CURTISS WRIGHT CORP [CW] Filings

10-Q 1 cw-20230630.htm 10-Q cw-20230630

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 June 30, 2023

☐ 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: 38,305,442 shares as of July 31, 2023.

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	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

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		32

Signatures			33

Page 3

PART 1- FINANCIAL INFORMATION

Item 1. Financial Statements

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share data)	2023		2022		2023		2022
Net sales
Product sales	$	583,036	$	505,416	$	1,107,917	$	958,837
Service sales	121,360		103,941		227,339		209,981
Total net sales	704,396		609,357		1,335,256		1,168,818
Cost of sales
Cost of product sales	369,549		316,389		713,306		610,916
Cost of service sales	75,274		64,454		140,969		127,986
Total cost of sales	444,823		380,843		854,275		738,902
Gross profit	259,573		228,514		480,981		429,916
Research and development expenses	20,210		23,868		42,234		44,417
Selling expenses	34,273		30,407		66,698		58,499
General and administrative expenses	92,315		76,134		180,659		163,734
Loss on divestiture	—		—		—		4,651
Operating income	112,775		98,105		191,390		158,615
Interest expense	14,992		9,788		27,936		19,318
Other income, net	7,954		4,555		15,721		7,552
Earnings before income taxes	105,737		92,872		179,175		146,849
Provision for income taxes	(24,738)		(22,000)		(41,330)		(35,292)
Net earnings	$	80,999	$	70,872	$	137,845	$	111,557

Net earnings per share:
Basic earnings per share	$	2.11	$	1.84	$	3.60	$	2.90
Diluted earnings per share	$	2.10	$	1.83	$	3.58	$	2.89

Dividends per share	0.20		0.19		0.39		0.37

Weighted-average shares outstanding:
Basic	38,329		38,429		38,309		38,438
Diluted	38,555		38,654		38,528		38,657
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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net earnings	$	80,999	$	70,872	$	137,845	$	111,557
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax (1)	$	19,298	$	(40,336)	$	33,964	$	(47,161)
Pension and postretirement adjustments, net of tax (1)	(231)		3,988		(423)		9,754
Other comprehensive income (loss), net of tax	19,067		(36,348)		33,541		(37,407)
Comprehensive income	$	100,066	$	34,524	$	171,386	$	74,150

(1) The tax benefit (expense) included in foreign currency translation adjustments and pension and postretirement adjustments for the three and six months ended June 30, 2023 and June 30, 2022 was immaterial.

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)


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	158,737	$	256,974
Receivables, net	751,532		724,603
Inventories, net	545,596		483,113
Other current assets	67,693		52,623
Total current assets	1,523,558		1,517,313
Property, plant, and equipment, net	340,857		342,708
Goodwill	1,555,908		1,544,635
Other intangible assets, net	589,932		620,897
Operating lease right-of-use assets, net	143,814		153,855
Prepaid pension asset	232,557		222,627
Other assets	54,472		47,567
Total assets	$	4,441,098	$	4,449,602
Liabilities
Current liabilities:
Current portion of long-term debt	—		202,500
Accounts payable	233,602		266,525
Accrued expenses	144,073		177,536
Deferred revenue	264,766		242,483
Other current liabilities	78,486		82,395
Total current liabilities	720,927		971,439
Long-term debt	1,176,066		1,051,900
Deferred tax liabilities, net	117,882		123,001
Accrued pension and other postretirement benefit costs	58,267		58,348
Long-term operating lease liability	122,939		132,275
Long-term portion of environmental reserves	13,497		12,547
Other liabilities	93,256		107,973
Total liabilities	2,302,834		2,457,483
Contingencies and commitments (Note 13)
Stockholders’ equity
Common stock, $1 par value, 100,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 49,187,378 shares issued as of June 30, 2023 and December 31, 2022; outstanding shares were 38,292,332 as of June 30, 2023 and 38,259,722 as of December 31, 2022	49,187		49,187
Additional paid in capital	130,846		134,553
Retained earnings	3,297,281		3,174,396
Accumulated other comprehensive loss	(225,375)		(258,916)
Common treasury stock, at cost (10,895,046 shares as of June 30, 2023 and 10,927,656 shares as of December 31, 2022)	(1,113,675)		(1,107,101)
Total stockholders’ equity	2,138,264		1,992,119
Total liabilities and stockholders’ equity	$	4,441,098	$	4,449,602

See notes to condensed consolidated financial statements

Page 6

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended
	June 30,
(In thousands)	2023		2022
Cash flows from operating activities:
Net earnings	$	137,845	$	111,557
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities
Depreciation and amortization	57,975		53,645
Loss on divestiture	—		4,651
Loss/(gain) on sale/disposal of long-lived assets	16		(3,004)
Deferred income taxes	(6,553)		(4,516)
Share-based compensation	8,859		7,580
Change in operating assets and liabilities, net of businesses acquired:
Receivables, net	(22,370)		(47,826)
Inventories, net	(57,557)		(58,620)
Progress payments	1,830		(954)
Accounts payable and accrued expenses	(72,019)		(55,406)
Deferred revenue	21,586		(45,397)
Pension and postretirement liabilities, net	(9,392)		(4,376)
Other current and long-term assets and liabilities	(40,867)		(50,605)
Net cash provided by (used for) operating activities	19,353		(93,271)
Cash flows from investing activities:
Proceeds from sale/disposal of long-lived assets	473		6,319
Additions to property, plant, and equipment	(22,664)		(19,492)
Additional consideration paid on prior year acquisitions	—		(5,062)
Net cash used for investing activities	(22,191)		(18,235)
Cash flows from financing activities:
Borrowings under revolving credit facilities	481,099		653,547
Payments of revolving credit facilities	(356,099)		(494,347)
Principal payments on debt	(202,500)		—
Repurchases of common stock	(24,365)		(31,645)
Proceeds from share-based compensation	5,225		5,284
Dividends paid	(7,290)		(14,220)
Other	(537)		(499)
Net cash (used for)/provided by financing activities	(104,467)		118,120
Effect of exchange-rate changes on cash	9,068		(6,204)
Net increase (decrease) in cash and cash equivalents	(98,237)		410
Cash and cash equivalents at beginning of period	256,974		171,004
Cash and cash equivalents at end of period	$	158,737	$	171,414
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 six months ended June 30, 2023
	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
December 31, 2022	$	49,187	$	134,553	$	3,174,396	$	(258,916)	$	(1,107,101)
Net earnings	—		—		137,845		—		—
Other comprehensive income, net of tax	—		—		—		33,541		—
Dividends declared	—		—		(14,960)		—		—
Restricted stock	—		(13,878)		—		—		13,878
Employee stock purchase plan	—		1,483		—		—		3,742
Share-based compensation	—		8,949		—		—		(90)
Repurchase of common stock (1)	—		—		—		—		(24,365)
Other	—		(261)		—		—		261
June 30, 2023	$	49,187	$	130,846	$	3,297,281	$	(225,375)	$	(1,113,675)


	For the three months ended June 30, 2023
	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
March 31, 2023	$	49,187	$	126,909	$	3,223,944	$	(244,442)	$	(1,101,439)
Net earnings	—		—		80,999		—		—
Other comprehensive income, net of tax	—		—		—		19,067		—
Dividends declared	—		—		(7,662)		—		—
Restricted stock	—		(73)		—		—		73
Share-based compensation	—		4,010		—		—		(330)
Repurchase of common stock (1)	—		—		—		—		(11,979)
June 30, 2023	$	49,187	$	130,846	$	3,297,281	$	(225,375)	$	(1,113,675)

Page 8

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)


	For the six months ended June 30, 2022
	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
December 31, 2021	$	49,187	$	127,104	$	2,908,827	$	(190,465)	$	(1,068,163)
Net earnings	—		—		111,557		—		—
Other comprehensive loss, net of tax	—		—		—		(37,407)		—
Dividends declared	—		—		(14,220)		—		—
Restricted stock	—		(8,523)		—		—		8,523
Employee stock purchase plan	—		814		—		—		4,470
Share-based compensation	—		7,427		—		—		153
Repurchase of common stock (1)	—		—		—		—		(31,645)
Other	—		(506)		—		—		506
June 30, 2022	$	49,187	$	126,316	$	3,006,164	$	(227,872)	$	(1,086,156)


	For the three months ended June 30, 2022
	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
March 31, 2022	$	49,187	$	122,603	$	2,942,580	$	(191,524)	$	(1,073,426)
Net earnings	—		—		70,872		—		—
Other comprehensive loss, net of tax	—		—		—		(36,348)		—
Dividends declared	—		—		(7,288)		—		—
Share-based compensation	—		3,713		—		—		58
Repurchase of common stock (1)	—		—		—		—		(12,788)
June 30, 2022	$	49,187	$	126,316	$	3,006,164	$	(227,872)	$	(1,086,156)

See notes to condensed consolidated financial statements

(1) For the three and six months ended June 30, 2023, the Corporation repurchased approximately 0.1 million and 0.1 million shares of its common stock, respectively. For the three and six months ended June 30, 2022, the Corporation repurchased approximately 0.1 million and 0.2 million shares of its common stock, respectively.

Page 9

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

Curtiss-Wright Corporation along with its subsidiaries (we, the Corporation, or the Company) is a global integrated business that provides highly engineered products, solutions, and services mainly to aerospace & defense (A&D) markets, as well as critical technologies in demanding commercial power, process, and 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 and six months ended June 30, 2023 and 2022, 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 2022 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.

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 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 and six months ended June 30, 2023 and 2022:

Page 10

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Over-time	46	%	53	%	47	%	53	%
Point-in-time	54	%	47	%	53	%	47	%

Contract backlog represents the remaining performance obligations that have not yet been recognized as revenue. Backlog includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Total backlog was approximately $2.8 billion as of June 30, 2023, of which the Corporation expects to recognize approximately 90% as net sales over the next 36 months. The remainder will be recognized thereafter.

Disaggregation of Revenue

The following table presents the Corporation’s total net sales disaggregated by end market and customer type:


Total Net Sales by End Market and Customer Type	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2023		2022		2023		2022
Aerospace & Defense
Aerospace Defense	$	132,192	$	94,545	$	232,071	$	192,549
Ground Defense	70,875		44,393		137,132		83,501
Naval Defense	180,956		172,786		352,912		335,753
Commercial Aerospace	82,033		68,192		152,523		129,084
Total Aerospace & Defense	$	466,056	$	379,916	$	874,638	$	740,887

Commercial
Power & Process	$	131,000	$	125,355	$	251,338	$	230,143
General Industrial	107,340		104,086		209,280		197,788
Total Commercial	$	238,340	$	229,441	$	460,618	$	427,931

Total	$	704,396	$	609,357	$	1,335,256	$	1,168,818

Contract Balances

Timing of revenue recognition and cash collection may result in billed receivables, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the Condensed Consolidated Balance Sheet. The Corporation’s contract assets primarily relate to its rights to consideration for work completed but not billed as of the reporting date. Contract assets are transferred to billed receivables when the rights to consideration become unconditional. This is typical in situations where amounts are billed as work progresses in accordance with agreed-upon contractual terms or upon achievement of contractual milestones. The Corporation’s contract liabilities primarily consist of customer advances received prior to revenue being earned. Revenue recognized during the three and six months ended June 30, 2023 included in the contract liabilities balance as of January 1, 2023 was approximately $58 million and $147 million, respectively. Revenue recognized during the three and six months ended June 30, 2022 included in the contract liabilities balance as of January 1, 2022 was approximately $56 million and $135 million, respectively. Contract assets and contract liabilities are reported in the "Receivables, net" and "Deferred revenue" lines, respectively, within the Condensed Consolidated Balance Sheet.

3. ASSETS HELD FOR SALE

In January 2022, the Corporation completed the sale of its industrial valve business in Germany for gross cash proceeds of $3 million. The Corporation recorded a loss of $5 million upon sale closing during the first quarter of 2022.

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4. RECEIVABLES

Receivables primarily include amounts billed to customers, unbilled charges on long-term contracts consisting of amounts recognized as sales but not billed, and other receivables. Substantially all amounts of unbilled receivables are expected to be billed and collected within one year. An immaterial amount of unbilled receivables are subject to retainage provisions. The amount of claims and unapproved change orders within our receivables balances are immaterial.

The composition of receivables is as follows:


(In thousands)	June 30, 2023		December 31, 2022
Billed receivables:
Trade and other receivables	$	434,557	$	412,682
Unbilled receivables (contract assets):
Recoverable costs and estimated earnings not billed	322,025		316,682
Less: Progress payments applied	(435)		(67)
Net unbilled receivables	321,590		316,615
Less: Allowance for doubtful accounts	(4,615)		(4,694)
Receivables, net	$	751,532	$	724,603

5. INVENTORIES

Inventoried costs contain amounts relating to long-term contracts and programs with long production cycles, a portion of which will not be realized within one year. Long-term contract inventory includes an immaterial amount of claims or other similar items subject to uncertainty concerning their determination or realization. Inventories are valued at the lower of cost or net realizable value.

The composition of inventories is as follows:


(In thousands)	June 30, 2023		December 31, 2022
Raw materials	$	252,666	$	242,116
Work-in-process	102,339		76,328
Finished goods	148,493		128,090
Inventoried costs related to U.S. Government and other long-term contracts (1)	44,872		39,685
Inventories, net of reserves	548,370		486,219
Less: Progress payments applied	(2,774)		(3,106)
Inventories, net	$	545,596	$	483,113

(1) This caption includes capitalized development costs of $15.5 million as of June 30, 2023 related to certain aerospace and defense programs. These capitalized costs will be liquidated as units are produced under contract. As of June 30, 2023, capitalized development costs of $8.3 million are not currently supported by existing firm orders.

6. GOODWILL

The changes in the carrying amount of goodwill for the six months ended June 30, 2023 are as follows:


(In thousands)	Aerospace & Industrial		Defense Electronics		Naval & Power		Consolidated
December 31, 2022	$	321,550	$	702,786	$	520,299	$	1,544,635
Foreign currency translation adjustment	3,070		5,473		2,730		11,273
June 30, 2023	$	324,620	$	708,259	$	523,029	$	1,555,908

7. OTHER INTANGIBLE ASSETS, NET

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables present the cumulative composition of the Corporation’s intangible assets:


	June 30, 2023						December 31, 2022
(In thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Technology	$	309,627	$	(188,261)	$	121,366	$	306,160	$	(176,675)	$	129,485
Customer related intangibles	670,523		(320,041)		350,482		666,638		(298,160)		368,478
Programs (1)	144,000		(37,800)		106,200		144,000		(34,200)		109,800
Other intangible assets	54,187		(42,303)		11,884		53,879		(40,745)		13,134
Total	$	1,178,337	$	(588,405)	$	589,932	$	1,170,677	$	(549,780)	$	620,897

(1) Programs include values assigned to major programs of acquired businesses and represent the aggregate value associated with the customer relationships, contracts, technology, and trademarks underlying the associated program.

Total intangible amortization expense for the six months ended June 30, 2023 was $33 million, as compared to $28 million in the comparable prior year period. The estimated future amortization expense of intangible assets over the next five years is as follows:


(In millions)
2023	$	65
2024	$	57
2025	$	54
2026	$	53
2027	$	50

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

Forward Foreign Exchange and Currency Option Contracts

The Corporation has foreign currency exposure primarily in the United Kingdom, Europe, and Canada. The Corporation uses financial instruments, such as forward and option contracts, to hedge a portion of existing and anticipated foreign currency denominated transactions. The purpose of the Corporation’s foreign currency risk management program is to reduce volatility in earnings caused by exchange rate fluctuations. Guidance on accounting for derivative instruments and hedging activities requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets based upon quoted market prices for comparable instruments.

Interest Rate Risks and Related Strategies

The Corporation’s primary interest rate exposure results from changes in U.S. dollar interest rates. The Corporation’s policy is to manage interest cost using a mix of fixed and variable rate debt.

Effects on Condensed Consolidated Balance Sheets

As of June 30, 2023 and December 31, 2022, the fair values of the asset and liability derivative instruments were immaterial.

Effects on Condensed Consolidated Statements of Earnings

Undesignated hedges

The gains and losses on forward exchange derivative contracts not designated for hedge accounting are recognized to general and administrative expenses within the Condensed Consolidated Statements of Earnings. The gains for the three and six months ended June 30, 2023 were $3 million and $6 million, respectively. The losses for the three and six months ended June 30, 2022 were $5 million and $6 million, respectfully.

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Debt

The estimated fair value amounts were determined by the Corporation using available market information that is primarily based on quoted market prices for the same or similar issuances as of June 30, 2023. Accordingly, all of the Corporation’s debt is valued as a Level 2 financial instrument. The fair values described below may not be indicative of net realizable value or reflective of future fair values. Furthermore, the use of different methodologies to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.


	June 30, 2023				December 31, 2022
(In thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Revolving credit agreement, due 2027	$	125,000	$	125,000	$	—	$	—
3.70% Senior notes due 2023	—		—		202,500		202,082
3.85% Senior notes due 2025	90,000		86,918		90,000		87,298
4.24% Senior notes due 2026	200,000		192,590		200,000		191,760
4.05% Senior notes due 2028	67,500		63,748		67,500		63,300
4.11% Senior notes due 2028	90,000		84,628		90,000		83,955
3.10% Senior notes due 2030	150,000		128,742		150,000		127,429
3.20% Senior notes due 2032	150,000		124,306		150,000		123,656
4.49% Senior notes due 2032	200,000		183,150		200,000		183,007
4.64% Senior notes due 2034	100,000		90,700		100,000		90,341
Total debt	1,172,500		1,079,782		1,250,000		1,152,828
Debt issuance costs, net	(1,651)		(1,651)		(1,631)		(1,631)
Unamortized interest rate swap proceeds	5,217		5,217		6,031		6,031
Total debt, net	$	1,176,066	$	1,083,348	$	1,254,400	$	1,157,228

9. PENSION PLANS

Defined Benefit Pension Plans

The following table is a consolidated disclosure of all domestic and foreign defined benefit pension plans as described in the Corporation’s 2022 Annual Report on Form 10-K.

The components of net periodic pension cost for the three and six months ended June 30, 2023 and 2022 were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2023		2022		2023		2022
Service cost	$	4,137	$	5,970	$	8,264	$	12,033
Interest cost	8,811		5,418		17,601		10,706
Expected return on plan assets	(15,858)		(13,858)		(31,678)		(27,715)
Amortization of prior service cost	(33)		(87)		(66)		(173)
Amortization of unrecognized actuarial loss	76		3,845		153		7,851
Cost of settlements	—		—		—		1,842
Net periodic pension cost	$	(2,867)	$	1,288	$	(5,726)	$	4,544

The Corporation did not make any contributions to the Curtiss-Wright Pension Plan during the six months ended June 30, 2023, and does not expect to do so throughout the remainder of the year. Contributions to the foreign benefit plans are not expected to be material in 2023.

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

During the six months ended June 30, 2022, the Company recognized settlement charges related to the retirement of former executives. The settlement charges represent events that are accounted for under guidance on employers’ accounting for settlements and curtailments of defined benefit pension plans.

Defined Contribution Retirement Plan

The Company also maintains a defined contribution plan for all non-union employees who are not currently receiving final or career average pay benefits for its U.S. subsidiaries. The employer contributions include both employer match and non-elective contribution components up to a maximum employer contribution of 7% of eligible compensation. During the three and six months ended June 30, 2023, the expense relating to the plan was $6.1 million and $12.2 million, respectively. During the three and six months ended June 30, 2022, the expense relating to the plan was $4.6 million and $10.3 million, respectively.

10. EARNINGS PER SHARE

Diluted earnings per share was computed based on the weighted-average number of shares outstanding plus all potentially dilutive common shares. A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
(In thousands)	2023	2022	2023	2022
Basic weighted-average shares outstanding	38,329	38,429	38,309	38,438
Dilutive effect of deferred stock compensation	226	225	219	219
Diluted weighted-average shares outstanding	38,555	38,654	38,528	38,657

For the three and six months ended June 30, 2023, approximately 20,000 and 22,000 shares, respectively, issuable under equity-based awards were excluded from the calculation of diluted earnings per share as they were anti-dilutive based on the average stock price during the period. There were approximately 37,000 and 31,000 anti-dilutive equity-based awards for the three and six months ended June 30, 2022, respectively.

11. SEGMENT INFORMATION

The Corporation’s measure of segment profit or loss is operating income. Interest expense and income taxes are not reported on an operating segment basis as they are not considered in the segments’ performance evaluation by the Corporation’s chief operating decision-maker, its Chief Executive Officer.

Net sales and operating income by reportable segment were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2023		2022		2023		2022
Net sales
Aerospace & Industrial	$	226,766	$	209,311	$	430,352	$	401,161
Defense Electronics	198,407		150,404		361,477		294,342
Naval & Power	280,731		251,313		547,545		476,628
Less: Intersegment revenues	(1,508)		(1,671)		(4,118)		(3,313)
Total consolidated	$	704,396	$	609,357	$	1,335,256	$	1,168,818

Operating income (expense)
Aerospace & Industrial	$	35,665	$	32,464	$	62,210	$	57,317
Defense Electronics	43,180		24,460		66,548		47,750
Naval & Power	46,782		50,001		84,719		77,289
Corporate and other (1)	(12,852)		(8,820)		(22,087)		(23,741)
Total consolidated	$	112,775	$	98,105	$	191,390	$	158,615

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Includes pension and other postretirement benefit expense, certain environmental costs related to remediation at legacy sites, foreign currency transactional gains and losses, and certain other expenses.

Adjustments to reconcile operating income to earnings before income taxes are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2023		2022		2023		2022
Total operating income	$	112,775	$	98,105	$	191,390	$	158,615
Interest expense	14,992		9,788		27,936		19,318
Other income, net	7,954		4,555		15,721		7,552
Earnings before income taxes	$	105,737	$	92,872	$	179,175	$	146,849


(In thousands)	June 30, 2023		December 31, 2022
Identifiable assets
Aerospace & Industrial	$	1,064,442	$	1,041,562
Defense Electronics	1,567,053		1,546,331
Naval & Power	1,517,090		1,488,867
Corporate and Other	292,513		372,842
Total consolidated	$	4,441,098	$	4,449,602

12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The cumulative balance of each component of accumulated other comprehensive income (AOCI), net of tax, is as follows:


(In thousands)	Foreign currency translation adjustments, net		Total pension and postretirement adjustments, net		Accumulated other comprehensive income (loss)
December 31, 2021	$	(99,566)	$	(90,899)	$	(190,465)
Other comprehensive income (loss) before reclassifications (1)	(61,241)		(23,447)		(84,688)
Amounts reclassified from accumulated other comprehensive income (1)	—		16,237		16,237
Net current period other comprehensive income (loss)	(61,241)		(7,210)		(68,451)
December 31, 2022	$	(160,807)	$	(98,109)	$	(258,916)
Other comprehensive income (loss) before reclassifications (1)	33,964		(485)		33,479
Amounts reclassified from accumulated other comprehensive income (1)	—		62		62
Net current period other comprehensive income (loss)	33,964		(423)		33,541
June 30, 2023	$	(126,843)	$	(98,532)	$	(225,375)

(1) All amounts are after tax.

Details of amounts reclassified from accumulated other comprehensive income (loss) are below:

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


(In thousands)	Amount reclassified from AOCI		Affected line item in the statement where net earnings is presented
Defined benefit pension and other postretirement benefit plans
Amortization of prior service costs	$	66	Other income, net
Amortization of actuarial losses	(153)		Other income, net
	(87)		Earnings before income taxes
	25		Provision for income taxes
Total reclassifications	$	(62)	Net earnings

13. CONTINGENCIES AND COMMITMENTS

From time to time, the Corporation and its subsidiaries are involved in legal proceedings that are incidental to the operation of our business. Some of these proceedings allege damages relating to asbestos and environmental exposures, intellectual property matters, copyright infringement, personal injury claims, employment and employee benefit matters, government contract issues, commercial or contractual disputes, and acquisitions or divestitures. The Corporation continues to defend vigorously against all claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including assessment of the merits of the particular claim, as well as current accruals and insurance coverage, the Corporation does not expect that such legal proceedings will have a material adverse impact on its condensed consolidated financial statements.

Legal Proceedings

The Corporation has been named in a number of lawsuits that allege injury from exposure to asbestos. To date, the Corporation has not been found liable for or paid any material sum of money in settlement in any asbestos-related case. The Corporation believes its minimal use of asbestos in its past operations as well as its acquired businesses’ operations and the relatively non-friable condition of asbestos in its historical products makes it unlikely that it will face material liability in any asbestos litigation, whether individually or in the aggregate. The Corporation maintains insurance coverage and indemnification agreements for these potential liabilities and believes adequate coverage exists to cover any unanticipated asbestos liability.

Letters of Credit and Other Financial Arrangements

The Corporation enters into standby letters of credit agreements and guarantees with financial institutions and customers primarily relating to guarantees of repayment, future performance on certain contracts to provide products and services, and to secure advance payments from certain international customers. As of June 30, 2023 and December 31, 2022, there were $21 million and $17 million of stand-by letters of credit outstanding, respectively, and $14 million and $3 million of bank guarantees outstanding, respectively. In addition, the Corporation is required to provide the Nuclear Regulatory Commission financial assurance demonstrating its ability to cover the cost of decommissioning its Cheswick, Pennsylvania facility upon closure, though the Corporation does not intend to close this facility. The Corporation has provided this financial assurance in the form of a $35 million surety bond.

AP1000 Program

In February 2022, the Corporation and Westinghouse Electric Company (WEC) executed a settlement agreement to resolve all open claims and counterclaims under the AP1000 U.S. and China contracts. Under the terms of the settlement agreement, the Corporation paid WEC $15 million in the first quarter of 2022 and a final amount of $10 million in the first quarter of 2023 in exchange for the Corporation’s full release from all open claims under such contracts, whether known or unknown, as well as negotiating and executing a right of first refusal for all future AP1000 projects.

******

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MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Except for historical information, this Quarterly Report on Form 10-Q may be deemed to contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to: (a) projections of or statements regarding return on investment, future earnings, interest income, sales, volume, other income, earnings or loss per share, growth prospects, capital structure, and other financial terms, (b) statements of plans and objectives of management, (c) statements of future economic performance, (d) impacts on our business relating to ongoing supply chain delivery disruptions, significant inflation, higher interest rates or deflation, and measures taken by governments and private industry in response, (e) statements of future economic performance and potential impacts due to the conflict between Russia and Ukraine, (f) the effect of laws, rules, regulations, new accounting pronouncements, and outstanding litigation on our business and future performance, and (g) statements of assumptions, such as economic conditions underlying other statements. Such forward-looking statements can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continue,” “could,” “estimate,” “expects,” “intend,” “may,” “might,” “outlook,” “potential,” “predict,” “should,” “will,” as well as the negative of any of the foregoing or variations of such terms or comparable terminology, or by discussion of strategy. No assurance may be given that the future results described by the forward-looking statements will be achieved. While we believe these forward-looking statements are reasonable, they are only predictions and are subject to known and unknown risks, uncertainties, and other factors, many of which are beyond our control, which could cause actual results, performance, or achievement to differ materially from anticipated future results, performance, or achievement expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, those described in “Item 1A. Risk Factors” of our 2022 Annual Report on Form 10-K filed with the SEC, and elsewhere in that report, those described in this Quarterly Report on Form 10-Q, and those described from time to time in our future reports filed with the Securities and Exchange Commission. Such forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, those contained in Item 1. Financial Statements (including the Notes to Condensed Consolidated Financial Statements) and Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date they were made, and we assume no obligation to update forward-looking statements to reflect actual results or changes in or additions to the factors affecting such forward-looking statements.

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MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

COMPANY ORGANIZATION

Curtiss-Wright Corporation along with its subsidiaries is a global integrated business that provides highly engineered products, solutions, and services mainly to aerospace & defense markets, as well as critical technologies in demanding commercial power, process, and industrial markets. We report our operations through our Aerospace & Industrial, Defense Electronics, and Naval & Power segments. We operate across a diversified array of niche markets through engineering and technological leadership, precision manufacturing, and strong relationships with our customers. Approximately 67% of our 2023 revenues are expected to be generated from A&D-related markets.

RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand the results of operations and financial condition of the Corporation for the three and six month periods ended June 30, 2023. The financial information as of June 30, 2023 should be read in conjunction with the financial statements for the year ended December 31, 2022 contained in our Form 10-K.

The MD&A is organized into the following sections: Condensed Consolidated Statements of Earnings, Results by Business Segment, and Liquidity and Capital Resources. Our discussion will be focused on the overall results of operations followed by a more detailed discussion of those results within each of our reportable segments.

Our three reportable segments are generally concentrated in a few end markets; however, each may have sales across several end markets. An end market is defined as an area of demand for products and services. The sales for the relevant markets will be discussed throughout the MD&A.

Analytical Definitions

Throughout management’s discussion and analysis of financial condition and results of operations, the terms “incremental” and “organic” are used to explain changes from period to period. The term “incremental” is used to highlight the impact that acquisitions and divestitures had on the current year results. The results of operations for acquisitions are incremental for the first twelve months from the date of acquisition. The definition of “organic” excludes the loss from sale of our industrial valves business in Germany as well as the effects of foreign currency translation.

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MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued


Condensed Consolidated Statements of Earnings
	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2023		2022		% change		2023		2022		% change
Sales
Aerospace & Industrial	$	226,260	$	208,572	8	%	$	428,707	$	399,684	7	%
Defense Electronics	197,722		149,549		32	%	359,876		292,618		23	%
Naval & Power	280,414		251,236		12	%	546,673		476,516		15	%
Total sales	$	704,396	$	609,357	16	%	$	1,335,256	$	1,168,818	14	%

Operating income
Aerospace & Industrial	$	35,665	$	32,464	10	%	$	62,210	$	57,317	9	%
Defense Electronics	43,180		24,460		77	%	66,548		47,750		39	%
Naval & Power	46,782		50,001		(6	%)	84,719		77,289		10	%
Corporate and other	(12,852)		(8,820)		(46	%)	(22,087)		(23,741)		7	%
Total operating income	$	112,775	$	98,105	15	%	$	191,390	$	158,615	21	%

Interest expense	14,992		9,788		(53	%)	27,936		19,318		(45	%)
Other income, net	7,954		4,555		75	%	15,721		7,552		108	%

Earnings before income taxes	105,737		92,872		14	%	179,175		146,849		22	%
Provision for income taxes	(24,738)		(22,000)		(12	%)	(41,330)		(35,292)		(17	%)
Net earnings	$	80,999	$	70,872	14	%	$	137,845	$	111,557	24	%

New orders	$	841,602	$	776,162	8	%	$	1,559,418	$	1,410,428	11	%

Components of sales and operating income increase (decrease):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023 vs. 2022				2023 vs. 2022
	Sales		Operating Income		Sales		Operating Income
Organic	12	%	13	%	11	%	14	%
Acquisitions	4	%	—	%	3	%	—	%
Loss on divestiture	—	%	—	%	—	%	3	%
Foreign currency	—	%	2	%	—	%	4	%
Total	16	%	15	%	14	%	21	%

Sales in the second quarter increased $95 million, or 16%, to $704 million, compared with the prior year period. On a segment basis, sales from the Aerospace & Industrial, Defense Electronics, and Naval & Power segments increased $18 million, $48 million, and $29 million, respectively.

Sales during the six months ended June 30, 2023 increased $166 million, or 14%, to $1,335 million, compared with the prior year period. On a segment basis, sales from the Aerospace & Industrial, Defense Electronics, and Naval & Power segments increased $29 million, $67 million, and $70 million, respectively. Changes in sales by segment are discussed in further detail in the results by business segment section below.

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MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Operating income in the second quarter increased $15 million, or 15%, to $113 million, while operating margin decreased 10 basis points to 16.0% compared with the same period in 2022. Operating income and operating margin in the Defense Electronics segment benefited from favorable overhead absorption on higher sales. In the Aerospace & Industrial segment, favorable overhead absorption on higher sales was partially offset by unfavorable mix on actuation and sensors products. In the Naval & Power segment, both operating income and operating margin decreased, as favorable overhead absorption on higher sales was more than offset by unfavorable product mix as well as first year purchase accounting costs from our arresting systems acquisition.

Operating income during the six months ended June 30, 2023 increased $33 million, or 21%, to $191 million, and operating margin increased 70 basis points to 14.3%, compared with the same period in 2022. In the Defense Electronics segment, increases in operating income and operating margin were primarily due to favorable overhead absorption on higher sales, partially offset by unfavorable mix on defense electronics products. Operating income and operating margin in the Aerospace & Industrial segment increased primarily due to favorable overhead absorption on higher sales, partially offset by unfavorable mix on actuation and sensors products. In the Naval & Power segment, operating income benefited from the absence of a prior year loss on sale of our industrial valves business in Germany, as well as favorable overhead absorption on higher organic sales. These increases were partially offset by unfavorable product mix as well as first year purchase accounting costs from our arresting systems acquisition.

Non-segment operating expense in the second quarter increased $4 million, or 46%, to $13 million, primarily due to higher foreign currency losses in the current period. Non-segment operating expense during the six months ended June 30, 2023 decreased $2 million, or 7%, to $22 million, as the absence of costs associated with shareholder activism recorded in the prior year period was partially offset by higher foreign currency losses in the current period.

Interest expense in the second quarter and six months ended June 30, 2023 increased $5 million, or 53%, to $15 million and $9 million, or 45%, to $28 million, respectively, primarily due to the issuance of $300 million Senior Notes in October 2022 as well as higher interest rates in the current period under our revolving Credit Agreement (the “Credit Agreement” or “credit facility”).

Other income, net in the second quarter increased $3 million, or 75%, to $8 million. Other income, net during the six months ended June 30, 2023 increased $8 million, or 108%, to $16 million. Increases in both periods were primarily due to lower overall pension costs against the comparable prior year periods.

The effective tax rate of 23.4% in the second quarter decreased compared to an effective tax rate of 23.7% in the prior year period, primarily due to lower expected executive compensation adjustments in the current period. The effective tax rate of 23.1% for the six months ended June 30, 2023 decreased as compared to an effective tax rate of 24.0%, primarily due to lower expected executive compensation adjustments and higher stock compensation benefits in the current period.

Comprehensive income in the second quarter was $100 million, compared to comprehensive income of $35 million in the prior year period. The change was primarily due to the following:

•Foreign currency translation adjustments in the second quarter resulted in a $19 million comprehensive gain, compared to a $40 million comprehensive loss in the prior year period. The comprehensive gain during the current period was primarily attributed to increases in the British Pound.

•Net earnings increased $10 million, primarily due to higher operating income and other income, net.

Comprehensive income during the six months ended June 30, 2023 was $171 million, compared to comprehensive income of $74 million in the prior year period. The change was primarily due to the following:

•Foreign currency translation adjustments for the six months ended June 30, 2023 resulted in a $34 million comprehensive gain, compared to a $47 million comprehensive loss in the prior period. The comprehensive gain during the current period was primarily attributed to increases in the British Pound.

•Net earnings increased $26 million, primarily due to higher operating income and other income, net.

New orders in the second quarter increased $65 million from the comparable prior year period, primarily due to the incremental impact from our arresting systems acquisition, an increase in orders for nuclear aftermarket products and services,

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FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

and higher demand for naval defense products in the Naval & Power segment. New orders also benefited from an increase in orders for flight test equipment and tactical communications products in the Defense Electronics segment. These increases were partially offset by the timing of orders for actuation products within the Aerospace & Industrial segment.

New orders during the six months ended June 30, 2023 increased $149 million from the comparable prior year period, primarily due to the incremental impact from our arresting systems acquisition, as well as higher demand for commercial nuclear aftermarket products in the Naval & Power segment. New orders also benefited from an increase in orders for defense electronics equipment in the Defense Electronics segment.

RESULTS BY BUSINESS SEGMENT

Aerospace & Industrial

The following tables summarize sales, operating income and margin, and new orders within the Aerospace & Industrial segment.


	Three Months Ended							Six Months Ended
	June 30,							June 30,
(In thousands)	2023			2022			% change	2023			2022			% change
Sales	$	226,260		$	208,572		8%	$	428,707		$	399,684		7%
Operating income	35,665			32,464			10%	62,210			57,317			9%
Operating margin	15.8		%	15.6		%	20 bps	14.5		%	14.3		%	20 bps
New orders	$	192,670		$	215,279		(11%)	$	451,313		$	443,593		2%

Components of sales and operating income increase (decrease):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023 vs. 2022				2023 vs. 2022
	Sales		Operating Income		Sales		Operating Income
Organic	9	%	11	%	8	%	8	%

Foreign currency	(1	%)	(1	%)	(1	%)	1	%
Total	8	%	10	%	7	%	9	%

Sales in the Aerospace & Industrial segment are primarily generated from the general industrial and aerospace & defense markets, and, to a lesser extent, the power & process markets.

Sales in the second quarter increased $18 million, or 8%, to $226 million from the prior year period. Sales in the commercial aerospace market benefited $9 million from higher demand for sensors products as well as surface treatment services on various narrow-body and wide-body platforms. Sales in the general industrial market increased primarily due to higher demand for industrial automation products. Sales increases in the naval defense and aerospace defense markets were primarily due to the timing of sales for actuation equipment on various programs.

Sales during the six months ended June 30, 2023 increased $29 million, or 7%, to $429 million from the prior year period, primarily due to higher sales in the commercial aerospace and general industrial markets. In the commercial aerospace market, sales increased $16 million primarily due to higher demand for sensors products as well as surface treatment services on various narrow-body and wide-body platforms. The general industrial market benefited from sales increases of $11 million primarily due to higher demand for industrial automation products as well as higher sales of surface treatment services.

Operating income in the second quarter increased $3 million, or 10%, to $36 million from the prior year period, and operating margin increased 20 basis points to 15.8%. Operating income during the six months ended June 30, 2023 increased $5 million, or 9%, to $62 million from the prior year period, and operating margin increased 20 basis points to 14.5%. The increases in

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operating income and operating margin for each of the respective periods were primarily due to favorable overhead absorption on higher sales, partially offset by unfavorable mix on actuation and sensors products.

New orders in the second quarter decreased $23 million primarily due to the timing of orders for actuation products within our defense markets.

New orders during the six months ended June 30, 2023 increased $8 million primarily due to an increase in orders for actuation and sensors products within our A&D markets. This increase was partially offset by the timing of new orders for industrial vehicles.

Defense Electronics

The following tables summarize sales, operating income and margin, and new orders within the Defense Electronics segment.


	Three Months Ended							Six Months Ended
	June 30,							June 30,
(In thousands)	2023			2022			% change	2023			2022			% change
Sales	$	197,722		$	149,549		32%	$	359,876		$	292,618		23%
Operating income	43,180			24,460			77%	66,548			47,750			39%
Operating margin	21.8		%	16.4		%	540 bps	18.5		%	16.3		%	220 bps
New orders	$	229,555		$	195,442		17%	$	463,670		$	355,130		31%

Components of sales and operating income increase (decrease):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023 vs. 2022				2023 vs. 2022
	Sales		Operating Income		Sales		Operating Income
Organic	32	%	69	%	23	%	32	%

Foreign currency	—	%	8	%	—	%	7	%
Total	32	%	77	%	23	%	39	%

Sales in the Defense Electronics segment are primarily to the defense markets and, to a lesser extent, the commercial aerospace market.

Sales in the second quarter increased $48 million, or 32%, to $198 million from the prior year period. In the ground defense market, sales increased $27 million primarily due to higher demand for tactical battlefield communications equipment. Sales in the aerospace defense market benefited $13 million from higher sales of embedded computing and flight test instrumentation equipment on various fighter jet programs. Sales increases in the commercial aerospace market were primarily due to higher demand for avionics and flight test equipment on various domestic and international programs.

Sales during the six months ended June 30, 2023 increased $67 million, or 23%, to $360 million from the prior year period. In the ground defense market, sales increased $54 million primarily due to higher demand for tactical battlefield communications equipment. Sales in the commercial aerospace market increased $8 million primarily due to higher demand for avionics and flight test equipment on various domestic and international platforms. Sales increases in the aerospace defense market were primarily due to higher demand for embedded computing and flight test instrumentation equipment on various fighter jet programs.

Operating income in the second quarter increased $19 million, or 77%, to $43 million compared to the prior year period, and operating margin increased 540 basis points from the prior year period to 21.8%, primarily due to favorable overhead absorption on higher sales.

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PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Operating income during the six months ended June 30, 2023 increased $19 million, or 39%, to $67 million, and operating margin increased 220 basis points from the prior year period to 18.5%, as favorable overhead absorption on higher sales was partially offset by unfavorable mix on defense electronics products.

New orders in the second quarter increased $34 million, primarily due to an increase in orders for flight test equipment and tactical communications products.

New orders during the six months ended June 30, 2023 increased $109 million primarily due to an increase in orders for defense electronics equipment, including embedded computing and tactical communications products.

Naval & Power

The following tables summarize sales, operating income and margin, and new orders within the Naval & Power segment.


	Three Months Ended							Six Months Ended
	June 30,							June 30,
(In thousands)	2023			2022			% change	2023			2022			% change
Sales	$	280,414		$	251,236		12%	$	546,673		$	476,516		15%
Operating income	46,782			50,001			(6%)	84,719			77,289			10%
Operating margin	16.7		%	19.9		%	(320 bps)	15.5		%	16.2		%	(70 bps)
New orders	$	419,377		$	365,441		15%	$	644,435		$	611,705		5%

Components of sales and operating income increase (decrease):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023 vs. 2022				2023 vs. 2022
	Sales		Operating Income		Sales		Operating Income
Organic	3	%	(7	%)	7	%	2	%
Acquisitions	9	%	—	%	8	%	—	%
Loss on divestiture	—	%	—	%	—	%	7	%
Foreign currency	—	%	1	%	—	%	1	%
Total	12	%	(6	%)	15	%	10	%

Sales in the Naval & Power segment are primarily to the naval defense and power & process markets, and, to a lesser extent, the aerospace defense market.

Sales in the second quarter increased $29 million, or 12%, to $280 million from the prior year period. In the aerospace defense market, sales increased $23 million due to the incremental impact from our arresting systems acquisition. Sales in the power & process market benefited from higher demand for industrial valves in the process market, as well as higher commercial nuclear aftermarket sales supporting the maintenance of existing operating reactors. These increases were partially offset by the wind-down on the China Direct AP1000 program. The naval defense market benefited from higher sales on the Columbia-class and Virginia-class submarine programs, partially offset by the timing of sales on various aircraft carrier programs.

Sales during the six months ended June 30, 2023 increased $70 million, or 15%, to $547 million from the prior year period, primarily due to higher sales across our aerospace defense, naval defense, and power & process markets. In the aerospace defense market, sales increased $39 million due to the incremental impact from our arresting systems acquisition. Sales in the naval defense market benefited $11 million primarily due to higher sales on the Columbia-class and Virginia-class submarine programs. In the power & process market, sales increased $19 million primarily due to higher nuclear aftermarket sales supporting the maintenance of existing operating reactors as well as higher industrial valve sales in the process market. These increases were partially offset by the wind-down on the China Direct AP1000 program.

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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Operating income in the second quarter decreased $3 million, or 6%, to $47 million, and operating margin decreased 320 basis points from the prior year period to 16.7%, as favorable overhead absorption on higher sales was more than offset by unfavorable product mix as well as first year purchase accounting costs from our arresting systems acquisition.

Operating income during the six months ended June 30, 2023 increased $7 million, or 10%, to $85 million, while operating margin decreased 70 basis points from the prior year period to 15.5%. Both operating income and operating margin benefited from the absence of a prior year loss on sale of our industrial valves business in Germany as well as favorable overhead absorption on higher organic sales. These increases were partially offset by unfavorable product mix as well as first year purchase accounting costs from our arresting systems acquisition.

New orders in the second quarter increased $54 million primarily due to the incremental impact from our arresting systems acquisition, an increase in orders for nuclear aftermarket products and services, and higher demand for naval defense products.

New orders during the six months ended June 30, 2023 increased $33 million primarily due to the incremental impact from our arresting systems acquisition, as well as an increase in orders for nuclear aftermarket products and services.

SUPPLEMENTARY INFORMATION

The table below depicts sales by end market and customer type, as it helps provide an enhanced understanding of our businesses and the markets in which we operate. The table has been included to supplement the discussion of our consolidated operating results.


Total Net Sales by End Market and Customer Type	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2023		2022		% change		2023			2022	% change
Aerospace & Defense markets:
Aerospace Defense	$	132,192	$	94,545	40	%	$	232,071	<