millions)

Q4-2021

Q4-2020

Change

Reported

Sales

$

258

$

274

(6%)

Operating income

$

25

$

18

43%

Operating margin

9.7%

6.4%

330 bps

Adjusted (1)

Sales

$

248

$

267

(7%)

Operating income

$

48

$

57

(16%)

Operating margin

19.3%

21.4%

(210 bps)

(1)

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

  • Adjusted sales of $248 million, down $19 million, or 7%;

  • Naval defense market revenue declines primarily reflected lower revenues on the Virginia-class submarine program, partially offset by higher revenues on the CVN-81 aircraft carrier program;

  • Higher power & process market sales reflected solid industrial valve demand in the oil and gas market and higher domestic nuclear aftermarket revenues, partially offset by the timing of production on the China Direct AP1000 program; and

  • Adjusted operating income of $48 million, down 16% from the prior year, while Adjusted operating margin decreased 210 basis points to 19.3%, driven by unfavorable absorption on lower revenues and unfavorable mix in the power & process market.

Free Cash Flow

(In millions)

Q4-2021

Q4-2020

Change

Net cash provided by operating activities

$

232

$

257

(10%)

Capital expenditures

(13)

(11)

(19%)

Reported free cash flow

$

219

$

246

(11%)

Adjusted free cash flow (1)

$

219

$

256

(15%)

(1)

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

  • Reported free cash flow of $219 million decreased approximately $28 million, or 11%, primarily due to higher working capital and higher taxes;

  • Capital expenditures increased $2 million compared with the prior year, primarily due to higher capital investments within the Naval & Power segment; and

  • Adjusted free cash flow of $219 million decreased $37 million, or approximately 15%, compared with record free cash flow achieved in the prior year period.

New Orders and Backlog

  • New orders of $676 million increased 19% and generated an overall book-to-bill that exceeded 1.0x, principally driven by solid demand within our A&D markets for our commercial aerospace and naval defense products; and

  • Backlog of $2.2 billion, up 3% from December 31, 2020, reflects higher demand in both our A&D and commercial markets.

Share Repurchase and Dividends

  • During the fourth quarter, the Company repurchased 1.96 million shares of its common stock for approximately $258 million;

  • During full-year 2021, the Company repurchased 2.70 million shares for a record $350 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

  • In January 2022, the Company completed the sale of its German valves business.

Other Items – Westinghouse Legal Settlement

  • In February 2022, the Company and Westinghouse reached an agreement to settle all open claims and counterclaims under the AP1000 U.S. and China contracts. Based on the terms of the settlement, the Company recorded full-year charges of approximately $13 million related to this matter for the year ended December 31, 2021; and

  • The Company’s 2021 non-GAAP results have been adjusted for this legal matter.

Full-Year 2022 Guidance

The Company’s full-year 2022 Adjusted financial guidance(1) is as follows:

(In millions, except EPS)

2022 Adjusted
Non-GAAP Guidance

% Chg vs 2021

Total Sales

$2,530 - $2,580

Up 3% - 5%

Operating Income

$432 - $446

Up 3% - 6%

Operating Margin

17.1% - 17.3%

Up 10 - 30 bps

Diluted EPS

$8.05 - $8.25

Up 10% - 12%

Free Cash Flow(2)

$345 - $365

Up 0% - 5%

(1)

Reconciliations of Reported to Adjusted 2021 operating results and 2022 financial guidance are available in the Appendix.

(2)

2022 Adjusted Free Cash Flow includes $50 - $60 million in capital expenditures compared with $41 million in 2021.

A more detailed breakdown of the Company’s 2022 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 2021 financial results and expectations for 2022 guidance at 10:00 a.m. ET on Thursday, February 24, 2022. 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

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

($'s in thousands, except per share data)

Three Months Ended

Year Ended

December 31,

December 31,

2021

2020

2021

2020

Product sales

$

556,911

$

583,314

$

2,109,617

$

2,041,086

Service sales

109,847

85,130

396,314

350,250

Total net sales

666,758

668,444

2,505,931

2,391,336

Cost of product sales

340,432

373,676

1,330,191

1,319,562

Cost of service sales

64,454

52,967

242,384

230,547

Total cost of sales

404,886

426,643

1,572,575

1,550,109

Gross profit

261,872

241,801

933,356

841,227

Research and development expenses

21,814

20,653

88,489

74,816

Selling expenses

27,729

27,887

116,956

109,537

General and administrative expenses

96,532

72,773

326,140

303,288

Impairment of assets held for sale

10,432

33,043

19,088

33,043

Restructuring expenses

10,965

31,695

Operating income

105,365

76,480

382,683

288,848

Interest expense

10,146

10,486

40,240

35,545

Other income, net

3,157

2,904

12,067

9,748

Earnings before income taxes

98,376

68,898

354,510

263,051

Provision for income taxes

(21,797

)

(14,905

)

(87,351

)

(61,659

)

Net earnings

$

76,579

$

53,993

$

267,159

$

201,392

Net earnings per share:

Basic earnings per share

$

1.95

$

1.31

$

6.61

$

4.83

Diluted earnings per share

$

1.94

$

1.30

$

6.58

$

4.80

Dividends per share

$

0.18

$

0.17

$

0.71

$

0.68

Weighted average shares outstanding:

Basic

39,309

41,209

40,417

41,738

Diluted

39,524

41,459

40,602

41,999

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

December 31,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

171,004

$

198,248

Receivables, net

647,148

588,718

Inventories, net

411,567

428,879

Assets held for sale

10,988

27,584

Other current assets

67,101

57,395

Total current assets

1,307,808

1,300,824

Property, plant, and equipment, net

360,031

378,200

Goodwill

1,463,026

1,455,137

Other intangible assets, net

538,077

609,630

Operating lease right-of-use assets, net

143,613

150,898

Prepaid pension asset

256,422

92,531

Other assets

34,568

34,114

Total assets

$

4,103,545

$

4,021,334

Liabilities

Current liabilities:

Current portion of long-term and short term debt

$

$

100,000

Accounts payable

211,640

201,237

Accrued expenses

144,466

140,200

Income taxes payable

3,235

6,633

Deferred revenue

260,157

253,411

Liabilities held for sale

12,655

10,141

Other current liabilities

102,714

98,755

Total current liabilities

734,867

810,377

Long-term debt, net

1,050,610

958,292

Deferred tax liabilities

147,349

115,007

Accrued pension and other postretirement benefit costs

91,329

98,345

Long-term operating lease liability

127,152

133,069

Long-term portion of environmental reserves

...

13,656

15,422

Other liabilities

112,092

103,248

Total liabilities

2,277,055

2,233,760

Stockholders' equity

Common stock, $1 par value