Dear Shareholders:

Over the past dozen years, Curtiss-Wright’s people and technologies have propelled its annual revenues from $500 million to more than $2.5 billion. We are a leader in multiple markets and recognized for state-of-the-art reliable solutions, superior customer focus and our international footprint.

We are now at a critical juncture in our history. Previously we looked to expand our portfolio of products and services through acquisitions supplemented by organic growth. Today we are concentrating on growing steadily by leveraging the critical mass and powerful suite of capabilities we built over the past decade, while driving operational excellence and financial discipline to achieve top quartile performance as compared to our peer group. These objectives will be tied to a much more balanced capital deployment strategy – all part of our effort to improve the competitiveness of Curtiss-Wright over the long term and generate stronger returns for shareholders.  

One Curtiss-Wright

I’m excited about the future of Curtiss-Wright, which is now evolving into an integrated, market-facing business that is easier for our customers, employees, investors and business partners to understand.

Effectuating change is seldom easy, but continual change has always characterized Curtiss-Wright. We have an exceptional leadership team in place across our enterprise, all of whom are fully committed to driving operations to generate top quartile returns. We recognize that improved operating performance is vital to getting to the next level in our successful corporate journey.

On the preceding page, we listed a few phrases that best capture our vision of One Curtiss-Wright:

• Integrates our Structure – We’ve realigned the Company. While our businesses previously were grouped by common technologies, as we grew, the lines between these units blurred with respect to markets and customers served. Our new structure has been organizationally flattened, driving the focus upon our end markets under three new segments – Commercial/Industrial, Defense and Energy. This new alignment, our pursuit of operational efficiencies through best practices, and our efforts to increase penetration in high-value end markets worldwide combine to support our overriding vision of one unified global diversified industrial company.
• Prioritizes the Customer – We are creating an organization that is much simpler and easier for our customers to understand. We have the breadth of products, services and technologies necessary to continue to be a trusted partner with our customers and to address new market opportunities. The One Curtiss-Wright vision presents one face to the customer, replacing the multiple points of interaction our customers previously needed to access the full range of our technological expertise. This change makes working with us easier and enables us to be more efficient in meeting our customers’ evolving needs more quickly.
• Builds Upon our Critical Mass – We achieved critical mass over the past decade through solid organic growth and strategic acquisitions. Today we have a well-balanced end market structure serving three major segments. For the foreseeable future, our emphasis will shift primarily to organic revenue growth, though acquisitions will play a role if they meet our strategic objectives and investment return requirements. We will focus on protecting or expanding market share to ensure that we maintain appropriate mass and scale to realize the synergies and efficiencies necessary to achieve steady operating margin expansion.
• Emphasizes Market Leadership – We currently enjoy the #1 or #2 leading positions in several of our served key markets. As our business has evolved, we have grown to become a market leader rather than simply a market participant. It speaks to the depth and breadth of what Curtiss-Wright has to offer and the competitive drive of our employees. Our goal is to be #1 or #2 in all our key end markets, to be the trusted “go to” company in solving the most difficult engineering problems within specific specialties or solutions. We pride ourselves in maintaining long-standing customer relationships, which should continue to propel us further into leading positions. Speaking to the expansiveness of our served markets, we enjoy a strong global presence that is well balanced and continues to grow, with approximately 30% of our sales from international customers.
• Targets Top Quartile Performance – I have the utmost confidence that our new alignment and focus will succeed in driving the business and enabling Curtiss-Wright to reach top quartile performer heights in our key financial measures. It begins with clear and transparent operating metrics by which our management team will be judged. We’ve set clear and achievable long-term financial objectives: 5-6% organic sales growth, double-digit EPS growth, top quartile operating margins (at least 12.5%) with the ultimate objective of 14%, greater than 12% Return on Invested Capital (ROIC) and at least 100% free cash flow conversion. Top quartile performance metrics, combined with a balanced capital deployment strategy, will serve to significantly expand value.

Together, these key elements of One Curtiss-Wright will drive our business and enable us to deliver superior shareholder returns.

2013 Financial Performance

Our financial results this past year were strong. Net sales of $2.5 billion increased 20% from the prior year, driven by solid demand for our highly engineered products and services, particularly in our commercial end markets. The majority of the growth was a result of the late 2012 acquisitions and their contributions to our overall revenues in 2013 – particularly for upstream products serving the oil and gas market, and for sensors and electronic control systems on specialty vehicles serving the industrial market.

Similarly, our operating performance was strong, as we generated a 45% increase in operating income and 160 basis points in margin expansion to 9.3%, based on improvements in all three operating segments. Our net earnings from continuing operations rose 50% to $138 million, or $2.88 per diluted share.

Our free cash flow – defined as cash flow from operations less capital expenditures – was $166 million for the year, equating to a much improved 120% cash conversion (based on net earnings from continuing operations). Our balance sheet remains strong with a debt-to-capitalization of 38% and provides a solid base of financial flexibility to continue the pursuit of our overall corporate growth strategies.

Commitment to a Balanced Capital Deployment Strategy

We are consistently working to maximize value to our shareholders. We plan a better balance between capital expenditures, acquisitions and shareholder distributions. Looking ahead, while we remain committed to a disciplined strategy of reinvesting in our business and focusing on strategic bolt-on acquisitions, we are dedicated to increasing returns to shareholders in the form of dividends and share repurchases.

During 2013, we increased our annual dividend 11%, reflecting the Board’s continued confidence in our ability to deliver strong revenue and profitable growth. In February 2014, we announced an additional 30% increase in the annual dividend, which marked the third straight year of dividend increases. We also announced our commitment to re-enter the market to repurchase shares. Together, we see these as key measures of annual investor returns, as they express the confidence we have in our strategy..

Looking to the Future

Finally, I would like to thank our approximately 10,000 global employees for their continued drive and commitment.

As we enter 2014 and celebrate our 85th anniversary, I am more confident than ever that Curtiss-Wright will make great strides toward our objective of top quartile performance, returning strong shareholder value and long-term success to this storied company.

David C. Adams
President and Chief Executive Officer