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Curtiss-Wright Reports Second Quarter 2022 Financial Results and Raises Full-year 2022 Guidance

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DAVIDSON, N.C., August 03, 2022--(BUSINESS WIRE)--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the second quarter ended June 30, 2022.

Second Quarter 2022 Highlights:

  • Reported sales of $609 million, operating income of $98 million, operating margin of 16.1%, and diluted earnings per share (EPS) of $1.83;

  • Adjusted operating margin of 16.1%, up 50 basis points;

  • Adjusted diluted EPS of $1.83, up 18%;

  • New orders of $776 million, up 13%, reflecting strong Aerospace & Defense (A&D) market demand, and book-to-bill of 1.27;

  • Backlog of $2.4 billion, up 9% year-to-date;

  • Reported free cash flow (FCF) of $22 million; and

  • Share repurchases of approximately $12 million.

Full-Year 2022 Adjusted Guidance:

  • Full-year 2022 guidance updated to include the acquisition of the Safran aerospace arresting systems business (SAA) that was completed on June 30, 2022; the business is expected to generate partial year sales of approximately $40 million within the Naval & Power segment and also be accretive to full-year Adjusted diluted EPS;

  • Sales increased to new range of 4% to 6% growth (previously 3% to 5%);

  • Adjusted operating income increased to new range of 5% to 7% growth (previously 3% to 6%) to reflect organic improvements and the contribution from SAA;

  • Maintained Adjusted operating margin range of 17.1% to 17.3%, up 10 to 30 basis points compared with the prior year;

  • Adjusted diluted EPS increased by $0.05 to new range of $8.10 to $8.30, up 10% to 13%; and

  • Maintained free cash flow range of $345 to $365 million, reflecting greater than 110% FCF conversion.

"Curtiss-Wright delivered solid second quarter results, as overall sales were in-line with our expectations and our ongoing focus on operational execution enabled us to generate 50 basis points in operating margin expansion. As a result, Adjusted diluted EPS of $1.83 exceeded our expectations in the second quarter," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. "We also experienced strong order activity, as bookings increased 13% year over year, yielding a book-to-bill of 1.27, driven by increased demand in our defense and commercial aerospace markets."

"Looking ahead to the remainder of 2022, although near-term headwinds from ongoing supply chain disruption continue to impact the timing of revenue within our defense markets, we are encouraged by the improving trends in our commercial markets which provides confidence in achieving our full-year outlook. We raised our full-year 2022 guidance for total sales growth to a new range of 4% to 6% to reflect the contribution of the recently completed SAA acquisition, and we continue to anticipate solid organic growth of 3% to 5% in our A&D and Commercial markets. We also expect continued operating margin expansion and double-digit Adjusted diluted EPS growth of 10% to 13%, as we successfully execute on our Pivot to Growth strategy to drive long-term shareholder value."

Financing of $300 Million in Senior Notes:

  • On July 29, 2022, the Company priced a private placement debt offering of $300 million for senior notes, consisting of $200 million 4.49% notes due 2032 and $100 million 4.64% notes due 2034; The offering is expected to close in the fourth quarter; and

  • Curtiss-Wright maintains a flexible and conservative capital structure, and has significant capacity for acquisitions, returns to shareholders and other corporate needs.

Second Quarter 2022 Operating Results

(In millions)

Q2-2022

Q2-2021

Change

Reported

Sales

$

609

$

621

(2

%)

Operating income

$

98

$

95

4

%

Operating margin

16.1

%

15.2

%

90 bps

Adjusted (1)

Sales

$

609

$

609

0

%

Operating income

$

98

$

95

3

%

Operating margin

16.1

%

15.6

%

50 bps

(1)

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

  • Adjusted sales of $609 million were flat compared with the prior year;

  • Total A&D market sales decreased 3%, while total Commercial market sales increased 6%;

  • In our A&D markets, we experienced reduced sales in our defense markets due to ongoing supply chain headwinds principally for defense electronics components and the timing of naval defense revenues, which were partially offset by modest growth in the commercial aerospace market;

  • In our Commercial markets, we experienced solid sales growth within the power & process market, despite the wind down on the China Direct AP1000 program, as well as solid mid-single-digit growth in the general industrial market; and

  • Adjusted operating income of $98 million increased 3%, while Adjusted operating margin increased 50 basis points to 16.1%, principally driven by increased profitability in the Naval & Power segment, as well as the benefits of our ongoing company-wide operational excellence initiatives; These increases were partially offset by unfavorable overhead absorption on lower revenues in our Defense Electronics segment.

Second Quarter 2022 Segment Performance

Aerospace & Industrial

(In millions)

Q2-2022

Q2-2021

Change

Reported

Sales

$

209

$

200

4

%

Operating income

$

32

$

32

2

%

Operating margin

15.6

%

16.0

%

(40 bps)

Adjusted (1)

Sales

$

209

$

194

8

%

Operating income

$

32

$

30

7

%

Operating margin

15.6

%

15.7

%

(10 bps)

(1)

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

  • Adjusted sales of $209 million, up $15 million, or 8%;

  • Higher commercial aerospace market revenue reflected strong demand for actuation and sensors products, as well as surface treatment services, on numerous narrowbody and widebody platforms;

  • Higher general industrial market revenue was driven by increased sales of industrial vehicle products, principally serving off-highway and specialty platforms;

  • Lower aerospace defense market revenue principally reflected reduced sales of actuation and sensors products on various fighter jet programs; and

  • Adjusted operating income was $32 million, up 7% from the prior year, while Adjusted operating margin decreased 10 basis points to 15.6%, as favorable absorption on strong Commercial market sales and the benefits of our ongoing operational excellence initiatives were offset by higher research and development investments.

Defense Electronics

(In millions)

Q2-2022

Q2-2021

Change

Reported

Sales

$

150

$

162

(8

%)

Operating income

$

24

$

29

(16

%)

Operating margin

16.4

%

18.0

%

(160 bps)

Adjusted (1)

Sales

$

150

$

163

(8

%)

Operating income

$

24

$

31

(21

%)

Operating margin

16.4

%

18.9

%

(250 bps)

(1)

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

  • Adjusted sales of $150 million, down $14 million, or 8%, principally reflected the timing of sales within our aerospace and ground defense markets due to ongoing supply chain headwinds and the delayed signing of the FY22 defense budget;

  • Higher naval defense market revenue primarily reflected increased revenues on the Virginia-class submarine program;

  • Lower commercial aerospace market revenue reflected decreased sales of avionics and flight test equipment on various domestic and international platforms; and

  • Adjusted operating income was $24 million, down 21% from the prior year, while adjusted operating margin decreased 250 basis points to 16.4%, primarily reflecting unfavorable absorption on lower A&D revenues.

Naval & Power

(In millions)

Q2-2022

Q2-2021

Change

Reported

Sales

$

251

$

259

(3

%)

Operating income

$

50

$

43

16

%

Operating margin

19.9

%

16.6

%

330 bps

Adjusted (1)

Sales

$

251

$

252

0

%

Operating income

$

50

$

43

15

%

Operating margin

19.9

%

17.2

%

270 bps

(1)

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

  • Adjusted sales of $251 million were essentially flat compared with the prior year period;

  • Naval defense market revenue declines primarily reflected lower revenues on the CVN-80 aircraft carrier and Virginia-class submarine programs, partially offset by higher revenues on the CVN-81 aircraft carrier and Columbia-class submarine programs;

  • Higher power & process market revenues reflected strong growth in industrial valve sales in the process market as well as higher nuclear aftermarket revenues supporting the maintenance of existing operating reactors; Those increases were partially offset by the timing of production on the China Direct AP1000 program; and

  • Adjusted operating income was $50 million, up 15% from the prior year, while adjusted operating margin increased 270 basis points to 19.9%, primarily driven by favorable mix in the naval defense and process markets, as well as the benefits of our ongoing operational excellence initiatives.

Free Cash Flow

(In millions)

Q2-2022

Q2-2021

Change

Net cash provided by operating activities

$

31

$

75

(59

%)

Capital expenditures

(9

)

(9

)

(7

%)

Reported free cash flow

$

22

$

66

(66

%)

Adjusted free cash flow (1)

$

22

$

66

(66

%)

(1)

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

  • Reported free cash flow of $22 million decreased $43 million, primarily due to the timing of defense revenues and higher working capital;

  • Adjusted free cash flow of $22 million; and

  • Capital expenditures were essentially flat compared with the prior year.

New Orders and Backlog

  • New orders of $776 million increased 13% and generated a strong book-to-bill of 1.27, principally driven by strong demand for naval defense and commercial aerospace products within our A&D markets, and for nuclear aftermarket and process products within our Commercial markets; and

  • Backlog of $2.4 billion, up 9% from December 31, 2021, reflects higher demand in both our A&D and commercial markets.

Share Repurchase and Dividends

  • During the second quarter, the Company repurchased 87,412 shares of its common stock for approximately $12 million; and

  • The Company also declared and paid a quarterly dividend of $0.19 a share, an increase of 6% from the previous quarter.

Full-Year 2022 Guidance

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

($ in millions, except EPS)

2022 Adjusted
Non-GAAP Guidance
(Prior)

2022 Adjusted
Non-GAAP Guidance
(Current)

% Chg vs 2021

Total Sales

$2,530 - $2,580

$2,570 - $2,620

Up 4% - 6%

Operating Income

$432 - $446

$439 - $452

Up 5% - 7%

Operating Margin

17.1% - 17.3%

17.1% - 17.3%

Up 10 - 30 bps

Diluted EPS

$8.05 - $8.25

$8.10 - $8.30

Up 10% - 13%

Free Cash Flow

$345 - $365

$345 - $365

Up 0% - 5%

(1)

Reconciliations of Reported to Adjusted 2021 operating results and 2022 financial guidance are available in the Appendix. Adjusted guidance includes the contribution from the SAA acquisition to the Company's second half 2022 performance.

**********

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 second quarter 2022 financial results and updates to 2022 guidance at 10:00 a.m. ET on Thursday, August 4, 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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

Product sales

$

505,416

$

515,392

$

958,837

$

1,024,367

Service sales

103,941

106,103

209,981

194,187

Total net sales

609,357

621,495

1,168,818

1,218,554

Cost of product sales

316,389

331,881

610,916

661,335

Cost of service sales

64,454

64,895

127,986

122,743

Total cost of sales

380,843

396,776

738,902

784,078

Gross profit

228,514

224,719

429,916

434,476

Research and development expenses

23,868

23,194

44,417

45,057

Selling expenses

30,407

29,564

58,499

59,160

General and administrative expenses

76,134

77,378

163,734

150,610

Loss on divestiture

4,651

Operating income

98,105

94,583

158,615

179,649

Interest expense

9,788

10,180

19,318

20,139

Other income, net

4,555

440

7,552

5,283

Earnings before income taxes

92,872

84,843

146,849

164,793

Provision for income taxes

(22,000

)

(23,435

)

(35,292

)

(43,916

)

Net earnings

$

70,872

$

61,408

$

111,557

$

120,877

Net earnings per share:

Basic earnings per share

$

1.84

$

1.50

$

2.90

$

2.95

Diluted earnings per share

$

1.83

$

1.49

$

2.89

$

2.94

Dividends per share

$

0.19

$

0.18

$

0.37

$

0.35

Weighted-average shares outstanding:

Basic

38,429

40,915

38,438

40,921

Diluted

38,654

41,088

38,657

41,092

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

June 30,

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

$

171,414

$

171,004

Receivables, net

699,632

647,148

Inventories, net

482,790

411,567

Assets held for sale

10,988

Other current assets

84,584

67,101

Total current assets

1,438,420

1,307,808

Property, plant, and equipment, net

348,062

360,031

Goodwill

1,531,999

1,463,026

Other intangible assets, net

638,873

538,077

Operating lease right-of-use assets, net

145,325

143,613

Prepaid pension asset

263,719

256,422

Other assets

36,130

34,568

Total assets

$

4,402,528

$

4,103,545

Liabilities

Current liabilities:

Current portion of long-term debt

$

202,500

$

Accounts payable

171,589

211,640

Accrued expenses

133,706

147,701

Deferred revenue

215,188

260,157

Liabilities held for sale

12,655

Due to seller

247,215

Other current liabilities

89,009

102,714

Total current liabilities

1,059,207

734,867

Long-term debt

1,006,577

1,050,610

Deferred tax liabilities, net

149,213

147,349

Accrued pension and other postretirement benefit costs

84,404

91,329

...