Curtiss-Wright Corporation — 2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; it is not a quarterly filing. Curtiss-Wright supplies engineered products and services primarily to aerospace and defense customers, as well as commercial power, process, and industrial markets. Its reportable segments are Aerospace & Industrial, Defense Electronics, and Naval & Power.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net sales | $2,557.0 million | $2,505.9 million | +2% |
| Operating income | $423.4 million | $382.7 million | +11% |
| Operating margin | 16.6% | 15.3% | +130 basis points |
| Net earnings | $294.3 million | $267.2 million | +10% |
| Diluted earnings per share | $7.62 | $6.58 | +16% |
| Cash from operating activities | $294.8 million | $387.7 million | −24% |
| Capital expenditures | $38.2 million | $41.1 million | −7% |
Gross profit was $954.6 million, approximately 37.3% of sales. Operating cash flow declined primarily because of higher inventory purchases, lower advance cash receipts, and payment of the WEC legal settlement. Cash less capital expenditures, calculated from disclosed figures, was approximately $256.6 million, versus $346.6 million in 2021.
At year-end, cash and cash equivalents were $257.0 million, total debt was $1.25 billion, and total current assets and liabilities were $1.52 billion and $971.4 million, respectively. The company had $733 million available under its revolving credit facility, with no outstanding revolver borrowings. The $202.5 million 3.70% notes due in 2023 are the next scheduled principal maturity.
Changes versus 2021
- Sales growth was led by Aerospace & Industrial (+6%) and Naval & Power (+4%); Defense Electronics sales declined 5% amid component shortages and shipment delays.
- Operating income rose in Aerospace & Industrial (+12%) and Naval & Power (+25%), while Defense Electronics operating income fell 3%. Naval & Power benefited from lower losses related to the German industrial-valves business and the absence of the prior-year WEC settlement charge.
- New orders increased 14% to $2.94 billion and backlog grew 18% to $2.62 billion. Management said approximately 89% of backlog was expected to convert to sales within 36 months.
- Cash from operations fell despite higher earnings, while inventory increased to $483.1 million from $411.6 million.
Outlook, risks, and notable items
- Management characterized the defense demand environment as favorable, citing U.S. and international defense spending, naval programs, and demand for modernization and electronics. It also described commercial aerospace recovery as continuing, while noting global travel demand was not expected to fully recover to pre-pandemic levels until at least 2024.
- The filing does not provide a formal numerical sales or earnings forecast. Management expected inflationary pressures and supply-chain disruptions, particularly electronic-component shortages affecting Defense Electronics, to persist into 2023. Planned 2023 capital expenditures were approximately $50–$60 million; expected dividends were approximately $29 million.
- In 2022, the company acquired two businesses for approximately $282 million, including Safran Aerosystems Arresting Company and Keronite. The German industrial-valves business was sold for $3 million gross proceeds, with a $4.7 million loss recorded on sale.
- The WEC AP1000 settlement required $15 million paid in March 2022 and a further $10 million due in first-quarter 2023. The settlement released open claims under the U.S. and China contracts and included a right of first refusal for future AP1000 projects.
- Key risks include supply availability and inflation, government program funding and contract termination, commercial aerospace cyclicality, execution and integration of acquisitions, foreign exchange, cybersecurity, and environmental and litigation exposures. Goodwill and other intangible assets totaled approximately $2.17 billion, about 49% of total assets; the 2022 goodwill impairment test found no impairment.
- The company reported $1.3 billion of debt in its risk disclosures and remained compliant with debt covenants. Its new $750 million revolving credit facility matures in May 2027. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting; acquired businesses were excluded from management’s internal-control assessment for 2022.
Most important facts for investors to verify
- Whether Defense Electronics component constraints ease and translate higher orders and backlog into recognized sales and cash receipts.
- Whether inventory growth, customer advances, and operating cash flow improve; cash generation lagged earnings in 2022.
- Repayment or refinancing of the $202.5 million debt maturity due in 2023 and completion of the remaining $10 million WEC settlement payment.
- Acquisition integration, purchase-price allocations, and returns from the 2022 acquisitions; goodwill and intangible assets represent a substantial share of assets.
- Progress in passing inflation-related costs through to customers and maintaining margins, alongside the realization and timing of the reported backlog.