DAVIDSON, N.C.--(BUSINESS WIRE)-- Curtiss-Wright Corporation (NYSE: CW) reports financial results for the third quarter ended September 30, 2023.

Third Quarter 2023 Highlights:

• Reported sales of $724 million, up 15%;
• Reported operating income of $133 million, operating margin of 18.3%, and diluted earnings per share (EPS) of $2.51;
• Adjusted operating income of $134 million, up 17%;
• Adjusted operating margin of 18.5%, up 30 basis points;
• Adjusted diluted EPS of $2.54, up 23%;
• New orders of $846 million, up 3%, reflecting solid Aerospace & Defense (A&D) and Commercial market demand, and book-to-bill of 1.2;
• Backlog of $2.9 billion, up 12% year-to-date; and
• Free cash flow (FCF) of $137 million, generating 140% Adjusted FCF conversion.

Raised Full-Year 2023 Adjusted Financial Guidance:

• Sales increased to new range of 8% to 10% growth (previously 7% to 9%), reflecting growth in all A&D and Commercial end markets;
• Maintained operating income range of 8% to 11% growth, and operating margin range of 17.4% to 17.6%, up 10 to 30 basis points compared with the prior year;
• Diluted EPS increased to new range of $9.00 to $9.20, up 11% to 13% (previously $8.90 to $9.15); and
• Free cash flow increased to new range of $380 to $400 million (previously $370 to $400 million) and continues to reflect greater than 110% FCF conversion.

"Curtiss-Wright delivered strong third quarter results, as Adjusted diluted EPS of $2.54 exceeded our expectations driven by sales growth in all of our A&D and Commercial end markets and a better-than-expected operational performance in our Defense Electronics segment," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. "We also demonstrated solid order activity and grew our already strong backlog, yielding a book-to-bill of 1.2x in the quarter, highlighted by record quarterly orders within our Defense Electronics segment and continued solid demand for commercial nuclear products."

"Based on the strong year-to-date performance, we have increased our full-year sales, operating income, diluted EPS and free cash flow guidance as we continue to successfully execute on our Pivot to Growth strategy and maintain strong alignment with the near- and long-term favorable secular growth trends driving our business."

Third Quarter 2023 Operating Results

• Sales of $724 million increased 15% compared with the prior year;
• Total A&D market sales increased 18%, while total Commercial market sales increased 8%;
• In our A&D markets, we experienced higher sales in the defense markets driven by continued strong demand for our defense electronics products and higher sales of arresting systems equipment, as well as strong growth in OEM sales in the commercial aerospace market, and
• In our Commercial markets, we experienced strong growth in the power & process markets, despite the wind down on the China Direct AP1000 program, and higher sales in the general industrial market; and
• Adjusted operating income of $134 million increased 17%, while Adjusted operating margin increased 30 basis points to 18.5%, principally driven by favorable overhead absorption on higher revenues in the Defense Electronics segment.

Third Quarter 2023 Segment Performance

Aerospace & Industrial

• Sales of $220 million, up $7 million, or 3%;
• Commercial aerospace market revenue increases reflected higher OEM sales of actuation and sensors products, as well as surface treatment services, on narrowbody and widebody platforms;
• Higher general industrial market revenue was principally driven by increased sales of industrial automation products and surface treatment services;
• Lower revenue in the aerospace and ground defense markets reflected the timing of sales for our actuation equipment supporting various programs; and
• Adjusted operating income was $39 million, flat compared with the prior year, while Adjusted operating margin decreased 60 basis points to 17.7%, as favorable absorption on higher sales was offset by unfavorable mix in actuation products.

Defense Electronics

• Sales of $216 million, up $55 million, or 34%;
• Higher revenue in the aerospace defense market was primarily driven by increased sales of our embedded computing and flight test instrumentation equipment on various domestic and international platforms;
• Strong revenue growth in the ground defense market principally reflected the robust demand and timing of sales of tactical battlefield communications equipment;
• Higher commercial aerospace market revenue reflected increased OEM sales of avionics and flight test instrumentation equipment on various domestic and international platforms; and
• Adjusted operating income was $56 million, up 54% from the prior year, while adjusted operating margin increased 330 basis points to 26.0%, primarily due to favorable absorption on higher A&D revenues.

Naval & Power

• Sales of $288 million, up $31 million, or 12%;
• Higher revenue in the aerospace defense market was primarily driven by increased sales of our arresting systems equipment supporting various domestic and international customers;
• Naval defense market revenue increases principally reflected higher revenues on Columbia-class and Virginia-class submarines, partially offset by the timing of revenues on the CVN-81 aircraft carrier program;
• Higher power & process market revenues reflected strong growth in industrial valve sales in the process market, and solid growth in the commercial nuclear market supporting both increased maintenance of existing operating reactors as well as increased development on advanced small modular reactors; Those increases were partially offset by lower China Direct AP1000 program revenues; and
• Adjusted operating income was $49 million, up 1% from the prior year, while adjusted operating margin decreased 190 basis points to 17.0%, as favorable absorption on higher revenues was offset by unfavorable naval contract adjustments as well as unfavorable mix of products.

Free Cash Flow

• Reported free cash flow of $137 million increased $51 million year over year, primarily driven by higher cash earnings due to the timing of defense revenues;
• Adjusted free cash flow of $137 million; and
• Capital expenditures were nearly flat compared with the prior year.

New Orders and Backlog

• New orders of $846 million increased 3% compared with the prior year and generated an overall book-to-bill of approximately 1.2x, principally driven by strong demand for defense electronics products within our A&D markets, and for nuclear products within our Commercial markets; and
• Backlog of $2.9 billion, up 12% from December 31, 2022, reflects higher demand in both our A&D and Commercial markets.

Share Repurchase and Dividends

• During the third quarter, the Company repurchased 63,614 shares of its common stock for approximately $13 million; and
• The Company also declared a quarterly dividend of $0.20 a share.

Full-Year 2023 Guidance

The Company is updating its full-year 2023 Adjusted financial guidance(1) as follows:

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A more detailed breakdown of the Company’s 2023 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted Non-GAAP amounts, can be found in the accompanying schedules. Historical financial results are available in the Investor Relations section of Curtiss-Wright’s website.

Conference Call & Webcast Information

The Company will host a conference call to discuss its third quarter 2023 financial results and updates to 2023 guidance at 10:00 a.m. ET on Thursday, November 2, 2023. A live webcast of the call and the accompanying financial presentation, as well as a webcast 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.

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Use and Definitions 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 Adjusted (non-GAAP) measures provide investors with improved transparency in order to better measure Curtiss-Wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and 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. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within this release.

The following definitions are provided:

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

These Adjusted financials are defined as Reported Sales, Operating Income, Operating Margin, Net Earnings and Diluted Earnings per Share under GAAP excluding: (i) the impact of first year purchase accounting costs associated with acquisitions, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) the sale or divestiture of a business or product line; (iii) pension settlement charges; and (iv) significant legal settlements, impairment costs, and costs associated with shareholder activism, as applicable.

Organic Sales and Organic Operating Income

The Corporation discloses organic sales and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic sales and organic operating income are defined as sales and operating income, excluding contributions from acquisitions and results of operations from divested businesses or product lines during the last twelve months, loss from sale of our industrial valves business in Germany, and foreign currency fluctuations.

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 net cash provided by operating activities less capital expenditures. Adjusted free cash flow excludes: (i) payments associated with the Westinghouse legal settlement in both the current and prior year periods and (ii) executive pension payments in the prior year period. The Corporation discloses adjusted free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as adjusted free cash flow divided by adjusted net earnings.