DAVIDSON, N.C.--(BUSINESS WIRE)-- Curtiss-Wright Corporation (NYSE: CW) reports financial results for the third quarter ended September 30, 2018.

Beginning in the second quarter of 2018, the Company elected to change the presentation of its financials and guidance to include an Adjusted (non-GAAP) view that excludes first year purchase accounting costs associated with its acquisitions.

Third Quarter 2018 Highlights

• Reported diluted earnings per share (EPS) of $1.68, with Adjusted diluted EPS of $1.70, up 19% compared with the prior year;
• Net sales of $595 million, up 5%, including 2% organic growth (defined below);
• Reported operating income of $97 million, with Adjusted operating income of $98 million, up 6%;
• Reported operating margin of 16.3%, with Adjusted operating margin of 16.5%, up 20 basis points;
• Free cash flow of $62 million, down 31%;
• New orders of $514 million, down 1%; and
• Share repurchases of approximately $33 million.

Full-Year 2018 Business Outlook

• Full-year 2018 Adjusted guidance reflects higher sales (now up 7-9%), operating income (up 11-14%), operating margin of 15.3% to 15.5% (now up 60-80 bps) and diluted EPS (now up 23-26%), compared with Adjusted 2017 financial results;
• Increased full-year 2018 Adjusted diluted EPS guidance by $0.10 to new range of $6.10 to $6.25, compared with prior range of $6.00 to $6.15, reflecting improved profitability in the Defense and Power segments, as well as expectations for a lower tax rate and share count; and
• Increased Reported free cash flow by $10 million to new range of $260 to $280 million and Adjusted free cash flow to a new range of $310 to $330 million, which excludes a $50 million voluntary pension contribution made in the first quarter of 2018.

“Our third quarter results exceeded our expectations, as we generated solid 5% top-line growth, led by a better than expected performance in the Power segment,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “As a result, we delivered a strong Adjusted operating margin of 16.5% and Adjusted diluted EPS of $1.70.”

“We remain on track for a solid operational performance in 2018 which includes higher sales in all end markets, double-digit growth in operating income, strong margin expansion and solid free cash flow generation. Based on the solid year-to-date results and outlook for the remainder of 2018, we have increased our full-year Adjusted diluted EPS guidance to a new range of $6.10 to $6.25. In addition, we have raised our full-year Adjusted free cash flow guidance to a new range of $310 to $330 million. We look forward to continuing to deliver solid profitability and free cash flow in order to enhance shareholder value.”

Third Quarter 2018 Operating Results

�
(In millions)	�	�	3Q-2018	�	3Q-2017	�	Change
Sales	�	�	$ 595.4	�	$ 567.9	�	5%
Reported operating income	�	�	$ 97.0	�	$ 92.4	�	5%
Adjustments (1)			1.3		-		-
Adjusted operating income	�	�	$ 98.3	�	$ 92.4	�	6%
Adjusted operating margin	�	�	16.5%	�	16.3%	�	20 bps
(1)��Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions.
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• Sales of $595 million up $27 million, or 5%, compared with the prior year (2% organic, 3% acquisitions);
• Higher organic revenues were principally driven by strong power generation and general industrial sales, partially offset by lower defense and commercial aerospace revenues;
• From an end market perspective, total sales to the defense markets increased 4%, principally associated with the acquisition of Dresser-Rand’s government business (“DRG”), while total sales to the commercial markets increased 5%, most of which was organic, compared with the prior year. Please refer to the accompanying tables for a breakdown of sales by end market;
• Reported operating income was $97 million, with Reported operating margin of 16.3%;
• Adjusted operating income of $98 million, up $6 million, or 6%, compared with the prior year, principally reflects higher power generation revenues in the Power segment, most notably due to the China Direct AP1000 program, as well as the benefits of our DRG acquisition;
• Adjusted operating margin of 16.5%, up 20 basis points compared with the prior year, was primarily driven by higher revenues and favorable overhead absorption in the Power segment, as well as the benefits of our ongoing margin improvement initiatives; and
• Non-segment expenses of $10 million increased by $4 million compared with the prior year, primarily due to higher pension costs.

											�
Net Earnings and Diluted EPS
�					�						�
(In millions, except EPS)	�	�	3Q-2018		�	�	3Q-2017		�	Change	�
Reported net earnings	�	�	$	74.5		�	$	63.9	�	16	%
Adjustments (1)				1.3				-		-
Tax impact on Adjustments (1)	�	�	�	(0.3	)	�	�	-	�	-	�
Adjusted net earnings	�	�	$	75.5	�	�	$	63.9	�	18	%
Reported diluted EPS			$	1.68			$	1.43		17	%
Adjustments (1)			$	0.03				-		-
Tax impact on Adjustments (1)	�	�	�	($0.01	)	�	�	-	�	-	�
Adjusted diluted EPS	�	�	$	1.70	�	�	$	1.43	�	19	%
(1)��Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions.
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• Reported net earnings of $74 million and reported diluted EPS of $1.68;
• Adjusted net earnings of $75 million, up $12 million, or 18%, compared with the prior year, reflecting higher operating income, lower interest expense and a lower tax rate;
• Adjusted diluted earnings per share of $1.70, up $0.27, or 19%, compared with the prior year, reflecting higher operating income, lower interest expense and a lower tax rate, as well as a slightly lower share count; and
• The effective tax rate (ETR) for the third quarter was 19.9%, a decrease from 26.0% in the prior year quarter, primarily driven by the current period reduction of the U.S. corporate income tax rate from 35% to 21% associated with the 2017 Tax Cuts and Jobs Act (TCJA).

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Free Cash Flow

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(In millions)

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3Q-2018

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�

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3Q-2017

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Change

Net cash provided by operating activities

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�

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$

72.3

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$

101.4

�

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(29

%)

Capital expenditures

(10.4

)

(11.6

)

10

%

Free cash flow

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�

�

�

$

61.9

�

�

�

�

$

89.8

�

�

�

�

(31

%)

Adjusted free cash flow

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�

�

�

$

61.9

�

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$

89.8

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(31

%)

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• Free cash flow of $62 million, defined as cash flow from operations less capital expenditures, decreased $28 million compared with the prior year, as higher earnings were more than offset by the timing of collections; and
• Capital expenditures decreased by $1 million to $10 million compared with the prior year period, due to higher capital investments in the prior year period.

New Orders and Backlog

• New orders of $514 million, were down 1% compared with the prior year, as solid growth in naval defense orders, including the contribution from the DRG acquisition, were more than offset by lower commercial orders, most notably in the power generation market;
• Year-to-date, new orders of $1.8 billion are up 6% compared with the prior year; and
• Backlog of $2.0 billion was flat with December 31, 2017.

Other Items – Share Repurchase

• During the third quarter, the Company repurchased 250,394 shares of its common stock for approximately $33 million; and
• Year-to-date, the Company repurchased 611,665 shares for approximately $79 million.

Third Quarter 2018 Segment Performance

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Commercial/Industrial

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(In millions)

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3Q-2018

�

�

�

3Q-2017

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�

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Change

Sales

�

�

�

�

$ 295.2

�

�

�

$ 293.9

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�

0%

Reported operating income

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�

�

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$ 44.8

�

�

�

$ 46.7

�

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(4%)

Reported operating margin

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�

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15.2%

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�

�

15.9%

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�

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(70 bps)

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• Sales of $295 million were nearly flat compared with the prior year (1% organic, 1% unfavorable foreign currency translation);
• Lower aerospace and naval defense market sales reflect lower sales of sensors on various fighter jet programs and lower sales of valves on the CVN-80 Ford class aircraft carrier program, respectively;
• Commercial aerospace market sales were down slightly, as higher sales of sensors and controls products were more than offset by lower revenues resulting from FAA directives, which are winding down;
• General industrial market sales growth was driven by solid demand for industrial valves and industrial controls products, and surface treatment services;
• Reported operating income of $45 million, down $2 million, or 4%, compared with the prior year ((5%) organic, 1% favorable foreign currency translation); and
• Reported operating margin decreased 70 basis points to 15.2%, reflecting unfavorable mix and lower profitability for sensors and controls products, which more than offset the benefits of our ongoing margin improvement initiatives.

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Defense

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(In millions)

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�

3Q-2018

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�

�

3Q-2017

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�

�

Change

Sales

�

�

�

�

$ 138.4

�

�

�

$ 141.9

�

�

�

(3%)

Reported operating income

�

�

�

�

$ 33.6

�

�

�

$ 33.6

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�

�

0%

Reported operating margin

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�

�

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24.3%

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23.7%

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60 bps

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• Sales of $138 million, down $4 million, or 3%, compared with the prior year ((2%) organic, 1% unfavorable foreign currency translation);
• Sales in the aerospace defense market were flat, as higher sales of flight test equipment on fighter jet and bomber programs were offset by lower sales of embedded computing equipment on helicopter and unmanned aerial vehicle (UAV) platforms;
• Lower ground defense market sales principally reflect reduced sales of embedded computing equipment on various domestic and international programs; and
• Reported operating income of $34 million was flat compared with the prior year, while reported operating margin increased 60 basis points to 24.3%, as unfavorable absorption was offset by favorable foreign currency translation.

�
Power
�
(In millions)	�	�	3Q-2018	�	3Q-2017	�	Change
Sales	�	�	$ 161.8	�	$ 132.0	�	23%
Reported operating income	�	�	$ 28.2	�	$ 17.8	�	59%
Adjustments (1)			1.3		-		-
Adjusted operating income	�	�	$ 29.5	�	$ 17.8	�	66%
Adjusted operating margin	�	�	18.2%	�	13.5%	�	470 bps
(1)��Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions.
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• Sales of $162 million, up $30 million, or 23%, compared with the prior year (15% acquisition, 8% organic);
• Strong naval defense market sales were driven by higher CVN-80 aircraft carrier revenues and solid DRG service center revenues;
• Strong power generation market sales reflect higher revenues on the China Direct AP1000 program, which more than offset lower revenues on the domestic AP1000 program, as well as improved domestic aftermarket sales supporting currently operating nuclear reactors;
• Reported operating income was $28 million, with Reported operating margin of 17.5%; and
• Adjusted operating income of $30 million, up $12 million, or 66%, compared with the prior year, while Adjusted operating margin increased 470 basis points to 18.2%, reflecting higher sales and improved profitability on the China Direct AP1000 program.

Full-Year 2018 Guidance

The Company is updating its full-year 2018 financial guidance as follows:

(In millions, except EPS)

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�

Prior Reported Guidance (GAAP)

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Change in Acquisition Valuation Estimates(1)

�

3Q Change Operational Performance

�

Updated Reported Guidance (GAAP)

�

Adjustments (Non- GAAP)(1)

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Current Adjusted Guidance (Non-GAAP)

Total Sales

�

�

$2,445 - $2,485

�

-

�

($15)

�

$2,430 - $2,470

�

-

�

$2,430 - $2,470

Operating Income

�

�

$357 - $367

�

$6

�

-

�

$363 - $373

�

$8 (prev. $14)

�

$371 - $382

Operating Margin

�

�

14.6% - 14.8%

�

20 bps

�

10 bps

�

14.9% - 15.1%

�

40 bps (prev. 60 bps)

�

15.3% - 15.5%

Interest Expense

�

�

($35 - $36)

�

-

�

-

�

($35 - $36)

�

-

�

($35 - $36)

Effective Tax Rate

�

�

24.0%

�

-

�

(1.0%)

�

23.0%

�

-

�

23.0%

Diluted EPS

�

�

$5.75 - $5.90

�

$0.11

�

$0.10

�

$5.96 - $6.11

�

$0.14 (prev. $0.25)

�

$6.10 - $6.25

Diluted Shares Outstanding

�

�

44.6

�

-

�

(0.1)

�

44.5

�

-

�

44.5

Free Cash Flow

�

�

$250 - $270

�

-

�

$10

�

$260 - $280

�

$50

�

$310 - $330

(1)��Includes one-time Inventory Step-up, Backlog Amortization and Transaction costs for current and prior year acquisitions.

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Notes:

• Full-year 2018 Adjusted guidance reflects higher sales (now up 7-9%), operating income (up 11-14%), operating margin of 15.3% to 15.5% (now up 60-80 bps) and diluted EPS (now up 23-26%), compared with Adjusted 2017 financial results;
• Revised full-year 2018 Adjusted diluted EPS guidance to new range of $6.10 to $6.25, compared with prior range of $6.00 to $6.15; reflecting improved profitability in the Defense and Power segments, reduced profitability in the Commercial/Industrial segment, and higher corporate costs, as well as expectations for a lower effective tax rate and share count;
• Full-year 2018 Adjusted operating income guidance includes revised assumptions for first year acquisition-related purchase accounting costs following a $6 million true-up in DRG’s inventory step up valuation, which reduced the full-year, non-GAAP adjustment from $14 million to $8 million, and shifted $6 million into core operating performance;
• Full-year 2018 Adjusted diluted EPS guidance also reflects change in inventory valuation, which reduced the full-year, non-GAAP adjustment from $0.25 to $0.14, and shifted $0.11 into core operating performance; and
• Increased Reported free cash flow by $10 million to new range of $260 to $280 million and Adjusted free cash flow range of $310 to $330 million, which excludes a $50 million voluntary pension contribution made in the first quarter of 2018.
• A more detailed breakdown of the Company’s 2018 guidance by segment and by market can be found in the accompanying schedules.

Conference Call & Webcast Information

The Company will host a conference call to discuss third quarter 2018 financial results at 9:00 a.m. EDT on Wednesday, October 31, 2018. A live webcast of the call and the accompanying financial presentation, as well as a replay of the call, will be made available on the internet by visiting the Investor Relations section of the Company’s website at www.curtisswright.com.

(Tables to Follow)

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
($'s in thousands, except per share data)
	�	�	�				�	�				�	�				�	�			�	�				�	�				�	�				�	�
				Three Months Ended																			Nine Months Ended
				September 30,										Change									September 30,										Change
				2018					2017					$					%				2018					2017					$					%
Product sales				$	495,197				$	468,073				$	27,124				6	%			$	1,451,560				$	1,351,076				$	100,484				7	%
Service sales				100,196		�			99,828		�			368		�			0	%			311,653		�			308,069		�			3,584		�			1	%
Total net sales				595,393					567,901					27,492					5	%			1,763,213					1,659,145					104,068					6	%
																																						�
Cost of product sales				312,702					294,907					17,795					6	%			936,197					887,311					48,886					6	%
Cost of service sales				60,173		�			65,498		�			(5,325		)			(8	%)			196,807		�			202,393		�			(5,586		)			(3	%)
Total cost of sales				372,875					360,405					12,470					3	%			1,133,004					1,089,704					43,300					4	%
																																						�
Gross profit				222,518					207,496					15,022					7	%			630,209					569,441					60,768					11	%
																																						�
Research and development expenses				14,239					14,826					(587		)			(4	%)			45,234					46,205					(971		)			(2	%)
Selling expenses				30,361					29,252					1,109					4	%			94,546					87,765					6,781					8	%
General and administrative expenses				80,871		�			71,004		�			9,867		�			14	%			226,808		�			215,633		�			11,175		�			5	%
																																						�
Operating income				97,047					92,414					4,633					5	%			263,621					219,838					43,783					20	%
																																						�
Interest expense				7,949					10,457					(2,508		)			(24	%)			25,719					31,584					(5,865		)			(19	%)
Other income, net				3,843		�			4,457		�			(614		)			(14	%)			12,497		�			12,033		�			464		�			4	%
																																						�
Earnings before income taxes				92,941					86,414					6,527					8	%			250,399					200,287					50,112					25	%
Provision for income taxes				(18,458		)			(22,470		)			4,012		�			(18	%)			(57,485		)			(53,146		)			(4,339		)			8	%
Net earnings				$	74,483	�			$	63,944	�			$	10,539	�			16	%			$	192,914	�			$	147,141	�			$	45,773	�			31	%
																																						�
Net earnings per share:
Basic earnings per share				$	1.70				$	1.45													$	4.38				$	3.33
Diluted earnings per share				$	1.68				$	1.43													$	4.33				$	3.29
																																						�
Dividends per share				$	0.15				$	0.15													$	0.45				$	0.41
																																						�
Weighted average shares outstanding:
Basic				43,892					44,137														44,060					44,196
Diluted				44,334					44,686														44,513					44,782

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($'s in thousands, except par value)
	�	�	�				�	�				�	�
				September 30,					December 31,					Change
				2018					2017					%
Assets
Current assets:
Cash and cash equivalents				$	245,917				$	475,120				(48	%)
Receivables, net				615,398					494,923					24	%
Inventories, net				429,267					378,866					13	%
Other current assets				55,752		�			52,951		�			5	%
Total current assets				1,346,334		�			1,401,860		�			(4	%)
Property, plant, and equipment, net				369,996					390,235					(5	%)
Goodwill				1,097,268					1,096,329					0	%
Other intangible assets, net				442,295					329,668					34	%
Other assets				20,178		�			18,229		�			11	%
Total assets				$	3,276,071	�			$	3,236,321	�			1	%
														�
Liabilities
Current liabilities:
Current portion of long-term and short-term debt				$	1,023				$	150				582	%
Accounts payable				176,350					185,176					(5	%)
Accrued expenses				141,849					150,406					(6	%)
Income taxes payable				5,787					4,564					27	%
Deferred revenue				223,686					214,891					4	%
Other current liabilities				48,747		�			35,810		�			36	%
Total current liabilities				597,442		�			590,997		�			1	%
Long-term debt				812,731					813,989					0	%
Deferred tax liabilities, net				56,862					49,360					15	%
Accrued pension and other postretirement benefit costs				63,141					121,043					(48	%)
Long-term portion of environmental reserves				15,087					14,546					4	%
Other liabilities				109,531		�			118,586		�			(8	%)
Total liabilities				1,654,794		�			1,708,521		�			(3	%)
														�
Stockholders' equity
Common stock, $1 par value				49,187					49,187					0	%
Additional paid in capital				123,193					120,609					2	%
Retained earnings				2,115,166					1,944,324					9	%
Accumulated other comprehensive loss				(238,288		)			(216,840		)			(10	%)
Less: cost of treasury stock				(427,981		)			(369,480		)			(16	%)
Total stockholders' equity				1,621,277		�			1,527,800		�			6	%
				�					�
Total liabilities and stockholders' equity				$	3,276,071	�			$	3,236,321	�			1	%

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SEGMENT INFORMATION (UNAUDITED)
($'s in thousands)
	�	�	�				�	�				�	�			�	�				�	�				�	�
				Three Months Ended														Nine Months Ended
				September 30,														September 30,
														Change														Change
				2018					2017					%				2018					2017					%
Sales:
Commercial/Industrial				$	295,239				$	293,939				0	%			$	904,343				$	864,360				5	%
Defense				138,372					141,945					(3	%)			403,450					382,968					5	%
Power				161,782		�			132,017		�			23	%			455,420		�	�		411,817		�			11	%
																												�
Total sales				$	595,393				$	567,901				5	%			$	1,763,213				$	1,659,145				6	%
																												�
Operating income (expense):
Commercial/Industrial				$	44,786				$	46,702				(4	%)			$	135,747				$	120,874				12	%
Defense				33,615					33,575					0	%			91,984					65,800					40	%
Power				28,249		�			17,771		�			59	%			62,792		�			57,191		�			10	%
																												�
Total segments				$	106,650				$	98,048				9	%			$	290,523				$	243,865				19	%
Corporate and other				(9,603		)			(5,634		)			(70	%)			(26,902		)			(24,027		)			(12	%)
																												�
Total operating income				$	97,047	�			$	92,414	�			5	%			$	263,621	�			$	219,838	�			20	%
																												�
																												�
Operating margins:
Commercial/Industrial				15.2		%			15.9		%			(70	bps)			15.0		%			14.0		%			100	bps
Defense				24.3		%			23.7		%			60	bps			22.8		%			17.2		%			560	bps
Power				17.5		%			13.5		%			400	bps			13.8		%			13.9		%			(10	bps)
Total Curtiss-Wright				16.3		%			16.3		%			0	bps			15.0		%			13.3		%			170	bps
																												�
Segment margins				17.9		%			17.3		%			60	bps			16.5		%			14.7		%			180	bps

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SALES BY END MARKET (UNAUDITED)
($'s in thousands)
	�	�	�				�	�				�	�			�	�				�	�				�	�
				Three Months Ended														Nine Months Ended
				September 30,														September 30,
														Change														Change
				2018					2017					%				2018					2017					%
Defense markets:
Aerospace				$	91,919				$	93,005				(1	%)			$	266,128				$	247,666				7	%
Ground				24,798					27,820					(11	%)			67,081					65,071					3	%
Naval				115,142					102,617					12	%			349,928					293,635					19	%
Other				5,807		�			5,072		�			14	%			13,811		�			18,077		�			(24	%)
Total Defense				$	237,666				$	228,514				4	%			$	696,948				$	624,449				12	%
																												�
Commercial markets:
Aerospace				$	101,872				$	104,961				(3	%)			$	305,893				$	303,928				1	%
Power Generation				105,757					92,089					15	%			306,843					312,414					(2	%)
General Industrial				150,098		�			142,337		�			5	%			453,529		�			418,354		�			8	%
Total Commercial				$	357,727				$	339,387				5	%			$	1,066,265				$	1,034,696				3	%
				�					�									�					�
Total Curtiss-Wright				$	595,393	�			$	567,901	�			5	%			$	1,763,213	�			$	1,659,145	�			6	%
�
�
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Use of Non-GAAP Financial Information (Unaudited)

The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these non-GAAP measures provide investors with additional insight into the Company’s ongoing business performance. We believe that disclosing non-GAAP financial measures provides useful supplemental data that should not be considered in isolation, nor be considered a substitute for financial measures prepared in accordance with GAAP, and allows for greater transparency in the review of our financial and operational performance. Other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Beginning with the second quarter of 2018, coinciding with the initial reporting of the DRG acquisition, the Company elected to present its financials and guidance on an Adjusted, non-GAAP basis for operating income, operating margin, net earnings and diluted earnings per share to exclude first year purchase accounting costs associated with its acquisitions, specifically one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions that are included under GAAP. This press release refers to "Adjusted" amounts, which are Non-GAAP financial measures described below.

Management believes that this approach will provide improved transparency to the investment community in order to measure Curtiss-Wright’s core operating and financial performance, provide quarter-over-quarter comparisons excluding one-time items and show better comparisons among company peers. Additional details and tables reconciling the GAAP to non-GAAP financial measures are included within this release. All per share amounts are reported on a diluted basis.

The following definitions are provided:

Adjusted Operating Income, Operating Margin, Net Income and Diluted EPS

These Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding the impact of first year purchase accounting costs associated with acquisitions for current and prior year periods, specifically one-time inventory step-up, backlog amortization and transaction costs.

Organic Revenue and Organic Operating Income

The Corporation discloses organic revenue and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic revenue and organic operating income are defined as revenue and operating income excluding the impact of foreign currency fluctuations and contributions from acquisitions made during the last twelve months.

	�	�	�	�
																					�
Three Months Ended
September 30,
2018 vs. 2017
					Commercial/Industrial				�	�	Defense				�	�	Power				�	�	Total Curtiss-Wright
					Sales	�	�	Operating income			Sales	�	�	Operating income			Sales	�	�	Operating income			Sales	�	�	Operating income
Organic					1%			(5%)			(2%)			(3%)			8%			50%			2%			2%
Acquisitions					0%			0%			0%			0%			15%			9%			3%			2%
Foreign Currency					(1%)			1%			(1%)			3%			0%			0%			0%			1%
Total					0%			(4%)			(3%)			0%			23%			59%			5%			5%
																										�
�
�
�
Nine Months Ended
September 30,
2018 vs. 2017
					Commercial/Industrial						Defense						Power						Total Curtiss-Wright
					Sales			Operating income			Sales			Operating income			Sales			Operating income			Sales			Operating income
Organic					3%			11%			4%			41%			1%			14%			3%			21%
Acquisitions					0%			0%			0%			0%			10%			(4%)			2%			(1%)
Foreign Currency					2%			1%			1%			(1%)			0%			0%			1%			0%
Total					5%			12%			5%			40%			11%			10%			6%			20%
																										�
																										�

Free Cash Flow and Free Cash Flow Conversion

The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as cash flow provided by operating activities less capital expenditures. The Corporation discloses free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as free cash flow divided by net earnings from continuing operations.

�
�
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NON-GAAP FINANCIAL DATA (UNAUDITED)
($'s in thousands)
	�	�	�	�				�	�				�	�				�	�
					Three Months Ended										Nine Months Ended
					September 30,										September 30,
					2018					2017					2018					2017
																				�
Net cash provided by operating activities					$	72,290				$	101,375				$	98,975				$	162,307
Capital expenditures					(10,435		)			(11,586		)			(30,287		)			(34,874		)
Free cash flow					$	61,855	�			$	89,789	�			$	68,688	�			$	127,433	�
Pension payment					—		�			—		�			50,000		�			—		�
Adjusted free cash flow					$	61,855	�			$	89,789	�			$	118,688	�			$	127,433	�
Free Cash Flow Conversion					83		%			140		%			62		%			87		%

�
�
�
CURTISS-WRIGHT CORPORATION
2018 Guidance (1) (2)
As of October 30, 2018
($'s in millions, except per share data)
�
	�	�	�	Adjusted (Non- GAAP)			�	�	2018 Prior Reported Guidance (GAAP)											�	�	�								�	�	2018 Reported Guidance (GAAP)											�	�	�			�	�	2018 Current Adjusted Guidance (Non-GAAP)
				2017					Low			�	�	High			�	�	2018 Chg vs 2017 Reported			Change in Acquisition Valuation Estimates(3)			�	�	3Q Change in Operational Performance					Low			�	�	High			�	�	2018 Chg vs 2017 Adjusted			Adjustments (Non-GAAP)(3)					Low			�	�	High			�	�	2018 Chg vs 2017 Adjusted (3)
Sales:																									�	�
Commercial/Industrial				$	1,163				$	1,213				$	1,233							$	-				$	-				$	1,213				$	1,233							$	-				$	1,213				$	1,233
Defense					555					575					585								-					(15	)				560					570								-					560					570
Power				�	553	�			�	657	�			�	667	�			�			�	-	�	�	�	�	-	�			�	657	�			�	667	�			�			�	-	�			�	657	�			�	667	�			�
Total sales				$	2,271				$	2,445				$	2,485				8 to 9%			$	-				$	(15	)			$	2,430				$	2,470				7 to 9%			$	-				$	2,430				$	2,470				7 to 9%
																																																												�
Operating income:
Commercial/Industrial				$	168				$	183				$	188							$	-				$	(3	)			$	180				$	185							$	-				$	180				$	185
Defense					119					124					127								-					2					126					129								-					126					129
Power				�	81	�			�	85	�			�	87	�						�	6	�	�	�	�	3	�			�	94	�			�	97	�						�	8	�			�	102	�			�	105	�
Total segments					368					391					402								6					2					400					411								8					407					418
Corporate and other				�	(34	)			�	(34	)			�	(35	)			�			�	-	�	�	�	�	(2	)			�	(36	)			�	(37	)			�			�	-	�			�	(36	)			�	(37	)			�
Total operating income				$	335	�			$	357	�			$	367	�			7 to 10%			$	6	�	�	�	$	-	�			$	363	�			$	373	�			8 to 12%			$	8	�			$	371	�			$	382	�			11 to 14%
																																																												�
Interest expense				$	(41	)			$	(35	)			$	(36	)						$	-				$	-				$	(35	)			$	(36	)						$	-				$	(35	)			$	(36	)
Other income, net					16					15					15								-					-					15					15								-					15					15
Earnings before income taxes					309					337					347								6					-					344					353								8					352					361
Provision for income taxes				�	(88	)			�	(81	)			�	(83	)						�	(1	)	�	�	�	3	�			�	(79	)			�	(81	)						�	(2	)			�	(81	)			�	(83	)
Net earnings				$	222	�			$	256	�			$	263	�						$	5	�	�	�	$	3	�			$	265	�			$	272	�						$	6	�			$	271	�			$	278	�
																			�																							�																		�
Diluted earnings per share				$	4.96				$	5.75				$	5.90				16 to 19%			$	0.11				$	0.10				$	5.96				$	6.11				20 to 23%			$	0.14				$	6.10				$	6.25				23 to 26%
Diluted shares outstanding					44.8					44.6					44.6													(0.1	)				44.5					44.5													44.5					44.5
Effective tax rate					28.3	%				24.0	%				24.0	%												(1.0	%)				23.0	%				23.0	%												23.0	%				23.0	%
																																																												�
Operating margins:
Commercial/Industrial					14.5	%				15.1	%				15.2	%			60 to 70 bps				-				(30 bps)						14.8	%				15.0	%			30 to 50 bps				-					14.8	%				15.0	%			30 to 50 bps
Defense					21.4	%				21.5	%				21.7	%			10 to 30 bps				-				+90 bps						22.4	%				22.6	%			100 to 120 bps				-					22.4	%				22.6	%			100 to 120 bps
Power					14.7	%				12.9	%				13.1	%			(160 to 180 bps)			+90 bps					+40 bps						14.2	%				14.4	%			(30 to 50 bps)			+130 bps						15.5	%				15.7	%			80 to 100 bps
Total operating margin					14.7	%				14.6	%				14.8	%			(10) to 10 bps			+20 bps					+10 bps						14.9	%				15.1	%			20 to 40 bps			+40 bps						15.3	%				15.5	%			60 to 80 bps
�
Note: Full year amounts may not add due to rounding
�
(1) Full-year 2017 and 2018 effective tax rate guidance includes the impacts of the Tax Cuts and Jobs Act.
�
(2) Reconciliations of 2017 Reported (GAAP) results to Adjusted (non-GAAP) results are furnished within this release.
�
(3) Adjustments include one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions. Adjusted operating income and diluted EPS guidance includes revised assumptions for first year acquisition-related purchase accounting costs following a $6 million true-up in DRG’s inventory step up valuation, which reduced the full-year, non-GAAP adjustment from $14 million ($0.25) to $8 million ($0.14), and shifted $6 million ($0.11) into core operating performance.

						�	�
								�
								�
CURTISS-WRIGHT CORPORATION
2018 Sales Growth Guidance by End Market
As of October 30, 2018
	�	�	�	�
					2018 % Change vs 2017			2018 % Change vs 2017
								�
					(Prior)			(Current)
Defense Markets
Aerospace					11 - 13%			8 - 10%
Ground					0 - 2%			0 - 2%
Navy					20 - 22%			19 - 21%
								�
Total Defense (Including Other Defense)					13 - 15%			12 - 14%
								�
Commercial Markets
Commercial Aerospace					0 - 2%			0 - 2%
Power Generation					2 - 4%			2 - 4%
General Industrial					8 - 10%			8 - 10%
Total Commercial					3 - 5%			3 - 5%
								�
Total Curtiss-Wright Sales					8 - 9%			7 - 9%
								�
Note: Full year amounts may not add due to rounding

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�
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CURTISS-WRIGHT CORPORATION
2017 Reconciliation Reported (GAAP)(1) to Adjusted (Non-GAAP) (2)
($'s in millions, except per share data)
	�	�	�	�													�	�	�													�	�	�			�	�	�			�	�	�
				� Reported 1Q 2017			�	�	Adjustments (Non-GAAP)			�	�	Adjusted 1Q 2017					Reported 2Q 2017			�	�	Adjustments (Non-GAAP)			�	�	Adjusted 2Q 2017					Reported 3Q 2017					Reported 4Q 2017					Reported FY 2017			�	�	Adjustments (Non-GAAP)			�	�	Adjusted FY 2017
Sales:							�	�				�	�									�	�				�	�																			�	�				�	�
Commercial/Industrial				$	279				$	-				$	279				$	292				$	-				$	292				$	294				$	298				$	1,163				$	-				$	1,163
Defense					115					-					115					126					-					126					142					173					555					-					555
Power				�	130	�	�	�	�	-	�	�	�	�	130	�			�	150	�	�	�	�	-	�	�	�	�	150	�			�	132	�			�	141	�			�	553	�	�	�	�	-	�	�	�	�	553	�
Total sales				$	524					-				$	524				$	568					-				$	568				$	568				$	612				$	2,271					-				$	2,271
																																																						�
Operating income:
Commercial/Industrial				$	31				$	-				$	31				$	44				$	-				$	44				$	47				$	47				$	168				$	-				$	168
Defense					11					5					16					21					5					26					34					44					109					10					119
Power				�	16	�	�	�	�	-	�	�	�	�	16	�			�	24	�	�	�	�	-	�	�	�	�	24	�			�	18	�			�	24	�			�	81	�	�	�	�	-	�	�	�	�	81	�
Total segments					57					5					62					89					5					94					98					115					359					10					368
Corporate and other				�	(10	)	�	�	�	-	�	�	�	�	(10	)			�	(9	)	�	�	�	-	�	�	�	�	(9	)			�	(6	)			�	(9	)			�	(34	)	�	�	�	-	�	�	�	�	(34	)
Total operating income				$	48	�	�	�	$	5	�	�	�	$	52	�			$	80	�	�	�	$	5	�	�	�	$	85	�			$	92	�			$	105	�			$	325	�	�	�	$	10	�	�	�	$	335	�
																																																						�
Interest expense				$	(10	)			$	-				$	(10	)			$	(11	)			$	-				$	(11	)			$	(10	)			$	(10	)			$	(41	)			$	-				$	(41	)
Other income, net					4					-					4					4					-					4					4					4					16					-					16
Earnings before income taxes					41					5					46					73					5					78					86					99					300					10					309
Provision for income taxes				�	(9	)	�	�	�	(1	)	�	�	�	(10	)			�	(22	)	�	�	�	(2	)	�	�	�	(24	)			�	(22	)			�	(32	)			�	(85	)	�	�	�	(3	)	�	�	�	(88	)
Net earnings				$	33	�	�	�	$	4	�	�	�	$	36	�			$	51	�	�	�	$	4	�	�	�	$	54	�			$	64	�			$	68	�			$	215	�	�	�	$	7	�	�	�	$	222	�
																																																						�
Diluted earnings per share				$	0.73				$	0.08				$	0.81				$	1.13				$	0.08				$	1.21				$	1.43				$	1.52				$	4.80				$	0.16				$	4.96
Diluted shares outstanding					44.9										44.9					44.8										44.8					44.7					44.7					44.8										44.8
Effective tax rate					20.9	%									20.9	%				30.3	%									30.3	%				26.0	%				31.8	%				28.3	%									28.3	%
																																																						�
Operating margins:
Commercial/Industrial					11.0	%									11.0	%				15.0	%									15.0	%				15.9	%				15.8	%				14.5	%									14.5	%
Defense					9.7	%			+395 bps						13.6	%				16.7	%			+410 bps						20.8	%				23.7	%				25.2	%				19.7	%			+170 bps						21.4	%
Power					11.9	%									11.9	%				15.9	%									15.9	%				13.5	%				17.0	%				14.7	%									14.7	%
Total operating margin					9.1	%			+90 bps						10.0	%				14.0	%			+100 bps						15.0	%				16.3	%				17.2	%				14.3	%			+40 bps						14.7	%
																																																						�
Note: Full year amounts may not add due to rounding
�
(1) Reported 2017 results reflect the retrospective impact from the adoption of ASU 2017-07 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which results in reclassification of the non-service components of Pension expense from Operating Income to Other Income/Expense effective for fiscal years beginning after December 15, 2017. This accounting change lowers operating income by $14.6 million and lowers operating margin by 70 basis points for the full-year 2017 period. This change is neutral to earnings per share.
�
(2) Adjusted operating income, operating margin and diluted EPS exclude first year purchase accounting costs, specifically one-time inventory step-up, backlog amortization and transaction costs, associated with the acquisition of TTC in 2017 (Defense segment). First year purchase accounting costs in the third and fourth quarters of 2017 are not material.
																																�
																																�

About Curtiss-Wright Corporation

Curtiss-Wright Corporation (NYSE: CW) is a global innovative company that delivers highly engineered, critical function products and services to the commercial, industrial, defense and energy markets. Building on the heritage of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of providing reliable solutions through trusted customer relationships. The company employs approximately 8,600 people worldwide. For more information, visit www.curtisswright.com.

Certain statements made in this press release, including statements about future revenue, financial performance guidance, quarterly and annual revenue, net income, operating income growth, future business opportunities, cost saving initiatives, the successful integration of the Company’s acquisitions, and future cash flow from operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include, but are not limited to: a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December�31, 2017, and subsequent reports filed with the Securities and Exchange Commission.

This press release and additional information are available at www.curtisswright.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181030006153/en/

Curtiss-Wright Corporation

Jim Ryan, 704-869-4621

[email protected]

Source: Curtiss-Wright Corporation