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

Rhea-AI Summary

Curtiss-Wright Corporation (NYSE: CW) reported strong Q3 2021 results with sales of $621 million, operating income of $98 million, and adjusted diluted EPS of $1.88, a 6% increase year-over-year. Free cash flow reached $97 million, showing a 76% rise. The company authorized an additional $400 million for share repurchases, bringing total authorization to $550 million. New orders were up 13% to $617 million, with backlog at $2.2 billion, demonstrating solid demand in Aerospace & Defense and commercial markets. Adjusted EPS guidance for 2021 was raised to $7.20-$7.35.

Positive

• Sales increased by 12% to $614 million.
• Operating income rose 12% to $108 million.
• Free cash flow increased by 76% to $97 million.
• New orders increased by 13% to $617 million.
• Total backlog grew by 2% to $2.2 billion.
• Share repurchase authorization increased to $550 million.

Negative

• Increased research and development expenses by $4 million.
• Adjusted operating margin decreased by 270 basis points in Defense Electronics segment.

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				1,080				56,204				20,519				—				20,519				174	%
Naval Defense		175,800				—				175,800				165,524				—				165,524				6	%
Commercial Aerospace (2)		67,461				(381		)		67,080				70,943				(16,524		)		54,419				23	%
Total Aerospace & Defense		$	415,238			$	699			$	415,937			$	378,973			$	(15,776	)		$	363,197			15	%
Commercial markets:
Power & Process (3)		112,736				(7,472		)		105,264				113,919				(5,896		)		108,023				(3	%)
General Industrial		92,645				—				92,645				78,722				—				78,722				18	%
Total Commercial		205,381				(7,472		)		197,909				192,641				(5,896		)		186,745				6	%
Total Curtiss-Wright		$	620,619			$	(6,773	)		$	613,846			$	571,614			$	(21,672	)		$	549,942			12	%
		Nine Months Ended												Nine 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)		$	327,847			$	—			$	327,847			$	333,120			$	949			$	334,069			(2	%)
Ground Defense (1)		159,090				3,240				162,330				63,205				—				63,205				157	%
Naval Defense		531,429				—				531,429				496,157				—				496,157				7	%
Commercial Aerospace (2)		196,285				(8,764		)		187,521				242,708				(46,929		)		195,779				(4	%)
Total Aerospace & Defense		$	1,214,651			$	(5,524	)		$	1,209,127			$	1,135,190			$	(45,980	)		$	1,089,210			11	%
Commercial markets:
Power & Process (3)		343,573				(20,468		)		323,105				350,632				(18,604		)		332,028				(3	%)
General Industrial		280,949				—				280,949				237,070				—				237,070				19	%
Total Commercial		$	624,522			$	(20,468	)		$	604,054			$	587,702			$	(18,604	)		$	569,098			6	%
Total Curtiss-Wright		$	1,839,173			$	(25,992	)		$	1,813,181			$	1,722,892			$	(64,584	)		$	1,658,308			9	%
(1) Excludes first year purchase accounting adjustments.
(2) Excludes our build-to-print actuation product line supporting the Boeing 737 MAX program which we exited in the fourth quarter of 2020.
(3) Excludes our German valves business which was classified as held for sale in the fourth quarter of 2020.

Use 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 non-GAAP measures provide investors with additional insight into the Company’s ongoing business performance. 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.

The Company’s presentation of its financials and guidance includes an Adjusted (non-GAAP) view that excludes (i) the results of a build-to-print actuation product line supporting the Boeing 737 MAX program which we exited and a German valves business classified as held for sale, both in the fourth quarter of 2020; (ii) significant restructuring costs in 2020 associated with its operations; (iii) a non-cash impairment of capitalized development costs related to a commercial aerospace program in the prior period; (iv) first year purchase accounting costs in both periods associated with its acquisitions, including one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; and (v) one-time transition and IT security costs, and capital investments, specifically associated with the relocation of the DRG business in the Naval & Power segment in the prior period. Transition costs include relocation of employees and equipment as well as overlapping facility and labor costs associated with the relocation. We believe this Adjusted view will provide 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. 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 (EPS) under GAAP excluding: (i) the impact of first year purchase accounting costs in both periods associated with acquisitions, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) one-time transition and IT security costs associated with the relocation of a business in the prior year period; (iii) the non-cash impairment of capitalized development costs related to a commercial aerospace program in the prior year period; (iv) significant restructuring costs in 2020 associated with its operations, (v) a build-to-print actuation product line supporting the Boeing 737 MAX program which we exited, and (vi) the results of a German valves business classified as held for sale in the fourth quarter of 2020.

Organic Sales and Organic Operating Income

The Corporation discloses organic sales and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic sales and organic operating income are defined as sales and operating income excluding the impact of restructuring costs, impairment of assets held for sale, foreign currency fluctuations and contributions from acquisitions made during the last twelve months.

	Three Months Ended
	September 30,
	2021 vs. 2020
	Aerospace & Industrial				Defense Electronics				Naval & Power				Total Curtiss-Wright
	Sales		Operating income		Sales		Operating income		Sales		Operating income		Sales		Operating income
Organic	3%		19%		(3%)		(2%)		3%		11%		1%		7%
Acquisitions	0%		0%		25%		21%		0%		0%		7%		9%
Impairment of assets held for sale	0%		0%		0%		0%		0%		(26%)		0%		(10%)
Restructuring	0%		13%		0%		1%		0%		22%		0%		13%
Foreign Currency	1%		(3%)		0%		(4%)		1%		(1%)		1%		(4%)
Total	4%		29%		22%		16%		4%		6%		9%		15%
	Nine Months Ended
	September 30,
	2021 vs. 2020
	Aerospace & Industrial				Defense Electronics				Naval & Power				Total Curtiss-Wright
	Sales		Operating income		Sales		Operating income		Sales		Operating income		Sales		Operating income
Organic	(5%)		12%		(2%)		14%		4%		22%		0%		19%
Acquisitions	0%		0%		25%		16%		0%		0%		6%		6%
Impairment of assets held for sale	0%		0%		0%		0%		0%		(10%)		0%		(4%)
Restructuring	0%		14%		0%		4%		0%		18%		0%		13%
Foreign Currency	2%		(1%)		0%		(7%)		1%		(1%)		1%		(3%)
Total	(3%)		25%		23%		27%		5%		29%		7%		31%

Free Cash Flow and Free Cash Flow Conversion

The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as net cash provided by operating activities less capital expenditures. Adjusted free cash flow for 2020 excludes: (i) a capital investment in the Naval & Power segment related to the new, state-of-the-art naval facility principally for DRG; (ii) a voluntary contribution to the Company’s corporate defined benefit pension plan made in the first quarter of 2020; and (iii) the cash impact from restructuring in 2020. The Corporation discloses adjusted free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as adjusted free cash flow divided by adjusted net earnings.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
($'s in thousands)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Net cash provided by operating activities		$	107,285			$	55,993			$	155,761			$	3,784
Capital expenditures		(10,087		)		(7,017		)		(27,858		)		(36,341		)
Free cash flow		$	97,198			$	48,976			$	127,903			$	(32,557	)
Voluntary pension contribution		—				—				—				150,000
Adjustment to capital expenditures (DRG facility investment)		—				437				—				10,112
Restructuring		—				5,935				—				10,676
Adjusted free cash flow		$	97,198			$	55,348			$	127,903			$	138,231
Adjusted free cash flow conversion		127		%		75		%		63		%		76		%

	CURTISS-WRIGHT CORPORATION
	2021 Guidance (New Segment Structure)
	As of November 3, 2021
	($'s in millions, except per share data)
			2020 Adjusted (Non-GAAP)(1)				Exiting Non-Core Operations				2020 Adjusted (2,4) (Non-GAAP)				2021 Reported Guidance (GAAP)								Exiting Non-Core Operations			2021 Adjustments (3) (Non-GAAP)				2021 Adjusted Guidance (3) (Non-GAAP)
															Low				High											Low			High				2021 Chg vs 2020 Adjusted
	Sales:
	Aerospace & Industrial		$	805			$	(67	)		$	738			$	774			$	789			$	(14	)	$	-			$	760		$	775			3 - 5%
	Defense Electronics			611				-				611				742				756				-			4				745			760			22 - 24%
	Naval & Power			977				(26	)			951				991				1,011				(31	)		-				960			980			1 - 3%
	Total sales		$	2,393			$	(93	)		$	2,300			$	2,507			$	2,556			$	(45	)	$	4			$	2,465		$	2,515			7 to 9%
	Operating income:
	Aerospace & Industrial		$	114			$	(16	)		$	98			$	117			$	120			$	(2	)	$	-			$	115		$	118			17 - 21%
	Defense Electronics			144				-				144				153				158				-			6				159			164			10 - 13%
	Naval & Power			171				-				171				166				171				8			-				174			179			2 - 5%
	Total segments			429				(16	)			413				436				449				6			6				448			461
	Corporate and other			(38	)			-				(38	)			(37	)			(39	)			-			-				(37	)		(39	)
	Total operating income		$	391			$	(16	)		$	375			$	398			$	409			$	6		$	6			$	411		$	421			9 to 12%
	Interest expense		$	(36	)		$	-			$	(36	)		$	(40	)		$	(41	)		$	-		$	-			$	(40	)	$	(41	)
	Other income, net			21				-				21				13				13				-			3				16			17
	Earnings before income taxes			377				(16	)			361				372				381				6			9				387			397
	Provision for income taxes			(88	)			4				(85	)			(89	)			(92	)			(1	)		(2	)			(93	)		(95	)
	Net earnings		$	289			$	(12	)		$	277			$	283			$	290			$	5		$	7			$	295		$	302
	Diluted earnings per share		$	6.87			$	(0.29	)		$	6.59			$	6.91			$	7.06			$	0.11		$	0.17			$	7.20		$	7.35			9 to 12%
	Diluted shares outstanding			42.0								42.0				41.0				41.0											41.0			41.0
	Effective tax rate			23.4	%							23.4	%			24.0	%			24.0	%										24.0	%		24.0	%
	Operating margins:
	Aerospace & Industrial			14.2	%			NM				13.3	%			15.1	%			15.2	%		+10 bps				-				15.1	%		15.3	%		180 to 200 bps
	Defense Electronics			23.6	%			NM				23.6	%			20.6	%			20.8	%			-		+70 bps					21.3	%		21.5	%		(210 to 230 bps)
	Naval & Power			17.5	%			NM				18.0	%			16.8	%			16.9	%		+140 bps				-				18.2	%		18.3	%		20 to 30 bps
	Total operating margin			16.3	%			NM				16.3	%			15.9	%			16.0	%		+60 bps			+20 bps					16.7	%		16.8	%		40 to 50 bps
	Free cash flow		$	394			$	-			$	394			$	330			$	360				-			-			$	330		$	360

Notes: Full year amounts may not add due to rounding. All financial information by reportable segment for the 2020 and 2021 reporting periods reflects the Corporation’s first quarter 2021 segment reorganization.

(1) A reconciliation of our 2020 GAAP to our 2020 Non-GAAP Adjusted figures are provided in our February 24, 2021 press release.

(2) 2020 Adjusted financials are defined as Reported Sales Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding restructuring costs; first year purchase accounting costs, specifically one-time backlog amortization and transaction costs associated with acquisitions; a non-cash impairment of capitalized development costs related to a commercial aerospace program; one-time transition and IT security costs related to the relocation of the DRG business; and a $10 million non-cash currency translation loss (within non-operating income) related to the liquidation of a foreign legal entity. 2020 financial results excludes our build-to-print actuation product line supporting the Boeing 737 MAX program which we exited, and the results of our German valves business which was classified as held for sale in the fourth quarter of 2020 and resulted in an impairment loss of $33 million.

(3) 2021 Adjusted financials are defined as Reported Sales, Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding our build-to-print actuation product line supporting the Boeing 737 MAX program which we exited; the results of our German valves business which was classified as held for sale in the fourth quarter of 2020 and resulted in an additional impairment loss of $9 million; the impact of first year purchase accounting costs, specifically one-time backlog amortization and transaction costs associated with acquisitions; and a one-time, $3 million pension settlement charge related to the retirement of two former executives (within non-operating income).

(4) Free Cash Flow is defined as cash flow from operations less capital expenditures. 2020 Adjusted Free Cash Flow guidance excludes a $150 million voluntary contribution made in January to the Company’s corporate defined benefit pension plan, a $20 million cash impact from restructuring, and a $10 million capital investment related to the new, state-of-the-art naval facility principally for DRG.

	CURTISS-WRIGHT CORPORATION
	2021 Sales Growth Guidance by End Market
	As of November 3, 2021
				2021 % Change vs 2020
	Aerospace & Defense Markets			Current	% Total Sales
	Aerospace Defense			2 - 4%	19%
	Ground Defense			100 - 105%	9%
	Naval Defense			0 - 2%	28%
	Commercial Aerospace			Flat	10%
	Total Aerospace & Defense			7 - 9%	66%
	Commercial Markets
	Power & Process			1 - 3%	18%
	General Industrial			15 - 17%	15%
	Total Commercial			6 - 8%	34%
	Total Curtiss-Wright Sales			7 - 9%	100%
	Note: Amounts may not add due to rounding.
	(1) This table reflects the Company's first quarter 2021 End Market Structure and Realignment, where all Commercial Aerospace market revenues shifted into a newly defined Total Aerospace & Defense market.
	(2) The Power & Process end market is comprised of a) Nuclear and b) Process, while the General Industrial end market is comprised of a) Industrial Vehicles and b) Industrial Automation and Services.
	(3) Based on these changes, all of our general industrial businesses operate within the Aerospace & Industrial segment, and the majority of the Company’s nuclear and process revenues operate within the Naval & Power segment.

About Curtiss-Wright Corporation

Curtiss-Wright Corporation (NYSE:CW) is a global innovative company that delivers highly engineered, critical function products and services to the Aerospace and Defense markets, and to the Commercial markets including Power, Process and General Industrial. Building on the heritage of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of providing reliable solutions through trusted customer relationships. The company employs approximately 8,200 people worldwide. For more information, visit www.curtisswright.com.

Certain statements made in this press release, including statements about future revenue, financial performance guidance, quarterly and annual revenue, net income, operating income growth, future business opportunities, cost saving initiatives, the successful integration of the Company’s acquisitions, future cash flow from operations, and potential impacts of the COVID-19 pandemic are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act") and the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include, but are not limited to: a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; the impact of a global pandemic or national epidemic, and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and subsequent reports filed with the Securities and Exchange Commission.

This press release and additional information are available at www.curtisswright.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103006172/en/

Jim Ryan

(704) 869-4621

Jim.Ryan@curtisswright.com

Source: Curtiss-Wright Corporation

FAQ

What were the Q3 2021 financial results for Curtiss-Wright Corporation (CW)?

Curtiss-Wright reported Q3 2021 sales of $621 million, operating income of $98 million, and adjusted diluted EPS of $1.88.

How much did Curtiss-Wright authorize for share repurchases?

Curtiss-Wright authorized an additional $400 million for share repurchases, totaling $550 million.

What is the adjusted EPS guidance for Curtiss-Wright for 2021?

The adjusted EPS guidance for 2021 was raised to a range of $7.20 to $7.35.

What was the increase in new orders for Curtiss-Wright in Q3 2021?

New orders for Curtiss-Wright increased by 13% to $617 million in Q3 2021.

What were the highlights of Curtiss-Wright's Q3 2021 earnings call?

Highlights include a 12% increase in sales, strong free cash flow of $97 million, and a solid backlog of $2.2 billion.