cw-20210331

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, 2021

☐ 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: 40,938,233 shares as of April 30, 2021.

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		19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		29

Item 4.	Controls and Procedures		29


PART II – OTHER INFORMATION


Item 1.	Legal Proceedings		30

Item 1A.	Risk Factors		30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		30

Item 3.	Defaults upon Senior Securities		30

Item 4.	Mine Safety Disclosures		30

Item 5.	Other Information		30

Item 6.	Exhibits		31

Signatures			32

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)	2021		2020
Net sales
Product sales	$	508,975	$	497,929
Service sales	88,084		103,302
Total net sales	597,059		601,231
Cost of sales
Cost of product sales	329,454		330,813
Cost of service sales	57,848		69,839
Total cost of sales	387,302		400,652
Gross profit	209,757		200,579
Research and development expenses	21,863		18,307
Selling expenses	29,596		31,588
General and administrative expenses	73,232		76,658
Restructuring expenses	—		1,580
Operating income	85,066		72,446
Interest expense	9,959		7,489
Other income, net	4,843		5,532
Earnings before income taxes	79,950		70,489
Provision for income taxes	(20,481)		(18,728)
Net earnings	$	59,469	$	51,761

Net earnings per share:
Basic earnings per share	$	1.45	$	1.22
Diluted earnings per share	$	1.45	$	1.21

Dividends per share	0.17		0.17

Weighted-average shares outstanding:
Basic	40,933		42,456
Diluted	41,103		42,770

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,
	2021		2020
Net earnings	$	59,469	$	51,761
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax (1)	$	(3,960)	$	(50,275)
Pension and postretirement adjustments, net of tax (2)	5,600		4,681
Other comprehensive income (loss), net of tax	1,640		(45,594)
Comprehensive income	$	61,109	$	6,167

(1) The tax benefit (expense) included in foreign currency translation adjustments for the three months ended March 31, 2021 and 2020 was immaterial.

(2) The tax expense included in pension and postretirement adjustments for the three months ended March 31, 2021 and 2020 was $1.7 million and $1.3 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, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	147,069	$	198,248
Receivables, net	617,499		588,718
Inventories, net	446,632		428,879
Assets held for sale	27,055		27,584
Other current assets	48,484		57,395
Total current assets	1,286,739		1,300,824
Property, plant, and equipment, net	369,970		378,200
Goodwill	1,465,224		1,455,137
Other intangible assets, net	583,195		609,630
Operating lease right-of-use assets, net	143,969		150,898
Prepaid pension asset	99,087		92,531
Other assets	32,866		34,114
Total assets	$	3,981,050	$	4,021,334
Liabilities
Current liabilities:
Current portion of long-term debt	$	100,000	$	100,000
Accounts payable	160,765		201,237
Accrued expenses	108,486		140,200
Income taxes payable	18,399		6,633
Deferred revenue	238,742		253,411
Liabilities held for sale	9,132		10,141
Other current liabilities	99,278		98,755
Total current liabilities	734,802		810,377
Long-term debt	957,907		958,292
Deferred tax liabilities, net	114,791		115,007
Accrued pension and other postretirement benefit costs	98,645		98,345
Long-term operating lease liability	126,454		133,069
Long-term portion of environmental reserves	15,305		15,422
Other liabilities	94,982		103,248
Total liabilities	2,142,886		2,233,760
Contingencies and commitments (Note 14)
Stockholders’ equity
Common stock, $1 par value,100,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 49,187,378 shares issued as of March 31, 2021 and December 31, 2020; outstanding shares were 40,943,314 as of March 31, 2021 and 40,916,429 as of December 31, 2020	49,187		49,187
Additional paid in capital	119,172		122,535
Retained earnings	2,722,829		2,670,328
Accumulated other comprehensive loss	(309,216)		(310,856)
Common treasury stock, at cost (8,244,064 shares as of March 31, 2021 and 8,270,949 shares as of December 31, 2020)	(743,808)		(743,620)
Total stockholders’ equity	1,838,164		1,787,574
Total liabilities and stockholders’ equity	$	3,981,050	$	4,021,334

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)	2021		2020
Cash flows from operating activities:
Net earnings	$	59,469	$	51,761
Adjustments to reconcile net earnings to net cash used for operating activities
Depreciation and amortization	28,595		28,142
Gain on sale/disposal of long-lived assets	(349)		(387)
Deferred income taxes	3,629		2,809
Share-based compensation	3,327		3,340
Inventory write-down	—		1,205
Change in operating assets and liabilities, net of businesses acquired:
Receivables, net	(27,593)		(1,614)
Inventories, net	(18,059)		(24,099)
Progress payments	(1,114)		(1,906)
Accounts payable and accrued expenses	(71,528)		(98,179)
Deferred revenue	(14,836)		(23,298)
Income taxes payable	16,247		22,783
Pension and postretirement liabilities, net	1,182		(149,468)
Other current and long-term assets and liabilities	(5,573)		(3,665)
Net cash used for operating activities	(26,603)		(192,576)
Cash flows from investing activities:
Proceeds from sale/disposal of long-lived assets	1,022		2,006
Additions to property, plant, and equipment	(8,537)		(18,637)
Acquisition of business, net of cash acquired	—		(51,043)
Additional consideration paid on prior year acquisitions	(5,340)		—
Net cash used for investing activities	(12,855)		(67,674)
Cash flows from financing activities:
Borrowings under revolving credit facility	65,301		188,724
Payment of revolving credit facility	(65,301)		(42,297)
Repurchases of common stock	(11,797)		(112,013)
Proceeds from share-based compensation	4,919		5,066
Other	(229)		(212)
Net cash provided by (used for) financing activities	(7,107)		39,268
Effect of exchange-rate changes on cash	(4,614)		(12,294)
Net decrease in cash and cash equivalents	(51,179)		(233,276)
Cash and cash equivalents at beginning of period	198,248		391,033
Cash and cash equivalents at end of period	$	147,069	$	157,757
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, 2020
	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
December 31, 2019	$	49,187	$	116,070	$	2,497,111	$	(325,274)	$	(562,722)
Net earnings	—		—		51,761		—		—
Other comprehensive loss, net of tax	—		—		—		(45,594)		—
Dividends declared	—		—		(7,095)		—		—
Restricted stock	—		(4,115)		—		—		4,115
Employee stock purchase plan and stock options exercised	—		350		—		—		4,716
Share-based compensation	—		3,123		—		—		217
Repurchase of common stock (1)	—		—		—		—		(112,013)
Other	—		(517)		—		—		517
March 31, 2020	$	49,187	$	114,911	$	2,541,777	$	(370,868)	$	(665,170)


	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 and stock options exercised	—		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)

(1) For the three months ended March 31, 2021 and 2020, the Corporation repurchased approximately 0.1 million and 1.1 million shares of its common stock, respectively.

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, diversified manufacturing and service company that designs, manufactures, and overhauls precision components and provides highly engineered products and services to the aerospace, defense, power & process, and general 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, 2021 and 2020, 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 2020 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.

On January 1, 2021, the Corporation implemented an organizational change to simplify its reportable segments and align its product sales with its end market structure. As a result, the Corporation now operates under the following three reportable segments: Aerospace & Industrial, Defense Electronics, and Naval & Power. This change resulted in the transfer of the Corporation's valve-related operations into the new Naval & Power segment. While this organizational change resulted in the recasting of previously reported amounts across all reportable segments, it did not impact the Corporation’s previously reported consolidated financial statements.

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

Page 9

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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, 2021 and 2020:


	Three Months Ended
	March 31,
	2021	2020
Over-time	52

SEC Form 10-Q filed by Curtiss-Wright Corporation