Curtiss-WrightAnnual Report 2017


Curtiss-Wright achieved impressive results and delivered a highly successful performance in 2017.

Our team continues to execute on the vision of One Curtiss-Wright, and based on our perseverance, competitiveness and drive for increased efficiency, we have now achieved top quartile performance within our peer group for all of our key financial metrics established at our Investor Day back in December 2013. We remain focused on driving operational excellence and financial discipline in order to remain a top quartile performer. We are engineering success – building on our nearly 90 years as a public company through continued innovation and growth of our products and services, as well as developing our people – to continue to remain competitive in the global marketplace.

David C. Adams

While we are proud of our achievements, we will not rest on our laurels and must continue to look to the future. We are positioning the Company for renewed growth by increasing our investments in capital and research and development. Innovation remains critical to the Company’s long-term success and will enable us to take advantage of an improving organic growth outlook expected across all of our end markets. We intend to supplement this growth through a disciplined approach to strategic acquisitions, exemplified by our successful acquisition of Teletronics Technology Corporation (TTC) in early 2017.

As a testament to our successes this past year, our stock price continues to perform well. We exceeded $5 billion in market capitalization for the first time in our history and in early 2018, we reached $6 billion market capitalization.

David C. Adams
Chairman and Chief Executive Officer

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Making Headlines

  • Announced acquisition of Dresser-Rand government business*
  • Eclipsed $5 billion in market capitalization
  • Share price reached $125 for first time ever
  • Completed acquisition of Teletronics
    Technology Corporation (TTC)

*Announced Feb. 2018; Expected to close second quarter 2018. Financials in this document do not include the results of the acquisition.

Journey to Top Quartile Performance

In 2013, we established a five-year goal to achieve top quartile performance versus our peer group across a range of metrics, including: Operating Margin, Earnings per Share (EPS), Return on Invested Capital (ROIC), Working Capital as a percentage of Sales, Capital Expenditures and Free Cash Flow Conversion.

I’m proud to say that we’ve made tremendous strides as an organization. Several metrics were achieved well ahead of our original five-year target, most notably the very strong operating margin, which expanded nearly 600 basis points since we began this journey in 2013.

As a result of our excellent results in 2017, we have achieved or exceeded our original targets and reached top quartile for all metrics. The last two metrics to make the list – ROIC and Working Capital as a percentage of Sales – were achieved due to the team’s laser focus and execution over the past couple of years.

We are and will continue to focus on cost improvement, leveraging the critical mass of Curtiss-Wright across the enterprise, and maintaining top quartile performance.

2017 Financial Performance

We achieved strong operational performance in 2017, led by solid organic sales, continued margin expansion and strong free cash flow generation.

Net sales of $2.3 billion increased 8%, including 5% organic growth, driven by higher sales in all of our commercial and defense end markets. Of particular note was the strong rebound in our general industrial market, as several areas that had been depressed finally turned the corner, driving better than expected growth. We generated a 10% increase in operating income, as well as solid margin expansion, achieving an operating margin of 15.0%. This performance demonstrates our continual drive for execution and the benefits of our ongoing margin improvement initiatives. As a result, our diluted earnings per share increased 14% to $4.80.

In addition, we generated $336 million in free cash flow and a free cash flow conversion of 156%, as we efficiently reduced working capital to 18.8% of sales. Further, our balance sheet remains healthy and provides a solid base of financial flexibility to continue pursuing our growth strategies.

Balanced Capital Allocation Strategy

Curtiss-Wright remains committed to a balanced capital allocation strategy that consists of complementing our organic growth with a disciplined pace of acquisitions, reinvesting in our business (including increased research and development across all segments in 2018), and providing steady distributions to our shareholders in order to maximize shareholder value.

The Company’s strong financial position and continued ability to deliver solid earnings growth and free cash flow enables us to consistently provide a steady return to our shareholders. We maintain an active share repurchase program, where we repurchased $51 million in shares in 2017, and also authorized a 15% increase in the quarterly dividend payout to $0.15 per share, or $0.60 annually. We expect to repurchase at least $50 million in shares in 2018. Over the past four years, we have repurchased more than $500 million of our shares.

We will also seek acquisitions that support our long-term strategic and financial objectives. In early 2017, we completed the acquisition of TTC, a leading designer and manufacturer of high-technology, comprehensive data acquisition and flight test instrumentation systems for the aerospace and defense markets. TTC was a great addition to our portfolio with its attractive positioning within a growing defense market, as well as its robust profitability.

In early 2018, we announced an agreement to purchase the Dresser-Rand government business for $212.5 million in cash. Dresser-Rand is the preferred supplier of steam turbines and main engine guard valves on aircraft carriers, and has significant content on submarines and other surface ships. As a result, this acquisition is expected to significantly expand our shipset content and increase our footprint on new U.S. Navy Nuclear vessels. It also will establish a prominent Curtiss-Wright presence at U.S. Navy shipyards and provide an opportunity to grow our existing U.S. Navy aftermarket business. We are excited to add this marquee brand to the Curtiss-Wright portfolio, especially during a period of rising naval defense budgets.

These collective actions reflect the Board of Directors’ continued confidence in our ability to deliver solid, profitable growth and strong free cash flow.

Focus on Renewed Growth

As we turn our attention to 2018 and future years, we believe that we are well positioned for renewed top-line growth across our broad and highly diversified portfolio of products and services to the commercial aerospace, defense, power generation and general industrial markets.

Within the defense markets, we expect to continue to benefit from the favorable trends in military spending and increasing defense budgets, particularly as it relates to our content on critical fighter jet, submarine and aircraft carrier programs. In the commercial markets, we expect to leverage the continued production ramp up in commercial aerospace, ongoing support for operating and new build reactors in the commercial nuclear power industry and improving global economic conditions driving our industrial businesses. As a result, we anticipate sales growth in all end markets, strong operating margin expansion and increased earnings per share, along with continued strong free cash flow in 2018.

In closing, I would like to thank our 8,600 global employees for their unwavering determination and hard work in support of the One Curtiss-Wright vision, which will ensure our continued success.

We remain committed to enhancing Curtiss-Wright’s long-term shareholder value through steady organic investment supplemented with acquisitions, operating margin expansion, significant free cash flow generation and steady distributions to our shareholders, and look forward to continued successes in 2018.


David C. Adams signature

David C. Adams

Chairman and Chief Executive Officer