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Curtiss-Wright Reports Fourth Quarter and Full-Year 2023 Financial Results; Issues Full-Year 2024 Guidance Reflecting Strong Growth in Sales, EPS and Free Cash Flow

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CURTISS-WRIGHT REPORTS FOURTH QUARTER AND FULL-YEAR 2023 FINANCIAL RESULTS; ISSUES FULL-YEAR 2024 GUIDANCE REFLECTING STRONG GROWTH IN SALES, EPS AND FREE CASH FLOW

February 14, 2024

 

Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2023.

Fourth Quarter 2023 Highlights:

  • Reported sales of $786 million, up 4%, operating income of $161 million, operating margin of 20.4%, and diluted earnings per share (EPS) of $3.11;
  • Adjusted operating income of $163 million, up 2%;
  • Adjusted operating margin of 20.8%;
  • Adjusted diluted EPS of $3.16, up 8%; and
  • Free cash flow (FCF) of $270 million, generating 221% Adjusted FCF conversion.

Full-Year 2023 Highlights:

  • Reported sales of $2.8 billion, up 11%, operating income of $485 million, operating margin of 17.0%, diluted EPS of $9.20 and Reported FCF of $403 million;
  • Adjusted operating income of $494 million, up 11%;
  • Adjusted operating margin of 17.4%;
  • Adjusted diluted EPS of $9.38, up 15%;
  • Adjusted FCF of $413 million, generating 114% Adjusted FCF conversion;
  • Total share repurchases of $50 million;
  • New orders of $3.1 billion, up 5%, reflecting solid demand in Aerospace & Defense (A&D) and Commercial markets, and book-to-bill of 1.1x; and
  • Backlog of $2.9 billion, up 9%;

"Curtiss-Wright ended the year with a strong fourth quarter financial performance that reflected better-than-expected sales growth, record quarterly Adjusted diluted EPS of $3.16 and strong free cash flow," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation.

"Our full-year 2023 results were highlighted by another year of strong operational performance, as we delivered record high sales and operating income driven by 10% organic growth, and improved profitability while continuing to ramp up our investments in research and development across the portfolio. We achieved record Adjusted free cash flow of $413 million, driven by 15% growth in Adjusted diluted EPS as well as our continued efforts to reduce working capital. Our results also reflected strong demand across our A&D and Commercial markets, which drove record new orders exceeding $3 billion and a book-to-bill of 1.1x. Overall, these results mark the final, successful year for the three year goals we established at our May 2021 Investor Day. I'm incredibly proud of the team's efforts to successfully execute our pivot to growth strategy and the momentum we now carry forward into 2024."

 

"Looking ahead, our strong backlog entering the year supports our expectations to deliver total organic sales growth of 4% to 6% in 2024, including growth in all of our A&D and Commercial end markets. We expect to deliver continued operating margin expansion while increasing R&D investments, diluted EPS growth of 7% to 10%, and strong free cash flow generation ranging from $415 to $435 million. We remain well-positioned with strong alignment of our technologies to the favorable secular growth trends in each of our end markets, and confident in our ability to deliver profitable growth and drive long-term shareholder value."

Fourth Quarter 2023 Operating Results

(In millions)

Q4-2023

Q4-2022

Change

Reported

 

 

 

Sales

$

786

 

$

758

 

4

%

Operating income

$

161

 

$

157

 

2

%

Operating margin

 

20.4

%

 

20.8

%

(40 bps)

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

786

 

$

758

 

4

%

Operating income

$

163

 

$

160

 

2

%

Operating margin

 

20.8

%

 

21.1

%

(30 bps)

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

  • Sales of $786 million increased 4% compared with the prior year period;
  • Total A&D market sales increased 5%, while total Commercial market sales increased 2%;
  • In our A&D markets, we experienced solid growth in the defense markets principally driven by higher defense electronics revenues and higher sales of arresting systems equipment, as well as strong sales growth in the commercial aerospace market;
  • In our Commercial markets, we experienced solid growth in the power & process markets, despite the wind down on the China Direct AP1000 program, while sales in the general industrial market were in-line with the prior year period; and
  • Adjusted operating income was $163 million, up 2% compared with the prior year period, while Adjusted operating margin decreased 30 basis points to 20.8%, as favorable overhead absorption on higher revenues in all three segments was offset by unfavorable mix on products and higher investment in research and development.
 

Fourth Quarter 2023 Segment Performance

Aerospace & Industrial

(In millions)

Q4-2023

Q4-2022

Change

Reported

 

 

 

Sales

$

238

 

$

223

 

7

%

Operating income

$

44

 

$

41

 

9

%

Operating margin

 

18.5

%

 

18.2

%

30 bps

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

238

 

$

223

 

7

%

Operating income

$

44

 

$

41

 

7

%

Operating margin

 

18.5

%

 

18.5

%

0 bps

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

  • Sales of $238 million, up $15 million, or 7%;
  • Higher commercial aerospace market revenues reflected increased OEM sales of actuation and sensors products, as well as surface treatment services, on narrowbody and widebody platforms;
  • In the defense markets, higher revenue in the aerospace defense market supporting various fighter jet programs was mainly offset by lower sales on ground missile launchers in the ground defense market;
  • General industrial market revenue was essentially flat, as the benefit of new product introductions addressing the electrification of vehicles was mainly offset by lower sales on off-highway vehicle platforms; and
  • Adjusted operating income was $44 million, up 7%, with a strong Adjusted operating margin of 18.5%, as favorable absorption on higher revenues was partially offset by the timing of development contracts.
 

Defense Electronics

(In millions)

Q4-2023

Q4-2022

Change

Reported

 

 

 

Sales

$

240

 

$

236

 

1

%

Operating income

$

69

 

$

70

 

(2

%)

Operating margin

 

28.8

%

 

29.7

%

(90 bps)

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

240

 

$

236

 

1

%

Operating income

$

69

 

$

70

 

(2

%)

Operating margin

 

28.8

%

 

29.7

%

(90 bps)

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

  • Sales of $240 million, up $3 million, or 1%;
  • Aerospace defense market revenue declines principally reflected the timing of sales of our embedded computing equipment on various helicopter programs partially offset by higher sales of flight test instrumentation equipment on various fighter jet programs;
  • Strong revenue growth in the ground defense market reflected higher sales of tactical battlefield communications equipment as well as higher sales of embedded computing equipment on the Stryker ground combat vehicle;
  • Higher revenue in the naval defense market reflected increased sales of our embedded computing equipment supporting various domestic and international programs; and
  • Adjusted operating income was $69 million, down 2% from the prior year period, while adjusted operating margin decreased 90 basis points to 28.8%, as favorable absorption on higher revenues was offset by unfavorable mix and higher investments in research and development.
 

Naval & Power

(In millions)

Q4-2023

Q4-2022

Change

Reported

 

 

 

Sales

$

308

 

$

298

 

3

%

Operating income

$

57

 

$

59

 

(3

%)

Operating margin

 

18.5

%

 

19.7

%

(120 bps)

 

 

 

 

Adjusted (1)

 

 

 

Sales

$

308

 

$

298

 

3

%

Operating income

$

59

 

$

60

 

(2

%)

Operating margin

 

19.3

%

 

20.3

%

(100 bps)

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

  • Sales of $308 million, up $10 million, or 3%;
  • Higher revenue in the aerospace defense market was primarily driven by increased sales of our arresting systems equipment supporting various domestic and international customers;
  • Naval defense market revenue was essentially flat, as higher revenues on Columbia-class and Virginia-class submarines were mainly offset by the timing of revenues on the CVN-80 and CVN-81 aircraft carrier programs;
  • Higher power & process market revenues reflected strong growth in industrial valve sales in the process market, and solid growth in the commercial nuclear market supporting increased development on Advanced Small Modular Reactors (ASMRs); Those increases were partially offset by lower China Direct AP1000 program revenues; and
  • Adjusted operating income was $59 million, down 2% from the prior year period, while adjusted operating margin decreased 100 basis points to 19.3%, as favorable absorption on higher revenues was offset by unfavorable mix of products and timing of development contracts.
 

Free Cash Flow

(In millions)

Q4-2023

Q4-2022

Change

Net cash provided by operating activities

$

282

 

$

292

 

(3

%)

Capital expenditures

 

(13

)

 

(9

)

34

%

Reported free cash flow

$

270

 

$

283

 

(5

%)

Adjusted free cash flow (1)

$

270

 

$

299

 

(10

%)

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

  • Reported free cash flow of $270 million decreased $13 million, as higher cash earnings were more than offset by higher taxes;
  • Adjusted free cash flow of $270 million decreased $29 million; and
  • Capital expenditures increased approximately $3 million compared with the prior year period, primarily due to higher growth investments within the Naval & Power segment.

New Orders and Backlog

  • New orders of $685 million decreased 4% in the fourth quarter, reflecting timing in our Defense markets, partially offset by strong demand within our Commercial markets for nuclear aftermarket products as well as subsea pumps to the process market;
  • Full-year 2023 new orders of $3.1 billion increased 5% and generated an overall book-to-bill of 1.1x, reflecting growth in our A&D and Commercial markets; and
  • Backlog of $2.9 billion, up 9% from December 31, 2022, reflects strong demand in both our A&D and Commercial markets.

Share Repurchase and Dividends

  • During the fourth quarter, the Company repurchased 60,442 shares of its common stock for approximately $13 million;
  • During full-year 2023, the Company repurchased 0.3 million shares for $50 million; and
  • The Company also declared a quarterly dividend of $0.20 a share.
 

Full-Year 2024 Guidance

The Company's full-year 2024 financial guidance(1) is as follows:

($ in millions, except EPS)

2024 Guidance

% Chg vs 2023 Adjusted

Total Sales

$2,960 - $3,010

Up 4% - 6%

Operating Income

$514 - $528

Up 4% - 7%

Operating Margin

17.4% - 17.6%

Up 0 - 20 bps

Diluted EPS

$10.00 - $10.30

Up 7% - 10%

Free Cash Flow

$415 - $435

Up 0% - 5%

(1) Reconciliations of Reported to Adjusted 2023 operating results and 2024 financial guidance are available in the Appendix, and exclude first year purchase accounting costs associated with prior year acquisitions.

**********

A more detailed breakdown of the Company’s 2024 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 2023 financial results and expectations for 2024 guidance at 10:00 a.m. ET on Thursday, February 15, 2024. A live webcast of the call and the accompanying financial presentation, as well as a webcast 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,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Product sales

$

667,879

 

 

$

646,263

 

 

$

2,389,711

 

 

$

2,135,882

 

Service sales

 

117,912

 

 

 

111,402

 

 

 

455,662

 

 

 

421,143

 

Total net sales

 

785,791

 

 

 

757,665

 

 

 

2,845,373

 

 

 

2,557,025

 

 

 

 

 

 

 

 

 

Cost of product sales

 

414,010

 

 

 

399,389

 

 

 

1,507,480

 

 

 

1,348,569

 

Cost of service sales

 

67,051

 

 

 

65,792

 

 

 

270,715

 

 

 

253,847

 

Total cost of sales

 

481,061

 

 

 

465,181

 

 

 

1,778,195

 

 

 

1,602,416

 

 

 

 

 

 

 

 

 

Gross profit

 

304,730

 

 

 

292,484

 

 

 

1,067,178

 

 

 

954,609

 

 

 

 

 

 

 

 

 

Research and development expenses

 

20,066

 

 

 

19,032

 

 

 

85,764

 

 

 

80,836

 

Selling expenses

 

36,306

 

 

 

31,199

 

 

 

137,088

 

 

 

121,586

 

General and administrative expenses

 

87,664

 

 

 

85,008

 

 

 

359,724

 

 

 

324,093

 

Loss on divestiture

 

 

 

 

 

 

 

 

 

 

4,651

 

 

 

 

 

 

 

 

 

Operating income

 

160,694

 

 

 

157,245

 

 

 

484,602

 

 

 

423,443

 

 

 

 

 

 

 

 

 

Interest expense

 

10,961

 

 

 

13,665

 

 

 

51,393

 

 

 

46,980

 

Other income, net

 

7,117

 

 

 

1,434

 

 

 

29,861

 

 

 

12,732

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

156,850

 

 

 

145,014

 

 

 

463,070

 

 

 

389,195

 

Provision for income taxes

 

(36,963

)

 

 

(35,991

)

 

 

(108,561

)

 

 

(94,847

)

Net earnings

$

119,887

 

 

$

109,023

 

 

$

354,509

 

 

$

294,348

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

Basic earnings per share

$

3.14

 

 

$

2.85

 

 

$

9.26

 

 

$

7.67

 

Diluted earnings per share

$

3.11

 

 

$

2.82

 

 

$

9.20

 

 

$

7.62

 

 

 

 

 

 

 

 

 

Dividends per share

$

0.20

 

 

$

0.19

 

 

$

0.79

 

 

$

0.75

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

38,232

 

 

 

38,296

 

 

 

38,283

 

 

 

38,386

 

Diluted

 

38,505

 

 

 

38,633

 

 

 

38,529

 

 

 

38,649

 

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($'s in thousands, except par value)

 

 

 

 

 

December 31,

 

December 31,

 

 

2023

 

 

 

2022

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

406,867

 

 

$

256,974

 

Receivables, net

 

732,678

 

 

 

723,304

 

Inventories, net

 

510,033

 

 

 

483,113

 

Other current assets

 

67,502

 

 

 

52,623

 

Total current assets

 

1,717,080

 

 

 

1,516,014

 

Property, plant, and equipment, net

 

332,796

 

 

 

342,708

 

Goodwill

 

1,558,826

 

 

 

1,544,635

 

Other intangible assets, net

 

557,612

 

 

 

620,897

 

Operating lease right-of-use assets, net

 

141,435

 

 

 

153,855

 

Prepaid pension asset

 

261,869

 

 

 

222,627

 

Other assets

 

51,351

 

 

 

47,567

 

Total assets

$

4,620,969

 

 

$

4,448,303

 

 

 

 

 

Liabilities

 

 

 

Current liabilities:

 

 

 

Current portion of long-term and short-term debt

$

 

 

$

202,500

 

Accounts payable

 

243,833

 

 

 

266,525

 

Accrued expenses

 

188,039

 

 

 

174,440

 

Deferred revenue

 

303,872

 

 

 

254,801

 

Other current liabilities

 

70,800

 

 

 

82,779

 

Total current liabilities

 

806,544

 

 

 

981,045

 

Long-term debt

 

1,050,362

 

 

 

1,051,900

 

Deferred tax liabilities

 

132,319

 

 

 

123,001

 

Accrued pension and other postretirement benefit costs

 

66,875

 

 

 

58,348

 

Long-term operating lease liability

 

118,611

 

 

 

132,275

 

Long-term portion of environmental reserves

 

12,784

 

 

 

12,547

 

Other liabilities

 

105,061

 

 

 

107,973

 

Total liabilities

$

2,292,556

 

 

$

2,467,089

 

 

 

 

 

Stockholders' equity

 

 

 

Common stock, $1 par value

$

49,187

 

 

$

49,187

 

Additional paid in capital

 

140,182

 

 

 

134,553

 

Retained earnings

 

3,487,751

 

 

 

3,163,491

 

Accumulated other comprehensive loss

 

(213,223

)

 

 

(258,916

)

Less: cost of treasury stock

 

(1,135,484

)

 

 

(1,107,101

)

Total stockholders' equity

 

2,328,413

 

 

 

1,981,214

 

 

 

 

 

Total liabilities and stockholders' equity

$

4,620,969

 

 

$

4,448,303

 

 

Use and Definitions 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 Adjusted (non-GAAP) measures provide investors with 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. 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. 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 under GAAP excluding: (i) the impact of first year purchase accounting costs associated with acquisitions, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) the sale or divestiture of a business or product line; (iii) pension settlement charges; and (iv) significant legal settlements, impairment costs, and costs associated with shareholder activism, as applicable.

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

RECONCILIATION OF AS REPORTED TO ADJUSTED (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

 

 

December 31, 2023

 

December 31, 2022

 

% Change

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjusted

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

$

238,224

 

 

$

 

$

238,224

 

 

$

223,258

 

 

$

 

$

223,258

 

 

7

%

 

7

%

Defense Electronics

 

239,751

 

 

 

 

 

239,751

 

 

 

236,456

 

 

 

 

 

236,456

 

 

1

%

 

1

%

Naval & Power

 

307,816

 

 

 

 

 

307,816

 

 

 

297,951

 

 

 

 

 

297,951

 

 

3

%

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

$

785,791

 

 

$

 

$

785,791

 

 

$

757,665

 

 

$

 

$

757,665

 

 

4

%

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial (1)

$

44,054

 

 

$

 

$

44,054

 

 

$

40,599

 

 

$

703

 

$

41,302

 

 

9

%

 

7

%

Defense Electronics

 

69,015

 

 

 

 

 

69,015

 

 

 

70,230

 

 

 

 

 

70,230

 

 

(2

)% 

 

(2

)%

Naval & Power (2)

 

56,845

 

 

 

2,529

 

 

59,374

 

 

 

58,717

 

 

 

1,724

 

 

60,441

 

 

(3

)% 

 

(2

)% 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segments

$

169,914

 

 

$

2,529

 

$

172,443

 

 

$

169,546

 

 

$

2,427

 

$

171,973

 

 

%

 

%

Corporate and other

 

(9,221

)

 

 

 

 

(9,221

)

 

 

(12,301

)

 

 

 

 

(12,301

)

 

25

%

 

25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating income

$

160,693

 

 

$

2,529

 

$

163,222

 

 

$

157,245

 

 

$

2,427

 

$

159,672

 

 

2

%

 

2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margins:

As Reported

 

 

 

Adjusted

 

As Reported

 

 

 

Adjusted

 

As Reported

 

Adjusted

Aerospace & Industrial

 

18.5

%

 

 

 

 

18.5

%

 

 

18.2

%

 

 

 

 

18.5

%

 

30 bps

 

— bps

Defense Electronics

 

28.8

%

 

 

 

 

28.8

%

 

 

29.7

%

 

 

 

 

29.7

%

 

(90 bps)

 

(90 bps)

Naval & Power

 

18.5

%

 

 

 

 

19.3

%

 

 

19.7

%

 

 

 

 

20.3

%

 

(120 bps)

 

(100 bps)

Total Curtiss-Wright

 

20.4

%

 

 

 

 

20.8

%

 

 

20.8

%

 

 

 

 

21.1

%

 

(40 bps)

 

(30 bps)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment margins

 

21.6

%

 

 

 

 

21.9

%

 

 

22.4

%

 

 

 

 

22.7

%

 

(80 bps)

 

(80 bps)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes purchase accounting adjustments in the prior period.

(2) Excludes purchase accounting adjustments in the current and prior period and trailing costs associated with the divestiture of our German valves business.

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

RECONCILIATION OF AS REPORTED TO ADJUSTED (UNAUDITED)

($'s in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

Year Ended

 

 

 

 

 

December 31, 2023

 

December 31, 2022

 

% Change

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjusted

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Industrial

$

887,228

 

 

$

 

$

887,228

 

 

$

836,035

 

 

$

 

$

836,035

 

 

6

%

 

6

%

Defense Electronics

 

815,912

 

 

 

 

 

815,912

 

 

 

690,262

 

 

 

 

 

690,262

 

 

18

%

 

18

%

Naval & Power

 

1,142,233

 

 

 

 

 

1,142,233

 

 

 

1,030,728