Curtiss-Wright Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with FY2022. This is an annual report, not a standalone fourth-quarter filing. Curtiss-Wright supplies engineered products and services to aerospace and defense, power and process, and industrial markets through Aerospace & Industrial, Defense Electronics, and Naval & Power.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $2.845 billion | $2.557 billion | +11% |
| Gross profit / margin | $1.067 billion / 37.5% | $955 million / 37.3% | Margin +0.2 percentage points |
| Operating income / margin | $485 million / 17.0% | $423 million / 16.6% | Income +14%; margin +0.4 points |
| Net earnings | $355 million | $294 million | +20% |
| Diluted EPS | $9.20 | $7.62 | +21% |
| Operating cash flow | $448 million | $295 million | +$153 million |
| Capital expenditures | $45 million | $38 million | +$7 million |
| Cash flow less capital expenditures | $403 million | $257 million | Analyst-calculated |
Operating cash flow improved on higher earnings and better working capital. Cash and cash equivalents were $407 million at year-end, versus $257 million a year earlier. Current assets were $1.717 billion and current liabilities $807 million. Gross debt was approximately $1.048 billion; the company had no year-end borrowings under its revolving credit facility and $730 million of unused availability. Management reported compliance with debt covenants.
New orders rose 5% to $3.090 billion, and backlog increased 10% to $2.873 billion. The company expects approximately 90% of backlog to convert to sales within 36 months. Dividends were $0.79 per share, compared with $0.75 in FY2022; share repurchases totaled $50 million.
Segments and changes versus FY2022
- Aerospace & Industrial: Sales increased 6% to $887 million; operating income rose 6% to $145 million. Operating margin was unchanged at 16.4%. Growth reflected commercial aerospace and general industrial demand.
- Defense Electronics: Sales rose 18% to $816 million and operating income rose 24% to $192 million. Margin expanded 1.1 percentage points to 23.5%, mainly from higher sales and favorable overhead absorption. Tactical communications was a key growth area.
- Naval & Power: Sales increased 11% to $1.142 billion and operating income rose 7% to $189 million. Margin declined 0.6 percentage points to 16.6%; higher sales and the absence of a prior-year German divestiture loss were partly offset by mix, naval contract adjustments, and acquisition-related amortization.
Aerospace and defense markets grew 14% overall, while commercial markets grew 6%. Sales growth was primarily organic; acquisitions contributed about 2% to consolidated sales growth. Interest expense increased 9% to $51 million, reflecting the 2022 senior-note issuance and higher credit-agreement rates, partly offset by repayment of $203 million of notes in February 2023. The effective tax rate declined to 23.4% from 24.4%.
Outlook, risks, and unusual items
- Outlook: Management described cautious optimism for economically sensitive commercial and industrial markets, citing normalized growth, easing supply constraints, and the possibility of lower interest rates. It cited potential defense opportunities in naval programs, communications, cyber, and modernization, and opportunities in nuclear maintenance, new builds, and small modular reactors. The filing text provided here does not give clear quantified FY2024 revenue or EPS guidance.
- 2024 cash plans: Management expected capital expenditures of approximately $55–$65 million and dividend payments of approximately $30 million, subject to operating cash generation.
- Principal risks: Dependence on government and defense spending; customer contract cancellation or delay; commercial aerospace production cycles; supplier, component, labor, and inflation pressures; fixed-price contract cost overruns; cybersecurity and product-liability exposure; foreign exchange, geopolitical, and trade risks; and environmental remediation and regulatory obligations. Government-related sources accounted for 56% of net sales; no individual customer exceeded 10%.
- Prior-period correction: The company identified an error in cost estimates for one Naval & Power long-term contract, principally affecting 2020 and 2021. It revised comparative financial statements in this filing; previously reported 2021 sales and net earnings had been overstated by approximately $5 million and $4 million, respectively, and 2020 by approximately $8 million and $7 million. The company said the error was not material to any individual prior period and did not affect 2022 results. No incentive compensation recovery was required.
- Other notable disclosures: Goodwill and other intangible assets totaled approximately $2.1 billion, about 46% of total assets; the 2023 annual goodwill test found no impairment. Management reported no material cybersecurity incident in 2023. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor verification points
- Track order intake and backlog conversion, including timing and potential cancellations.
- Assess whether Defense Electronics growth and margins are sustainable, and monitor Naval & Power margin recovery.
- Monitor contract cost estimates and execution, particularly given the disclosed prior-period correction and the auditor’s critical audit matter on over-time revenue recognition.
- Review debt maturities, interest costs, covenant headroom, and planned capital returns alongside acquisition spending.
- Evaluate whether supply-chain, labor, inflation, and geopolitical risks affect costs, delivery schedules, or customer funding.