Curtiss-Wright Corporation — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Curtiss-Wright supplies engineered products and services mainly to aerospace and defense, with additional power, process, and industrial businesses. Its segments are Aerospace & Industrial, Defense Electronics, and Naval & Power.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $2.506 billion | $2.391 billion | +5% |
| Gross profit / margin | $933 million / 37.3% | $841 million / 35.2% | Margin +210 bps |
| Operating income / margin | $383 million / 15.3% | $289 million / 12.1% | Income +32%; margin +320 bps |
| Net earnings | $267 million | $201 million | +33% |
| Diluted EPS | $6.58 | $4.80 | +37% |
| Operating cash flow | $388 million | $261 million | +$126 million |
| Capital expenditures | $41 million | $47 million | -$6 million |
Operating cash flow less capital expenditures was approximately $347 million, versus $214 million in 2020. The cash-flow improvement primarily reflected the absence of a $150 million voluntary pension contribution in 2020 and timing of receipts and disbursements, partly offset by higher receivables.
At year-end, cash was $171 million and gross debt principal was approximately $1.044 billion, implying net debt of about $873 million. The company had $94 million drawn on its $500 million revolving facility, $21 million of letters of credit, and $385 million of unused availability. Current assets were $1.308 billion and current liabilities $735 million. The company reported compliance with debt covenants.
Backlog was $2.229 billion, up 3%; new orders rose 11% to $2.580 billion. Management expected approximately 87% of backlog to convert to sales within 36 months.
Changes and segment performance
- Aerospace & Industrial: Sales declined 2% to $786 million, as commercial aerospace weakness and the exit from a Boeing 737 MAX build-to-print product line outweighed stronger general industrial demand. Operating income rose 22% to $122 million; margin increased to 15.5%.
- Defense Electronics: Sales increased 19% to $724 million, primarily reflecting $115 million of incremental PacStar sales. Operating income increased 34% to $159 million; margin rose to 22.0%.
- Naval & Power: Sales increased 2% to $995 million. Operating income rose 31% to $142 million, benefiting from restructuring savings and lower impairment losses. Backlog declined 1% to $1.223 billion.
Improved profitability also reflected savings from 2020 restructuring, operational initiatives, and lower German industrial-valve impairment charges. The effective tax rate increased to 24.6% from 23.4%. Government-related sales were 55% of total sales, versus 53% in 2020; commercial aerospace sales fell 18%, while general industrial sales rose 16%.
Outlook, risks, and unusual items
- The filing provides no formal full-year earnings or revenue guidance. Management anticipated 2022 capital expenditures of $50–$60 million and dividend payments of approximately $29 million, and said available cash, operating cash flow, and credit access should cover expected needs.
- Management described a cautiously optimistic view of commercial and industrial market recovery, while highlighting persistent COVID-related supply-chain disruption, particularly for electronic components, and uncertainty around inflation and cost pass-through.
- Key exposures include U.S. defense-budget and contract timing, commercial aerospace recovery, supplier availability and pricing, fixed-price contract execution, foreign exchange, cyber risk, and environmental and regulatory obligations. Government contracts may be terminated or modified; backlog is not guaranteed revenue.
- The German industrial-valve business incurred impairment charges of $19 million in 2021, following $33 million in 2020. It was sold in January 2022 for approximately $3 million gross cash proceeds.
- A February 2022 settlement with Westinghouse resolved open AP1000 U.S. and China contract claims. Curtiss-Wright agreed to pay $15 million in Q1 2022 and $10 million in Q1 2023; it recorded a $13 million charge in 2021. The agreement also provides a right of first refusal on future AP1000 projects.
- In January 2022, the company announced a planned $240 million cash acquisition of Safran Aerosystems Arresting Company, expected to close in Q3 2022 subject to approvals and other conditions.
- The company repurchased approximately 2.7 million shares for $343 million in 2021 and paid $29 million in dividends. The annual dividend per share rose to $0.71 from $0.68.
Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded internal controls were effective. The auditor identified over-time revenue recognition and estimated costs to complete certain long-term contracts as a critical audit matter.
Investor verification priorities
- Track whether higher orders and the $2.229 billion backlog convert to revenue on schedule, and assess the funding and cancellation characteristics of that backlog.
- Verify the durability of margin gains after restructuring benefits and acquisition-related impacts, including PacStar purchase-accounting costs.
- Monitor working-capital conversion, especially receivables, and reconcile reported operating cash flow with cash deployment and share repurchases.
- Review AP1000 settlement cash payments and the German valve sale proceeds against the related recorded charges and remaining obligations.
- Assess execution, financing, and integration risks for the proposed $240 million acquisition, alongside supply-chain and inflation pressures.