cw-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _________ to _______

Commission File Number 1-134

CURTISS-WRIGHT CORPORATION

(Exact name of Registrant as specified in its charter)


Delaware						13-0612970
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


130 Harbour Place Drive, Suite 300
Davidson,	North Carolina	28036
(Address of principal executive offices)		(Zip Code)

(704) 869-4600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period of time that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, par value $1.00 per share: 38,445,431 shares as of April 30, 2022.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

TABLE of CONTENTS


PART I – FINANCIAL INFORMATION			PAGE


Item 1.	Financial Statements (Unaudited):

		Condensed Consolidated Statements of Earnings	4

		Condensed Consolidated Statements of Comprehensive Income	5

		Condensed Consolidated Balance Sheets	6

		Condensed Consolidated Statements of Cash Flows	7

		Condensed Consolidated Statements of Stockholders’ Equity	8

		Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		27

Item 4.	Controls and Procedures		27


PART II – OTHER INFORMATION


Item 1.	Legal Proceedings		28

Item 1A.	Risk Factors		28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28

Item 3.	Defaults upon Senior Securities		28

Item 4.	Mine Safety Disclosures		28

Item 5.	Other Information		28

Item 6.	Exhibits		30

Signatures			31

Page 3

PART 1- FINANCIAL INFORMATION

Item 1. Financial Statements

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)


	Three Months Ended
	March 31,
(In thousands, except per share data)	2022		2021
Net sales
Product sales	$	453,421	$	508,975
Service sales	106,040		88,084
Total net sales	559,461		597,059
Cost of sales
Cost of product sales	294,527		329,454
Cost of service sales	63,532		57,848
Total cost of sales	358,059		387,302
Gross profit	201,402		209,757
Research and development expenses	20,549		21,863
Selling expenses	28,092		29,596
General and administrative expenses	87,600		73,232
Loss on divestiture	4,651		—
Operating income	60,510		85,066
Interest expense	9,530		9,959
Other income, net	2,997		4,843
Earnings before income taxes	53,977		79,950
Provision for income taxes	(13,292)		(20,481)
Net earnings	$	40,685	$	59,469

Net earnings per share:
Basic earnings per share	$	1.06	$	1.45
Diluted earnings per share	$	1.05	$	1.45

Dividends per share	0.18		0.17

Weighted-average shares outstanding:
Basic	38,456		40,933
Diluted	38,668		41,103

See notes to condensed consolidated financial statements

Page 4

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands)


	Three Months Ended
	March 31,
	2022		2021
Net earnings	$	40,685	$	59,469
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax (1)	$	(6,825)	$	(3,960)
Pension and postretirement adjustments, net of tax (2)	5,766		5,600
Other comprehensive income (loss), net of tax	(1,059)		1,640
Comprehensive income	$	39,626	$	61,109

(1) The tax benefit included in foreign currency translation adjustments for the three months ended March 31, 2022 and 2021 was immaterial.

(2) The tax expense included in pension and postretirement adjustments for the three months ended March 31, 2022 and 2021 was $1.4 million and $1.7 million, respectively.

See notes to condensed consolidated financial statements

Page 5

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except per share data)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	136,682	$	171,004
Receivables, net	661,129		647,148
Inventories, net	448,122		411,567
Assets held for sale	—		10,988
Other current assets	63,942		67,101
Total current assets	1,309,875		1,307,808
Property, plant, and equipment, net	355,363		360,031
Goodwill	1,458,899		1,463,026
Other intangible assets, net	523,913		538,077
Operating lease right-of-use assets, net	147,224		143,613
Prepaid pension asset	260,238		256,422
Other assets	33,855		34,568
Total assets	$	4,089,367	$	4,103,545
Liabilities
Current liabilities:
Current portion of long-term debt	$	202,500	$	—
Accounts payable	168,772		211,640
Accrued expenses	109,077		144,466
Income taxes payable	1,478		3,235
Deferred revenue	224,679		260,157
Liabilities held for sale	—		12,655
Other current liabilities	93,745		102,714
Total current liabilities	800,251		734,867
Long-term debt	967,744		1,050,610
Deferred tax liabilities, net	150,085		147,349
Accrued pension and other postretirement benefit costs	84,610		91,329
Long-term operating lease liability	128,897		127,152
Long-term portion of environmental reserves	13,924		13,656
Other liabilities	94,436		112,092
Total liabilities	2,239,947		2,277,055
Contingencies and commitments (Note 13)
Stockholders’ equity
Common stock, $1 par value,100,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 49,187,378 shares issued as of March 31, 2022 and December 31, 2021; outstanding shares were 38,471,738 as of March 31, 2022 and 38,469,778 as of December 31, 2021	49,187		49,187
Additional paid in capital	122,603		127,104
Retained earnings	2,942,580		2,908,827
Accumulated other comprehensive loss	(191,524)		(190,465)
Common treasury stock, at cost (10,715,640 shares as of March 31, 2022 and 10,717,600 shares as of December 31, 2021)	(1,073,426)		(1,068,163)
Total stockholders’ equity	1,849,420		1,826,490
Total liabilities and stockholders’ equity	$	4,089,367	$	4,103,545

See notes to condensed consolidated financial statements

Page 6

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended
	March 31,
(In thousands)	2022		2021
Cash flows from operating activities:
Net earnings	$	40,685	$	59,469
Adjustments to reconcile net earnings to net cash used for operating activities:
Depreciation and amortization	27,363		28,595
Loss on divestiture	4,651		—
Gain on sale/disposal of long-lived assets	(3,070)		(349)
Deferred income taxes	803		3,629
Share-based compensation	3,809		3,327
Change in operating assets and liabilities, net of businesses acquired:
Receivables, net	(13,414)		(27,593)
Inventories, net	(38,149)		(18,059)
Progress payments	(395)		(1,114)
Accounts payable and accrued expenses	(79,492)		(71,528)
Deferred revenue	(35,154)		(14,836)
Income taxes payable	6,927		16,247
Pension and postretirement liabilities, net	(6,034)		1,182
Other current and long-term assets and liabilities	(32,845)		(5,573)
Net cash used for operating activities	(124,315)		(26,603)
Cash flows from investing activities:
Proceeds from sale/disposal of long-lived assets	5,567		1,022
Additions to property, plant, and equipment	(10,896)		(8,537)
Additional consideration paid on prior year acquisitions	(5,062)		(5,340)
Net cash used for investing activities	(10,391)		(12,855)
Cash flows from financing activities:
Borrowings under revolving credit facility	241,198		65,301
Payment of revolving credit facility	(121,198)		(65,301)
Repurchases of common stock	(18,857)		(11,797)
Proceeds from share-based compensation	5,284		4,919
Other	(248)		(229)
Net cash provided by (used for) financing activities	106,179		(7,107)
Effect of exchange-rate changes on cash	(5,795)		(4,614)
Net decrease in cash and cash equivalents	(34,322)		(51,179)
Cash and cash equivalents at beginning of period	171,004		198,248
Cash and cash equivalents at end of period	$	136,682	$	147,069
See notes to condensed consolidated financial statements

Page 7

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)


	For the three months ended March 31, 2021
	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
December 31, 2020	$	49,187	$	122,535	$	2,670,328	$	(310,856)	$	(743,620)
Net earnings	—		—		59,469		—		—
Other comprehensive income, net of tax	—		—		—		1,640		—
Dividends declared	—		—		(6,968)				—
Restricted stock	—		(6,407)		—		—		6,407
Employee stock purchase plan	—		411		—		—		4,508
Share-based compensation	—		3,230		—		—		97
Repurchase of common stock (1)	—		—		—		—		(11,797)
Other	—		(597)		—		—		597
March 31, 2021	$	49,187	$	119,172	$	2,722,829	$	(309,216)	$	(743,808)


	For the three months ended March 31, 2022
	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
December 31, 2021	$	49,187	$	127,104	$	2,908,827	$	(190,465)	$	(1,068,163)
Net earnings	—		—		40,685		—		—
Other comprehensive loss, net of tax	—		—		—		(1,059)		—
Dividends declared	—		—		(6,932)		—		—
Restricted stock	—		(8,523)		—		—		8,523
Employee stock purchase plan	—		814		—		—		4,470
Share-based compensation	—		3,714		—		—		95
Repurchase of common stock (1)	—		—		—		—		(18,857)
Other	—		(506)		—		—		506
March 31, 2022	$	49,187	$	122,603	$	2,942,580	$	(191,524)	$	(1,073,426)

(1) For both the three months ended March 31, 2022 and 2021, the Corporation repurchased approximately 0.1 million shares of its common stock.

See notes to condensed consolidated financial statements

Page 8

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

Curtiss-Wright Corporation and its subsidiaries (the "Corporation" or the "Company") is a global integrated business that provides highly engineered products, solutions, and services mainly to aerospace & defense (A&D) markets, as well as critical technologies in demanding commercial power, process, and industrial markets.

The unaudited condensed consolidated financial statements include the accounts of Curtiss-Wright and its majority-owned subsidiaries. All intercompany transactions and accounts have been eliminated.

The unaudited condensed consolidated financial statements of the Corporation have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted as permitted by such rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of these financial statements.

Management is required to make estimates and judgments that affect the reported amount of assets, liabilities, revenue, and expenses and disclosure of contingent assets and liabilities in the accompanying financial statements. Actual results may differ from these estimates. The most significant of these estimates includes the estimate of costs to complete using the over-time revenue recognition accounting method, pension plan and postretirement obligation assumptions, estimates for inventory obsolescence, fair value estimates around assets and assumed liabilities from acquisitions, estimates for the valuation and useful lives of intangible assets, legal reserves, and the estimate of future environmental costs. Changes in estimates of contract sales, costs, and profits are recognized using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. Accordingly, the effect of the changes on future periods of contract performance is recognized as if the revised estimate had been the original estimate. During the three months ended March 31, 2022 and 2021, there were no significant changes in estimated contract costs. In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in these financial statements.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2021 Annual Report on Form 10-K. The results of operations for interim periods are not necessarily indicative of trends or of the operating results for a full year.

2. REVENUE

The Corporation recognizes revenue when control of a promised good and/or service is transferred to a customer in an amount that reflects the consideration that the Corporation expects to be entitled to in exchange for that good and/or service.

Performance Obligations

The Corporation identifies a performance obligation for each promise in a contract to transfer a distinct good or service to the customer. As part of its assessment, the Corporation considers all goods and/or services promised in the contract, regardless of whether they are explicitly stated or implied by customary business practices. The Corporation’s contracts may contain either a single performance obligation, including the promise to transfer individual goods or services that are not separately distinct within the context of the respective contracts, or multiple performance obligations. For contracts with multiple performance obligations, the Corporation allocates the overall transaction price to each performance obligation using standalone selling prices, where available, or utilizes estimates for each distinct good or service in the contract where standalone prices are not available.

The Corporation’s performance obligations are satisfied either at a point-in-time or on an over-time basis. Typically, over-time revenue recognition is based on the utilization of an input measure used to measure progress, such as costs incurred to date relative to total estimated costs. If a performance obligation does not qualify for over-time revenue recognition, revenue is then recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery.

The following table illustrates the approximate percentage of revenue recognized for performance obligations satisfied over-time versus at a point-in-time for the three months ended March 31, 2022 and 2021:

Page 9

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Three Months Ended
	March 31,
	2022		2021
Over-time	53	%	52	%
Point-in-time	47	%	48	%

Contract backlog represents the remaining performance obligations that have not yet been recognized as revenue. Backlog includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Total backlog was approximately $2.3 billion as of March 31, 2022, of which the Corporation expects to recognize approximately 89% as net sales over the next 36 months. The remainder will be recognized thereafter.

Disaggregation of Revenue

The following table presents the Corporation’s total net sales disaggregated by end market and customer type:


Total Net Sales by End Market and Customer Type	Three Months Ended
	March 31,
(In thousands)	2022		2021
Aerospace & Defense
Aerospace Defense	$	98,004	$	111,016
Ground Defense	39,108		55,746
Naval Defense	162,967		177,905
Commercial Aerospace	60,892		57,269
Total Aerospace & Defense customers	$	360,971	$	401,936

Commercial
Power & Process	$	104,788	$	105,504
General Industrial	93,702		89,619
Total Commercial customers	$	198,490	$	195,123

Total	$	559,461	$	597,059

Contract Balances

Timing of revenue recognition and cash collection may result in billed receivables, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the Condensed Consolidated Balance Sheet. The Corporation’s contract assets primarily relate to its rights to consideration for work completed but not billed as of the reporting date. Contract assets are transferred to billed receivables when the rights to consideration become unconditional. This is typical in situations where amounts are billed as work progresses in accordance with agreed-upon contractual terms or upon achievement of contractual milestones. The Corporation’s contract liabilities primarily consist of customer advances received prior to revenue being earned. Revenue recognized during the three months ended March 31, 2022 and 2021 included in contract liabilities at the beginning of the respective years was approximately $79 million and $77 million, respectively. Contract assets and contract liabilities are reported in the "Receivables, net" and "Deferred revenue" lines, respectively, within the Condensed Consolidated Balance Sheet.

3. ASSETS HELD FOR SALE

In January 2022, the Corporation completed the sale of its industrial valve business in Germany, which was presented as held for sale in the Corporation's Consolidated Balance Sheet as of December 31, 2021, for gross cash proceeds of $3 million. The Corporation recorded a loss of $5 million upon sale closing during the first quarter of 2022.

4. RECEIVABLES

Page 10

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Receivables primarily include amounts billed to customers, unbilled charges on long-term contracts consisting of amounts recognized as sales but not billed, and other receivables. Substantially all amounts of unbilled receivables are expected to be billed and collected within one year. An immaterial amount of unbilled receivables are subject to retainage provisions. The amount of claims and unapproved change orders within our receivables balances are immaterial.

The composition of receivables is as follows:


(In thousands)	March 31, 2022		December 31, 2021
Billed receivables:
Trade and other receivables	$	352,905	$	362,007
Unbilled receivables:
Recoverable costs and estimated earnings not billed	314,240		291,758
Less: Progress payments applied	(1,202)		(1,297)
Net unbilled receivables	313,038		290,461
Less: Allowance for doubtful accounts	(4,814)		(5,320)
Receivables, net	$	661,129	$	647,148

5. INVENTORIES

Inventoried costs contain amounts relating to long-term contracts and programs with long production cycles, a portion of which will not be realized within one year. Long-term contract inventory includes an immaterial amount of claims or other similar items subject to uncertainty concerning their determination or realization. Inventories are valued at the lower of cost or net realizable value.

The composition of inventories is as follows:


(In thousands)	March 31, 2022		December 31, 2021
Raw materials	$	217,900	$	191,066
Work-in-process	81,618		78,221
Finished goods	106,167		98,944
Inventoried costs related to U.S. Government and other long-term contracts (1)

SEC Form 10-Q filed by Curtiss-Wright Corporation