What changed in this filing

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Item 1. Financial Statements

2020-08-04 compared with 2020-05-07 · 358 added, 235 removed, 568 unchanged (51% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands, except per share data) 2020 2019 2020 2019

13 unchanged sentences

Interest expense 8,515 7,960 16,004 15,232

Other income, net 5,532 5,478

Other income (expense), net ( 4,105 ) 5,871 1,427 11,349

Earnings before income taxes 42,729 103,596 113,218 173,847

12 unchanged sentences

(In thousands)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Net earnings $ 31,018 $ 80,072 $ 82,779 $ 135,665

3 unchanged sentences

Pension and postretirement adjustments, net of tax (2)

4,002 1,749 8,683 3,432

Other comprehensive income (loss), net of tax 28,187 2,289 ( 17,407 ) 12,214

Comprehensive income $ 59,205 $ 82,361 $ 65,372 $ 147,879

(1) The tax benefit (expense) included in other comprehensive income (loss) for foreign currency translation adjustments for the three months ended March 31, 2020 and 2019 was $ 0.4 million and ($ 0.1 ) million, respectively.

(2) The tax expense included in other comprehensive income for pension and postretirement adjustments for the three months ended March 31, 2020 and 2019 was $ 1.3 million and $ 0.6 million, respectively.

(1) The tax benefit included in other comprehensive income (loss) for foreign currency translation adjustments for the three and six months ended June 30, 2020 and June 30, 2019 was immaterial.

(2) The tax expense included in other comprehensive income for pension and postretirement adjustments for the three and six months ended June 30, 2020 was $ 1.3 million and $ 2.7 million, respectively.

The tax expense included in other comprehensive income for pension and postretirement adjustments for the three and six months ended June 30, 2019 was $ 0.6 million and $ 1.1 million, respectively.

See notes to condensed consolidated financial statements

2 unchanged sentences

(In thousands, except per share data)

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Current assets:

12 unchanged sentences

Current liabilities:

Current portion of long-term and short-term debt $ 427 $ —

Accounts payable 171,842 222,000

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Stockholders’ equity

Common stock, $1 par value,100,000,000 shares authorized as of March 31, 2020 and December 31, 2019;

49,187,378 shares issued as of March 31, 2020 and December 31, 2019;

outstanding shares were 41,693,422 as of March 31, 2020 and 42,680,215 as of December 31, 2019 49,187 49,187

Common stock, $ 1 par value, 100,000,000 shares authorized as of June 30, 2020 and December 31, 2019;

49,187,378 shares issued as of June 30, 2020 and December 31, 2019;

outstanding shares were 41,565,240 as of June 30, 2020 and 42,680,215 as of December 31, 2019

49,187 49,187

Additional paid in capital 118,467 116,070

1 unchanged sentence

Accumulated other comprehensive loss ( 342,681 ) ( 325,274 )

Common treasury stock, at cost (7,493,956 shares as of March 31, 2020 and 6,507,163 shares as of December 31, 2019) ( 665,170 ) ( 562,722 )

Common treasury stock, at cost ( 7,622,138 shares as of June 30, 2020 and 6,507,163 shares as of December 31, 2019)

( 677,405 ) ( 562,722 )

Total stockholders’ equity 1,713,295 1,774,372

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands) 2020 2019

1 unchanged sentence

Net earnings $ 82,779 $ 135,665

Adjustments to reconcile net earnings to net cash used for operating activities

Adjustments to reconcile net earnings to net cash provided by (used for) operating activities

Depreciation and amortization 56,568 51,600

Gain on sale/disposal of long-lived assets ( 387 ) ( 504 )

Gain on fixed asset disposals ( 373 ) ( 6,080 )

Deferred income taxes 4,208 1,450

Share-based compensation 7,140 6,980

Inventory write-down 1,205 —

Change in operating assets and liabilities, net of businesses acquired:

Foreign exchange loss on substantial liquidation of subsidiary 9,550 —

Inventory write-downs 9,015 —

Change in operating assets and liabilities, net of businesses acquired and divested:

Receivables, net 31,898 ( 37,621 )

3 unchanged sentences

Deferred revenue ( 12,622 ) 5,278

Income taxes payable 22,783 11,948

Pension and postretirement liabilities, net ( 149,468 ) 255

Income taxes 26,042 2,872

Pension and postretirement benefits, net ( 149,514 ) 311

Other current and long-term assets and liabilities 6,109 ( 21,203 )

Net cash used for operating activities ( 192,576 ) ( 51,858 )

Net cash provided by (used for) operating activities ( 52,209 ) 40,386

Cash flows from investing activities:

Proceeds from sale/disposal of long-lived assets 2,006 1,268

Proceeds from sales and disposals of long lived assets 2,411 8,920

Acquisition of intangible assets — ( 147 )

Additions to property, plant, and equipment ( 29,324 ) ( 33,471 )

Acquisition of business, net of cash acquired ( 51,043 ) ( 49,037 )

Acquisition of businesses, net of cash acquired ( 82,003 ) ( 50,075 )

Net cash used for investing activities ( 108,916 ) ( 74,773 )

4 unchanged sentences

Proceeds from share-based compensation 5,189 5,411

Dividends paid ( 7,089 ) ( 6,420 )

Other ( 429 ) ( 395 )

Net cash provided by (used for) financing activities 39,268 ( 8,073 )

Net cash used for financing activities ( 51,942 ) ( 26,712 )

Effect of exchange-rate changes on cash ( 22,583 ) 1,377

8 unchanged sentences

(In thousands)

For the three months ended March 31, 2019

For the six months ended June 30, 2020

Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock

December 31, 2019 $ 49,187 $ 116,070 $ 2,497,111 $ ( 325,274 ) $ ( 562,722 )

Cumulative effect from adoption of ASU 2018-02 — — 26,257 ( 26,257 ) —

Net earnings — — 82,779 — —

Other comprehensive income, net of tax — — — 9,925 —

Other comprehensive loss, net of tax — — — ( 17,407 ) —

Dividends declared — — ( 14,163 ) — —

4 unchanged sentences

Other — ( 517 ) — — 517

June 30, 2020 $ 49,187 $ 118,467 $ 2,565,727 $ ( 342,681 ) $ ( 677,405 )

For the three months ended June 30, 2020

Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock

March 31, 2020 $ 49,187 $ 114,911 $ 2,541,777 $ ( 370,868 ) $ ( 665,170 )

For the three months ended March 31, 2020

Net earnings — — 31,018 — —

Other comprehensive income, net of tax — — — 28,187 —

Dividends declared — — ( 7,068 ) — —

Stock options exercised — ( 244 ) — — 365

Share-based compensation — 3,800 — — —

Repurchase of common stock — — — — ( 12,600 )

June 30, 2020 $ 49,187 $ 118,467 $ 2,565,727 $ ( 342,681 ) $ ( 677,405 )

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

For the six months ended June 30, 2019

Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock

December 31, 2018 $ 49,187 $ 118,234 $ 2,191,471 $ ( 288,447 ) $ ( 539,664 )

Cumulative effect from adoption of ASU 2018-02 — — 26,257 ( 26,257 ) —

Net earnings — — 135,665 — —

Other comprehensive loss, net of tax — — — ( 45,594 ) —

Other comprehensive income, net of tax — — — 12,214 —

Dividends declared — — ( 13,690 ) — —

4 unchanged sentences

Other — ( 661 ) — — 661

June 30, 2019 $ 49,187 $ 116,835 $ 2,339,703 $ ( 302,490 ) $ ( 550,939 )

For the three months ended June 30, 2019

Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock

March 31, 2019 $ 49,187 $ 114,696 $ 2,266,902 $ ( 304,779 ) $ ( 540,426 )

Net earnings — — 80,072 — —

Other comprehensive income, net of tax — — — 2,289 —

Dividends declared — — ( 7,271 ) — —

Stock options exercised — ( 1,303 ) — — 2,038

Share-based compensation — 3,442 — — 43

Repurchase of common stock — — — — ( 12,594 )

June 30, 2019 $ 49,187 $ 116,835 $ 2,339,703 $ ( 302,490 ) $ ( 550,939 )

See notes to condensed consolidated financial statements

1 unchanged sentence

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

B ASIS OF PRESENTATION

BASIS OF PRESENTATION

Curtiss-Wright Corporation and its subsidiaries (the "Corporation" or the "Company") is a global, diversified manufacturing and service company that designs, manufactures, and overhauls precision components and provides highly engineered products and services to the aerospace, defense, power generation, and general industrial markets.

7 unchanged sentences

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, the estimate of useful lives for property, plant, and equipment, cash flow estimates used for testing the recoverability of assets, 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.

The most significant of these estimates includes the estimate of costs to complete on contracts using the over-time revenue recognition accounting method, cash flow estimates used for testing the recoverability of assets, 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.

1 unchanged sentence

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 months ended March 31, 2020 and 2019, 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.

During the three and six months ended June 30, 2020 and 2019, there were no significant changes in estimated contract costs.

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 2019 Annual Report on Form 10-K.

4 unchanged sentences

Recent accounting pronouncements adopted

ASU 2016-13 -Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

A SU 2016-13 -Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

On January 1, 2020, the Company adopted ASU 2016-13 -Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

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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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

whether they are explicitly stated or implied by customary business practices.

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.

1 unchanged sentence

The Corporation’s performance obligations are satisfied either at a point-in-time or on an over-time basis.

Revenue recognized on an over-time basis for the three months ended March 31, 2020 and 2019 accounted for approximately 52 % and 48 %, respectively, of total net sales.

Revenue recognized on an over-time basis for the three and six months ended June 30, 2020 accounted for approximately 54 % and 53 %, respectively, of total net sales.

Revenue recognized on an over-time basis for both the three and six months ended June 30, 2019 accounted for approximately 48 % of total net sales.

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.

Revenue recognized at a point-in-time for the three months ended March 31, 2020 and 2019 accounted for approximately 48 % and 52 %, respectively, of total net sales.

Revenue recognized at a point-in-time for the three and six months ended June 30, 2020 accounted for approximately 46 % and 47 %, respectively, of total net sales.

Revenue recognized at a point-in-time for both the three and six months ended June 30, 2019 accounted for approximately 52 % of total net sales.

Revenue for these types of arrangements is recognized at the point in time in which control is transferred to the customer, typically based upon the terms of delivery.

1 unchanged sentence

Backlog includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

Total backlog was approximately $ 2.1 billion as of March 31, 2020, of which the Corporation expects to recognize approximately 91 % as net sales over the next 12-36 months .

Total backlog was approximately $ 2.2 billion as of June 30, 2020, of which the Corporation expects to recognize approximately 89 % as net sales over the next 12-36 months .

The remainder will be recognized thereafter.

1 unchanged sentence

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

Total Net Sales by End Market and Customer Type Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 2020 2019

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The Corporation’s contract liabilities primarily consist of customer advances received prior to revenue being earned.

Revenue recognized during the three months ended March 31, 2020 and 2019 included in contract liabilities at the beginning of the respective years were approximately $ 89 million and $ 79 million, respectively.

Contract assets and contract liabilities are reported in the "Receivables, net" and "Deferred revenue" lines, respectively, within the Condensed Consolidated Balance Sheet.

Revenue recognized during the three and six months ended June 30, 2020 included in the contract liabilities balance as

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of January 1, 2020 was approximately $ 71 million and $ 160 million, respectively.

Revenue recognized during the three and six months ended June 30, 2019 included in the contract liabilities balance as of January 1, 2019 was approximately $ 54 million and $ 133 million, respectively.

Contract assets and contract liabilities are reported in the "Receivables, net" and "Deferred revenue" lines, respectively, within the Condensed Consolidated Balance Sheet.

The Corporation continually evaluates potential acquisitions that either strategically fit within the Corporation’s existing portfolio or expand the Corporation’s portfolio into new product lines or adjacent markets.

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The Corporation will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

During the three months ended March 31, 2020, the Corporation acquired one business for an aggregate purchase price of $ 60 million, which is described in more detail below.

During the three months ended March 31, 2019, the Corporation acquired one business for an aggregate purchase price of $ 49 million, which is described in more detail below.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the three months ended March 31, 2020 and 2019.

During the six months ended June 30, 2020, the Corporation acquired two businesses for an aggregate purchase price of $ 90 million, which are described in more detail below.

During the six months ended June 30, 2019, the Corporation acquired one business for an aggregate purchase price of $ 50 million, which is described in more detail below.

The Condensed Consolidated Statement of Earnings for the six months ended June 30, 2020 includes $ 7 million of total net sales and $ 1 million of net losses from the Corporation's 2020 acquisitions.

The Condensed Consolidated Statement of Earnings for the six months ended June 30, 2019 includes $ 4 million of total net sales and $ 1 million of net losses from the Corporation's 2019 acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the six months ended June 30, 2020 and 2019.

(In thousands) 2020 2019

13 unchanged sentences

Goodwill deductible for tax purposes $ 38,469 $ 22,185

2020 Acquisition

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2020 Acquisitions

Integrated Air Defense System (IADS)

On April 20, 2020 , the Corporati on acquired the IADS product line for approximately $ 29 million.

The Asset Purchase Agreement contains representations and warranties customary for a transaction of this type.

IADS is a real-time display and post-test analysis product for flight tests.

The acquired product line operates within the Defense segment.

The acquisition is subject to post-closing adjustments with the purchase price allocation not yet complete.

Dyna-Flo Control Valve Services Ltd.

On February 26, 2020 , the Corporati on acquired 100% of the issued and outstanding share capital of Dyna- Flo for $ 60 million, net of cash acquired.

On February 26, 2020 , the Corporati on acquired 100% of the issued and outstanding share capital of Dyna- Flo for approximately $ 60 million, net of cash acquired.

The Asset Purchase Agreement contains representations and warranties customary for a transaction of this type, including a portion of the purchase price held back as security for potential indemnification claims against the seller.

Dyna-Flo specializes in control valves, actuators, and control systems for the chemical, petrochemical, and oil and gas markets.

The acquired business will operate within the Commercial/Industrial segment.

The acquired business operates within the Commercial/Industrial segment.

The acquisition is subject to post-closing adjustments with the purchase price allocation not yet complete.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2019 Acquisition

Tactical Communications Group (TCG)

On March 15, 2019 , the Corporation acquired 100% of the membership interest of TCG for $ 49 million, net of cash acquired.

The Purchase Agreement contains a purchase price adjustment mechanism and representations and warranties customary for a transaction of this type.

On March 15, 2019 , the Corporation acquired 100% of the membership interests of TCG for $ 50 million, net of cash acquired.

The Purchase Agreement contains a purchase price adjustment mechanism and representations and warranties customary for a transaction of this type, including a portion of the purchase price deposited in escrow as security for potential indemnification claims against the seller.

TCG is a designer and manufacturer of tactical data link software solutions for critical military communications systems.

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The composition of receivables is as follows:

(In thousands) March 31, 2020 December 31, 2019

(In thousands) June 30, 2020 December 31, 2019

Billed receivables:

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Inventories are valued at the lower of cost or net realizable value.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The composition of inventories is as follows:

(In thousands) March 31, 2020 December 31, 2019

(In thousands) June 30, 2020 December 31, 2019

Raw materials $ 177,200 $ 153,876

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Inventories, net $ 461,902 $ 424,835

(1) As of March 31, 2020 and December 31, 2019, this caption also includes capitalized development costs of $ 36.9 million and $ 39.1 million, respectively, related to certain aerospace and defense programs.

(1) As of June 30, 2020 and December 31, 2019, this caption also includes capitalized contract development costs of $ 32.4 million and $ 39.1 million, respectively, related to certain aerospace and defense programs.

These capitalized costs will be liquidated as units are produced under contract.

As of March 31, 2020 and December 31, 2019, capitalized development costs of $ 19.3 million and $ 23.7 million, respectively, are not currently supported by existing firm orders.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The changes in the carrying amount of goodwill for the three months ended March 31, 2020 are as follows:

As of June 30, 2020 and December 31, 2019, capitalized development costs of $ 16.5 million and $ 23.7 million, respectively, are not currently supported by existing firm orders.

The changes in the carrying amount of goodwill for the six months ended June 30, 2020 are as follows:

(In thousands) Commercial/Industrial Defense Power Consolidated

2 unchanged sentences

Adjustments — ( 1,386 ) — ( 1,386 )

— ( 1,416 ) — ( 1,416 )

Foreign currency translation adjustment ( 5,334 ) ( 5,942 ) ( 686 ) ( 11,962 )

March 31, 2020 $ 451,788 $ 516,535 $ 207,362 $ 1,175,685

(1) Amount primarily relates to post-closing purchase price adjustments on the Corporation's acquisition of 901D Holdings, LLC (901D) in December 2019.

June 30, 2020 $ 454,981 $ 534,256 $ 207,957 $ 1,197,194

OTHER INTANGIBLE ASSETS, NET

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

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

(In thousands) Gross Accumulated Amortization Net Gross Accumulated Amortization Net

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(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.

During the three months ended March 31, 2020, the Corporation acquired intangible assets of $ 24.7 million.

During the six months ended June 30, 2020, the Corporation acquired intangible assets of $ 39.4 million.

The Corporation acquired Customer-related intangibles of $ 28.9 million, Technology of $ 8.1 million, and Other intangible assets of $ 2.4 million, which have weighted average amortization periods of 19.4 years, 15.0 years, and 7.5 years, respectively.

Total intangible amortization expense for the three months ended March 31, 2020 was $ 14.1 million as compared to $ 11.2 million in the comparable prior year period.

Total intangible amortization expense for the six months ended June 30, 2020 was $ 28.7 million, as compared to $ 22.6 million in the comparable prior year period.

The estimated amortization expense for the five years ending December 31, 2020 through 2024 is $ 58 million, $ 48 million, $ 45 million, $ 41 million, and $ 38 million, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Forward Foreign Exchange and Currency Option Contracts

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The Corporation periodically uses interest rate swaps to manage such exposures.

Under these interest rate swaps, the Corporation exchanges, at specified intervals, the difference

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

Under these interest rate swaps, the Corporation exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

The Corporation’s foreign exchange contracts and interest rate swaps are considered Level 2 instruments which are based on market based inputs or unobservable inputs and corroborated by market data such as quoted prices, interest rates, or yield curves.

Effects on Condensed Consolidated Balance Sheets

As of March 31, 2020 and December 31, 2019, the fair values of the asset and liability derivative instruments were immaterial.

As of June 30, 2020 and December 31, 2019, the fair values of the asset and liability derivative instruments were immaterial.

Effects on Condensed Consolidated Statements of Earnings

Undesignated hedges

The location and amount of gains or (losses) recognized in income on forward exchange derivative contracts not designated for hedge accounting for the three months ended March 31 were as follows:

Three Months Ended

(In thousands) March 31,

For the three and six months ended June 30, 2020 and 2019, the gains or (losses) recognized in income on forward exchange derivative contracts not designated for hedge accounting were as follows:

Three Months Ended Six Months Ended

(In thousands) June 30, June 30,

Derivatives not designated as hedging instrument 2020 2019 2020 2019

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General and administrative expenses $ 700 $ ( 2,158 ) $ ( 7,432 ) $ 1,431

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 March 31, 2020.

Accordingly, all of the Corporation’s debt is valued as a Level 2 financial instrument.

1 unchanged sentence

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.

March 31, 2020 December 31, 2019

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020 December 31, 2019

(In thousands) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

1 unchanged sentence

3.84 % Senior notes due 2021

100,000 102,137 100,000 102,079

3.70 % Senior notes due 2023

202,500 209,416 202,500 207,882

3.85 % Senior notes due 2025

90,000 95,028 90,000 93,838

4.24 % Senior notes due 2026

200,000 217,026 200,000 213,126

4.05 % Senior notes due 2028

67,500 72,655 67,500 71,260

4.11 % Senior notes due 2028

Other debt 427 427 — —

90,000 97,159 90,000 95,607

Total debt 825,000 868,421 750,000 783,792

5 unchanged sentences

The following table is a consolidated disclosure of all domestic and foreign defined pension plans as described in the Corporation’s 2019 Annual Report on Form 10-K.

The components of net periodic pension cost for the three months ended March 31, 2020 and 2019 were as follows:

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

The components of net periodic pension cost for the three and six months ended June 30, 2020 and 2019 were as follows:

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 2020 2019

5 unchanged sentences

Net periodic pension cost $ 1,452 $ 836 $ 2,903 $ 1,671

During three months ended March 31, 2020, the Corporation made a $ 150 million voluntary contribution to the Curtiss-Wright Pension Plan.

During the six months ended June 30, 2020, the Corporation made a $ 150 million voluntary contribution to the Curtiss-Wright Pension Plan.

The Corporation does not expect to make any further contributions to the Curtiss-Wright Pension Plan in 2020.

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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 months ended March 31, 2020 and 2019, the expense relating to the plan was $ 6.0 million and $ 5.4 million, respectively.

The Corporation made $ 11.9 million in contributions to the plan during the three months ended March 31, 2020 and expects to make total contributions of $ 18.0 million in 2020.

During the three and six months ended June 30, 2020, the expense relating to the plan was $ 4.3 million and $ 10.3 million, respectively.

During the three and six months ended June 30, 2019, the expense relating to the plan was $ 4.2 million and $ 9.6 million, respectively.

The Corporation made $ 14.0 million in contributions to the plan during the six months ended June 30, 2020, and expects to make total contributions of $ 18.3 million in 2020.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

1 unchanged sentence

A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 2020 2019

2 unchanged sentences

Diluted weighted-average shares outstanding 41,855 43,024 42,362 43,038

For the three months ended March 31, 2020 and 2019, there were no anti-dilutive equity-based awards.

For the three and six months ended June 30, 2020 and 2019, there were no anti-dilutive equity-based awards.

SEGMENT INFORMATION

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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 2020 2019

11 unchanged sentences

Total consolidated $ 55,349 $ 105,685 $ 127,795 $ 177,730

(1) Corporate and eliminations 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.

(1) Corporate and eliminations includes service costs related to pension and other postretirement benefits, 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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 2020 2019

1 unchanged sentence

Interest expense 8,515 7,960 16,004 15,232

Other income, net 5,532 5,478

Other income (expense), net ( 4,105 ) 5,871 1,427 11,349

Earnings before income taxes $ 42,729 $ 103,596 $ 113,218 $ 173,847

(In thousands) March 31, 2020 December 31, 2019

(In thousands) June 30, 2020 December 31, 2019

Identifiable assets

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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) Foreign currency translation adjustments, net Total pension and postretirement adjustments, net Accumulated other comprehensive income (loss)

13 unchanged sentences

Net current period other comprehensive income (loss) ( 26,090 ) 8,683 ( 17,407 )

March 31, 2020 $ ( 180,294 ) $ ( 190,574 ) $ ( 370,868 )

(1) All amounts are after tax.

(2) Reclassification to retained earnings due to adoption of ASU No.

2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

June 30, 2020 $ ( 156,109 ) $ ( 186,572 ) $ ( 342,681 )

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

1 unchanged sentence

Defined benefit pension and other postretirement benefit plans

Amortization of prior service costs $ 236 (1)

Amortization of actuarial losses ( 5,749 ) (1)

( 5,513 ) Total before tax

1,330 Income tax

Total reclassifications $ ( 4,183 ) Net of tax

(1) These items are included in the computation of net periodic pension cost.

See Note 9, Pension Plans.

Amortization of prior service costs $ 470 Other income (expense), net

Amortization of actuarial losses ( 11,497 ) Other income (expense), net

( 11,027 ) Earnings before income taxes

2,660 Provision for income taxes

Total reclassifications $ ( 8,367 ) Net earnings

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTINGENCIES AND COMMITMENTS

6 unchanged sentences

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 March 31, 2020 and December 31, 2019, there were $ 29.9 million and $ 32.6 million of stand-by letters of credit outstanding, respectively, and $ 8.6 million and $ 10.8 million of bank

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

guarantees outstanding, respectively.

As of June 30, 2020 and December 31, 2019, there were $ 21.8 million and $ 32.6 million of stand-by letters of credit outstanding, respectively, and $ 6.4 million and $ 10.8 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.

5 unchanged sentences

The Corporation would be liable for liquidated damages under the contract if certain contractual delivery dates were not met and if the Corporation was deemed responsible for the delay.

As of March 31, 2020, the Corporation has not met certain contractual delivery dates under its AP 1000 China and U.S.

As of June 30, 2020, the Corporation has not met certain contractual delivery dates under its AP 1000 China and U.S.

however there are significant uncertainties as to which parties are responsible for the delays.

The Corporation believes it has adequate legal defenses and intends to vigorously defend this matter.

Given the uncertainties surrounding the responsibility for the delays, no accrual has been made for this matter as of March 31, 2020.

As of March 31, 2020, the range of possible loss is $ 0 to $ 31 million for the AP1000 U.S.

Given the uncertainties surrounding the responsibility for the delays, no accrual has been made for this matter as of June 30, 2020.

As of June 30, 2020, the range of possible loss is $ 0 to $ 31 million for the AP1000 U.S.

contract, for a total range of possible loss of $ 0 to $ 55.5 million.

RESTRUCTURING COSTS

During the three months ended March 31, 2020, the Corporation initiated restructuring activities across all of its segments to support the ongoing effort of improving capacity utilization and operating efficiency.

These restructuring activities, which include workforce reductions and consolidation of facilities, resulted in $ 3 million of pre-tax charges for the three months ended March 31, 2020, inclusive of approximately $ 1 million of inventory write-downs classified within "Cost of product sales" in the Condensed Consolidated Statement of Earnings.

Pre-tax restructuring charges for the year ending December 31, 2020 are expected to be $ 25 million to $ 30 million.

During the three and six months ended June 30, 2020, the Corporation executed restructuring activities across all of its segments to support its ongoing effort of improving capacity utilization and operating efficiency.

These restructuring activities, which include workforce reductions and consolidation of facilities, resulted in $ 15 million and $ 17 million of pre-tax charges for the three and six months ended June 30, 2020.

Included in the aforementioned amounts for the three and six months ended June 30, 2020 were approximately $ 6 million and $ 7 million of non-cash charges, respectively, related to inventory write-downs and impairments of property, plant, and equipment and operating lease right-of-use assets.

Inventory write-downs and asset impairments are reported in "Cost of product sales" and "Restructuring expenses," respectively, within the Condensed Consolidated Statement of Earnings.

Pre-tax restructuring charges for the year ending December 31, 2020 are expected to be $ 35 million.

The Company anticipates that these actions, which are expected to be substantially completed by the end of 2020, will result in total cost savings of approximately $ 40 million annually.

2 unchanged sentences

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restructuring Accrual Restructuring Accrual

In thousands as of December 31, 2019 Provision Cash Payments as of March 31, 2020

In thousands Restructuring Accrual as of December 31, 2019 Provision Cash Payments Restructuring Accrual as of June 30, 2020

Commercial/Industrial

4 unchanged sentences

Facility closure and other exit costs — 40 ( 40 ) —

Total Power $ — $ 799 $ ( 267 ) $ 532

Total Defense $ — $ 2,471 $ ( 1,936 ) $ 535

Severance $ — $ 2,553 $ ( 464 ) $ 2,089

4 unchanged sentences

Total consolidated $ — $ 10,601 $ ( 4,741 ) $ 5,860

SUBSEQUENT EVENTS

On April 20, 2020, the Corporation acquired the Integrated Air Defense System (IADS) product line for $ 29 million.

IADS is a real-time display and post-test analysis product for flight test.

The acquired business will operate within the Defense segment.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

5 unchanged sentences

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, and (d) statements of assumptions, such as economic conditions underlying other statements.

(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 and potential impacts from COVID-19, and (d) 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.

18 unchanged sentences

Approximately 50% of our 2020 revenues are expected to be generated from defense-related markets.

COVID-19, which was characterized as a pandemic by the World Health Organization in March 2020, has disrupted our supply chains and distribution systems, resulted in significant travel restrictions, and created significant disruption of the financial markets.

While the pandemic did not have a material impact on our results of operations, financial position, or cash flows as of and for the three months ended March 31, 2020, we expect that it could negatively impact demand in the commercial aerospace and general industrial end markets in the second quarter, and possibly beyond.

However, the extent to which COVID-19 will negatively affect our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak as well as impacts to our supply chain, transportation networks, and customers.

COVID-19, which was characterized as a pandemic by the World Health Organization in March 2020, has slowed our supply chains and production levels, resulted in significant travel restrictions, and created significant disruption of the financial markets.

While the pandemic negatively impacted demand in the second quarter, primarily in the commercial aerospace and general industrial end markets, it did not have a material impact on our results of operations during the first quarter.

The commercial aerospace and general industrial end markets are expected to be negatively impacted for the foreseeable future, the extent of which is contingent upon future developments.

These future developments, which are highly uncertain and unpredictable, include new information concerning the severity and duration of the outbreak as well as impacts to our supply chain, transportation networks, and customers.

The health and safety of our employees has remained our top priority throughout this crisis.

The vast majority of our manufacturing facilities have remained operational throughout the pandemic due to the critical nature of both our operations as well as our customers’ operations, with all manufacturing facilities open and operating as of June 30, 2020.

We have continued to execute safety measures at all of our facilities to protect the health and safety of our employees and visitors, including increased frequency in cleaning and disinfecting as well as implementing rigorous hygiene and social distancing practices.

In addition, a significant portion of our non-manufacturing employees are currently working remotely in an effort to minimize any potential spread of COVID-19.

These working conditions have been designed to allow for the continuation of key business-critical operations, including financial reporting and internal control.

Given the diversified breadth of our company, we believe that we are well-positioned to mitigate any material risks arising as a result of COVID-19.

From an operational perspective, our current cash balance, coupled with expected cash flows from operating activities for the remainder of the year as well as our current borrowing capacity under the Revolving Credit Agreement, are expected to be more than sufficient to meet operating cash requirements, planned capital expenditures, interest payments on long-term debt obligations, payments on lease obligations, pension and postretirement funding requirements, and dividend payments through at least the remainder of the year.

In May 2020, we took additional actions to strengthen our financial flexibility through the pricing of $300 million of senior notes.

The transaction is expected to close no later than August 13, 2020, with the proceeds intended to be used for general corporate purposes.

We will continue to diligently monitor business conditions and consider additional actions, as necessary.

However, given the current level of uncertainty regarding potential COVID-19 economic impacts, we are unable to predict whether we will experience increased borrowing costs or other costs of capital which in turn could potentially result in future liquidity issues.

See Part II, Item 1A.

“Risk Factors” for a detailed description of the risks resulting from the COVID-19 pandemic.

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 months ended March 31, 2020.

The financial information as of March 31, 2020 should be read in conjunction with the financial statements for the year ended December 31, 2019 contained in our Form 10-K.

The financial information as of June 30, 2020 should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019 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 continuing operations followed by a more detailed discussion of those results within each of our reportable segments.

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.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Our three reportable segments are generally concentrated in a few end markets;

2 unchanged sentences

The sales for the relevant markets will be discussed throughout the MD&A.

On January 1, 2020, we implemented an organizational change to align our reportable segments more closely with our current business structure.

This change resulted in the transfer of two business units, one from the Commercial/Industrial segment to the Defense segment and the other from the Defense segment to the Power segment.

While this organizational change resulted in the recasting of previously reported amounts across all reportable segments, it did not impact our previously reported consolidated financial statements.

Analytical Definitions

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

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.

2 unchanged sentences

Additionally, the results of operations of divested businesses are removed from the comparable prior year period for purposes of calculating “organic” and “incremental” results.

The definition of “organic” excludes the effect of foreign currency translation.

The definition of “organic” excludes the effects of restructuring-related expenses and foreign currency translation.

Condensed Consolidated Statements of Earnings

Three Months Ended

(In thousands) 2020 2019 % change

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 % change 2020 2019 % change

Commercial/Industrial $ 213,648 $ 292,900 (27 %) $ 478,016 $ 562,758 (15 %)

9 unchanged sentences

Interest expense 8,515 7,960 7 % 16,004 15,232 5 %

Other income, net 5,532 5,478 1 %

Other income (expense), net (4,105) 5,871 (170 %) 1,427 11,349 (87 %)

Earnings before income taxes 42,729 103,596 (59 %) 113,218 173,847 (35 %)

1 unchanged sentence

Net earnings $ 31,018 $ 80,072 $ 82,779 $ 135,665

Restructuring-related expenses $ 14,596 $ — NM $ 17,380 $ — NM

New orders $ 620,249 $ 600,769 3 % $ 1,190,050 $ 1,347,507 (12 %)

NM - Not meaningful

Components of sales and operating income increase (decrease):

Three Months Ended

Sales Operating Income

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Three Months Ended Six Months Ended

June 30, June 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Organic (17 %) (35 %) (8 %) (19 %)

Acquisitions 3 % (1 %) 3 % — %

Restructuring — % (13 %) — % (10 %)

Foreign currency — % 1 % — % 1 %

Total (14 %) (48 %) (5 %) (28 %)

Sales during the three months ended March 31, 2020 increased $23 million, or 4%, to $601 million, compared with the prior year period.

On a segment basis, sales increases of $32 million from the Defense segment were partially offset by lower sales of

Sales in the second quarter decreased $89 million, or 14%, to $550 million, compared with the prior year period.

On a segment basis, sales from the Commercial/Industrial and Power segments decreased $79 million and $21 million, respectively, with sales from the Defense segment increasing $11 million.

Sales during the six months ended June 30, 2020 decreased $66 million, or 5%, to $1,151 million, compared with the prior year period.

On a segment basis, sales from the Commercial/Industrial and Power segments decreased $85 million and $25 million, respectively, with sales from the Defense segment increasing $44 million.

Changes in sales by segment are discussed in further detail in the results by business segment section below.

Operating income in the second quarter decreased $50 million, or 48%, to $55 million, and operating margin decreased 640 basis points to 10.1% compared with the same period in 2019.

Operating income during the six months ended June 30, 2020 decreased $50 million, or 28%, to $128 million and operating margin decreased 350 basis points to 11.1%, compared with the same period in 2019.

The decreases in operating income and operating margin for each of the respective periods were primarily due to unfavorable overhead absorption on lower sales in the Commercial/Industrial and Power segments, costs associated with our restructuring activities across all segments, and first year purchase accounting costs from our 901D acquisition in the Defense segment .

These decreases were partially offset by the benefits of our ongoing margin improvement initiatives, which were recognized across all segments.

Non-segment operating expense in the second quarter decreased $2 million, or 21 %, to $8 million, primarily due to lower corporate costs.

Non-segment operating expense during the six months ended June 30, 2020 of $20 million was essentially flat compared to the prior year period.

Interest expense during the second quarter and six months ended June 30, 2020 of $9 million and $16 million, respectively, was essentially flat against the comparable prior year periods.

Other income (expense), net in the second quarter and six months ended June 30, 2020 decreased $10 million to ($4) million and $1 million, respectively, primarily due to the recognition of accumulated foreign currency translation losses of $10 million related to the substantial liquidation of our Norwegian subsidiary.

The effective tax rate of 27.4% in the second quarter increased compared to an effective tax rate of 22.7% in the prior year period.

This increase was primarily driven by the recognition of accumulated foreign currency translation losses related to the substantial liquidation of our Norwegian subsidiary, which are not deductible for tax purposes.

The effective tax rate of 26.9% for the six months ended June 30, 2020 increased as compared to an effective tax rate of 22.0% in the prior year period.

This increase was primarily due to the aforementioned foreign currency translation losses as well as additional tax expense associated with the establishment of a valuation allowance against certain foreign deferred tax assets.

Comprehensive income in the second quarter was $59 million, compared to comprehensive income of $82 million in the prior year period.

The change was primarily due to the following:

• Net earnings decreased $49 million, primarily due to lower operating income and higher other expense, net.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

2 unchanged sentences

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

$5 million and $4 million from the Commercial/Industrial and Power segments, respectively.

Changes in sales by segment are discussed in further detail in the results by business segment section below.

Operating income of $72 million during the three months ended March 31, 2020 was essentially flat compared to the prior year period, while operating margin decreased 50 basis points to 12.0%, compared with the same period in 2019.

F avorable overhead absorption on higher sales in the Def ense segment was partially offset by transition costs associated with our DRG facility move in the Power segment.

Operating income in the Commercial/Industrial segment was essentially flat as a favorable shift in mix for our actuation products as well as the benefits of our margin improvement initiatives were offset by lower sales of industrial vehicle products.

Non-segment operating expense during the three months ended March 31, 2020 increased $3 million , or 28%, to $12 million , primarily due to higher foreign currency losses.

Interest expense of $7 million and other income, net of $6 million were essentially flat compared to the prior year period.

The effective tax rate for the three months ended March 31, 2020 of 26.6% increased as compared to an effective tax rate of 20.9% in the prior year period, primarily due to additional tax expense associated with the establishment of a valuation allowance against certain foreign deferred tax assets.

Comprehensive income for the three months ended March 31, 2020 was $6 million, compared to comprehensive income of $66 million in the prior year period.

• Foreign currency translation adjustments in the second quarter resulted in a $24 million comprehensive gain, compared to a $1 million comprehensive gain in the prior year period.

The comprehensive gain during the current period was primarily attributed to increases in the Canadian dollar.

Comprehensive income for the six months ended June 30, 2020 was $65 million, compared to comprehensive income of $148 million in the prior year period.

The change was primarily due to the following:

• Net earnings decreased $4 million, primarily due to an increase in the effective tax rate during the current period.

• Foreign currency translation adjustments for the three months ended March 31, 2020 resulted in a $50 million comprehensive loss, compared to a $8 million comprehensive gain in the prior period.

• Net earnings decreased $53 million, primarily due to lower operating income and lower other income, net.

• Foreign currency translation adjustments for the six months ended June 30, 2020 resulted in a $26 million comprehensive loss, compared to a $9 million comprehensive gain in the prior period.

The comprehensive loss during the current period was primarily attributed to decreases in the British Pound and Canadian dollar.

New orders decreased $177 million during the three months ended March 31, 2020 from the comparable prior year period, primarily due to the timing of naval defense orders in the Defense and Power segments as well as orders for sensors products in the Commercial/Industrial segment.

New orders increased $19 million during the second quarter from the comparable prior year period, primarily du e to the timing of naval defense orders in the Defense and Power segments.

These increases were partially offset by a decline in new orders for sensors and controls equipment as well as industrial vehicle and valve products in the Commercial/Industrial segment.

New orders decreased $157 million during the six months ended June 30, 2020 from the comparable prior year period.

The decrease was primarily du e to a decline in new orders for sensors and controls equipment as well as industrial vehicle and valve products in the Commercial/Industrial segment.

RESULTS BY BUSINESS SEGMENT

1 unchanged sentence

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

Three Months Ended

(In thousands) 2020 2019 % change

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 % change 2020 2019 % change

Sales $ 213,648 $ 292,900 (27 %) $ 478,016 $ 562,758 (15 %)

Operating income 14,366 51,376 (72 %) 49,353 86,581 (43 %)

Operating margin 13.2 % 13.0 % 20 bps

Operating margin 6.7 % 17.5 % (1,080 bps) 10.3 % 15.4 % (510 bps)

Restructuring-related expenses $ 6,766 $ — NM $ 7,368 $ — NM

New orders $ 152,622 $ 270,670 (44 %) $ 398,624 $ 546,175 (27 %)

NM - Not meaningful

Components of sales and operating income increase (decrease):

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Three Months Ended

Sales Operating Income

Three Months Ended Six Months Ended

June 30, June 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Organic (28 %) (59 %) (16 %) (35 %)

Acquisitions 1 % — % 1 % — %

Restructuring — % (14 %) — % (9 %)

Foreign currency — % 1 % — % 1 %

1 unchanged sentence

Sales in the Commercial/Industrial segment are primarily generated from the commercial aerospace and general industrial markets, and to a lesser extent the defense and power generation markets.

Sales during the three months ended March 31, 2020 decreased $5 million, or 2%, to $264 million from the prior year period, as sales increases in the aerospace defense, naval defense, and commercial aerospace markets were more than offset by lower sales in the general industrial market.

In the aerospace defense market, sales increased $9 million primarily due to higher demand for actuation systems on the F-35 fighter jet program.

Sales increases in the naval defense market were primarily due to higher sales on the CVN-80 and CVN-81 aircraft carrier programs.

Sales in the commercial aerospace market benefited from higher demand for actuation equipment.

In the general industrial market, sales decreased $22 million primarily due to lower demand for industrial vehicle products and surface treatment services.

Operating income of $35 million during the three months ended March 31, 2020 was essentially flat compared to the prior year period, while operating margin increased 20 basis points to 13.2%.

A favorable shift in mix for our actuation products as well as the benefits of our margin improvement initiatives were offset by lower sales of industrial vehicle products.

New orders decreased $30 million during the three months ended March 31, 2020 from the comparable prior year period, primarily due to the timing of orders for sensors products.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Sales in the second quarter decreased $79 million, or 27%, to $214 million from the prior year period, primarily due to lower sales in the commercial aerospace and general industrial markets.

In the commercial aerospace market, sales decreased $34 million, primarily due to lower demand for actuation and sensors equipment as well as surface treatment services.

Sales in the general industrial market decreased $45 million, primarily due to lower sales of industrial vehicle products, industrial valve products, and surface treatment services of $20 million, $11 million, and $8 million, respectively.

Sales during the six months ended June 30, 2020 decreased $85 million, or 15%, to $478 million from the prior year period, primarily due to lower sales in the commercial aerospace and general industrial markets.

In the commercial aerospace market, sales decreased $30 million, primarily due to lower demand for actuation and sensors equipment as well as surface treatment services.

Sales in the general industrial market decreased $67 million, primarily due to lower sales of industrial vehicle products, industrial valve products, and surface treatment services of $32 million, $14 million, and $13 million, respectively.

These decreases were partially offset by higher sales of $9 million in the aerospace defense market, primarily due to higher demand for actuation systems on the F-35 fighter jet program.

Operating income in the second quarter decreased $37 million, or 72%, to $14 million from the prior year period, and operating margin decreased 1,080 basis points to 6.7%.

Operating income during the six months ended June 30, 2020 decreased $37 million, or 43%, to $49 million from the prior year period, and operating margin decreased 510 basis points to 10.3%.

The decreases in operating income and operating margin for each of the respective periods were primarily due to unfavorable overhead absorption on lower sales in the general industrial and commercial aerospace markets as well as costs associated with our restructuring activities .

These decreases were partially offset by the benefits of our ongoing margin improvement initiatives.

New orders during the second quarter and six months ended June 30, 2020 decreased $118 million and $148 million, respectively, from the comparable prior year periods, primarily due to a decline in new orders for sensors and controls equipment as well as industrial vehicle and valve products.

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

Three Months Ended

(In thousands) 2020 2019 % change

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 % change 2020 2019 % change

Sales $ 169,955 $ 158,492 7 % $ 336,066 $ 292,275 15 %

Operating income 27,872 32,607 (15 %) 56,576 53,339 6 %

Operating margin 17.3 % 15.5 % 180 bps

Operating margin 16.4 % 20.6 % (420 bps) 16.8 % 18.2 % (140 bps)

Restructuring-related expenses $ 1,648 $ — NM $ 2,447 $ — NM

New orders $ 280,194 $ 174,520 61 % $ 440,330 $ 391,110 13 %

NM - Not meaningful

Components of sales and operating income increase (decrease):

Three Months Ended

Sales Operating Income

Three Months Ended Six Months Ended

June 30, June 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Organic (2 %) (11 %) 5 % 10 %

Acquisitions 9 % (1 %) 10 % (1 %)

Restructuring — % (5 %) — % (5 %)

Foreign currency — % 2 % — % 2 %

5 unchanged sentences

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

Sales during the three months ended March 31, 2020 increased $32 million, or 24%, to $166 million from the prior year period.

In the aerospace defense market, sales increased $14 million primarily due to higher demand for embedded computing equipment supporting unmanned aerial vehicles (UAVs), helicopter platforms, and various Intelligence, Surveillance and Reconnaissance (ISR) programs.

Sales in the naval defense market benefited $25 million primarily due to the incremental impact of our 901D acquisition as well as higher demand for embedded computing equipment and valves on the Virginia-class submarine and CVN-80 aircraft carrier programs.

These increases were p artially offset by lower sales of flight test instrumentation equipment in the commercial aerospace market.

Operating income during the three months ended March 31, 2020 increased $8 million, or 38%, to $29 million, and operating margin increased 180 basis points from the prior year period to 17.3%.

The increases in operating income and operating margin were primarily due to favorable overhead absorption on higher sales, partially offset by first year purchase accounting costs from our 901D acquisition.

New orders during the three months ended March 31, 2020 decreased $56 million from the comparable prior year period, primarily due to the timing of naval defense orders.

Sales in the second quarter increased $11 million, or 7%, to $170 million from the prior year period, primarily due to higher sales in the naval defense and aerospace defense markets.

Sales in the naval defense market increased $22 million, primarily due to the incremental impact of our 901D acquisition, which contributed sales of $12 million.

Excluding the impact of 901D, the naval defense market benefited from higher demand for valves and embedded computing equipment on the Virginia-class submarine platform, which resulted in higher sales of $10 million.

In the aerospace defense market, sales increased $5 million due to higher demand for embedded computing equipment on various fighter jet and unmanned aerial vehicle (UAV) platforms.

These increases were partially offset by lower sales of $7 million in the ground defense market due to lower demand on various domestic and international tank platforms.

Sales during the six months ended June 30, 2020 increased $44 million, or 15%, to $336 million from the prior year period, primarily due to higher sales in the naval defense and aerospace defense markets.

Sales in the naval defense market increased $48 million, primarily due to the incremental impact of our 901D acquisition, which contributed sales of $24 million.

In the aerospace defense market, sales increased $19 million, primarily due to higher demand for embedded computing equipment on various fighter jet and UAV platforms.

These increases were partially offset by lower sales of $9 million in the commercial aerospace market, primarily due to lower demand for flight test instrumentation equipment.

Sales in the ground defense market were negatively impacted by lower demand on various domestic and international tank platforms.

Operating income in the second quarter decreased $5 million, or 15%, to $28 million compared to the prior year period, and operating margin decreased 420 basis points from the prior year period to 16.4%.

These decreases were primarily due to costs associated with our restructuring activities as well as first year purchase accounting costs from our 901D acquisition.

Operating income during the six months ended June 30, 2020 increased $3 million, or 6%, to $57 million, while operating margin decreased 140 basis points from the prior year period to 16.8%.

Favorable overhead absorption on higher sales as well as the benefits of our ongoing margin improvement initiatives were partially offset by costs associated with our restructuring activities as well as first year purchase accounting costs from our 901D acquisition.

New orders in the second quarter increased $106 million from the comparable prior year period, primarily due to the timing of naval defense orders.

This increase was partially offset by the timing of aerospace defense orders.

New orders during the six months ended June 30, 2020 increased $49 million from the comparable prior year period, primarily due to the timing of naval defense orders as well as higher orders for embedded computing equipment in the commercial aerospace market.

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

Three Months Ended

(In thousands) 2020 2019 % change

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 % change 2020 2019 % change

Sales $ 166,444 $ 187,604 (11 %) $ 337,196 $ 362,277 (7 %)

Operating income 21,259 31,983 (34 %) 41,881 57,364 (27 %)

Operating margin 12.1 % 14.5 % (240 bps)

Operating margin 12.8 % 17.0 % (420 bps) 12.4 % 15.8 % (340 bps)

Restructuring-related expenses $ 6,182 $ — NM $ 7,565 $ — NM

New orders $ 187,433 $ 155,579 20 % $ 351,096 $ 410,222 (14 %)

NM - Not meaningful

Components of sales and operating income increase (decrease):

Three Months Ended

Sales Operating Income

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Three Months Ended Six Months Ended

June 30, June 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Organic (11 %) (14 %) (7 %) (14 %)

Acquisitions — % — % — % — %

Restructuring — % (20 %) — % (13 %)

Foreign currency — % — % — % — %

1 unchanged sentence

Sales in the Power segment are primarily to the power generation and naval defense markets.

Sales during the three months ended March 31, 2020 decreased $4 million, or 2%, to $171 million from the prior year period.

In the naval defense market, sales increased $5 million primarily due to higher production on the CVN-80 and CVN-81 aircraft carrier programs.

This increase was more than offset by lower sales of $10 million in the power generation market primarily due to lower international aftermarket sales.

Operating income during the three months ended March 31, 2020 decreased $5 million, or 19%, to $21 million, and operating margin decreased 240 basis points from the prior year period to 12.1%.

The decreases in operating income and operating margin were primarily due to transition costs associated with our DRG facility in South Carolina.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

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MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

New orders decreased $91 million during the three months ended March 31, 2020 from the comparable prior year period, primarily due to the timing of naval defense orders.

Sales in the second quarter decreased $21 million, or 11%, to $166 million from the prior year period, primarily due to lower sales in the naval defense and power generation markets.

In the naval defense market, sales decreased $7 million as higher production levels on the Columbia class submarine were more than offset by the timing of production on the CVN-80 aircraft carrier program as well as lower service center sales.

Sales in the power generation market decreased $12 million primarily due to lower domestic and international aftermarket sales.

Sales during the six months ended June 30, 2020 decreased $25 million, or 7%, to $337 million from the prior year period, primarily due to lower sales of $22 million in the power generation market.

This decrease was primarily due to the lower domestic and international aftermarket sales as well as the timing of production on the China Direct AP1000 program.

Operating income in the second quarter decreased $11 million, or 34%, to $21 million, and operating margin decreased 420 basis points from the prior year period to 12.8%.

The decreases in operating income and operating margin were primarily due to costs associated with our restructuring activities as well as unfavorable overhead absorption on lower sales in the naval defense and power generation markets.

These decreases were partially offset by the benefits of our ongoing margin improvement initiatives.

Operating income during the six months ended June 30, 2020 decreased $15 million, or 27%, to $42 million, and operating margin decreased 340 basis points from the prior year period to 12.4%.

The decreases in operating income and operating margin were primarily due to unfavorable overhead absorption on lower sales in the power generation market, costs associated with our restructuring activities , and transition costs associated with our DRG facility in South Carolina.

These decreases were partially offset by the benefits of our ongoing margin improvement initiatives.

New orders during the second quarter and six months ended June 30, 2020 increased $32 million and decreased $59 million, respectively, from the comparable prior year periods, primarily due to the timing of naval defense orders.

SUPPLEMENTARY INFORMATION

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The table has been included to supplement the discussion of our consolidated operating results.

Net Sales by End Market Three Months Ended

(In thousands) 2020 2019 % change

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Net Sales by End Market Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2020 2019 % change 2020 2019 % change

Defense markets:

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Defense markets

Sales during the three months ended March 31, 2020 increased $60 million, or 26%, to $290 million, primarily due to higher sales in the naval defense and aerospace defense markets.

Sales in the second quarter increased $14 million, or 5%, to $294 million against the comparable prior year period, primarily due to higher sales in the naval defense and aerospace defense markets.

The naval defense market primarily benefited from the impact of our 901D acquisition, which contributed incremental sales of $12 million.

Higher sales of $18 million on the Virginia-class and Columbia-class submarine programs were partially offset by the ti ming of production on the CVN-80 aircraft carrier program as well as lower service center demand, which collectively reduced sales $13 million.

Sales in the aerospace defense market increased primarily due to higher demand for embedded computing equipment on various fighter jet and UAV platforms.

Sales during the six months ended June 30, 2020 increased $73 million, or 14%, to $584 million, primarily due to higher sales in the naval defense and aerospace defense markets.

The naval defense market benefited from the impact of our 901D acquisition, which contributed incremental sales of $24 million.

Excluding the impact of 901D, sales in the naval defense market increased primarily due to higher aircraft carrier program revenues of $10 million and increased production of $7 million on the Virginia-class and Columbia-class submarine programs.

Sales in the aerospace defense market increased primarily due to higher actuation systems sales of $4 million on the F-35 fighter jet program and higher demand of $15 million for embedded computing equipment supporting UAVs, helicopter platforms, and various ISR programs.

Excluding the impact of 901D, the naval defense market benefited from higher sales of $26 million on the Virginia-class and Columbia-class submarine programs.

Sales in the aerospace defense market increased primarily due to higher actuation systems sales of $11 million on the F-35 fighter jet program and higher demand for embedded computing equipment supporting UAVs, which resulted in a sales increase of $9 million.

Commercial markets

Sales during the three months ended March 31, 2020 decreased $37 million, or 11%, to $311 million, primarily due to lower sales in the power generation and general industrial markets.

In the power generation market, we experienced lower international aftermarket sales of $7 million.

Sales in the general industrial market decreased primarily due to lower demand of $18 million for industrial vehicle products and surface treatment services.

Sales in the second quarter decreased $103 million, or 29%, to $256 million due to lower sales across all segments.

Lower demand for actuation and sensors equipment as well as surface treatment services in the commercial aerospace market resulted in sales decreases of $27 million and $8 million, respectively.

In the power generation market, we experienced lower demand for domestic and international aftermarket products, which resulted in lower sales of $12 million.

Lower demand in the general industrial market for industrial vehicle products, industrial valve products, and surface treatment services resulted in sales decreases of $20 million, $13 million, and $8 million, respectively.

Sales during the six months ended June 30, 2020 decreased $139 million, or 20%, to $567 million due to lower sales across all markets.

In the commercial aerospace market, we experienced lower demand for actuation and sensors equipment as well as surface treatment services, which resulted in sales decreases of $29 million and $6 million, respectively.

Sales in the power generation market decreased primarily due to lower domestic and international aftermarket sales of $20 million as well as the timing of production on the China Direct AP1000 program.

Lower demand in the general industrial market for industrial vehicle products, industrial valve products, and surface treatment services resulted in sales decreases of $32 million, $15 million, and $13 million, respectively.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

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MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

LIQUIDITY AND CAPITAL RESOURCES

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In some cases, these payments can exceed the costs incurred on a project.

Management continually evaluates cash utilization alternatives,

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

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MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

including share repurchases, acquisitions, increased dividends, and paying down debt, to determine the most beneficial use of available capital resources.

Management continually evaluates cash utilization alternatives, including share repurchases, acquisitions, increased dividends, and paying down debt, to determine the most beneficial use of available capital resources.

We believe that our cash and cash equivalents, cash flow from operations, available borrowings under the credit facility, and ability to raise additional capital through the credit markets, are sufficient to meet both the short-term and long-term capital needs of the organization.

Condensed Consolidated Statements of Cash Flows Three Months Ended

(In thousands) March 31, 2020 March 31, 2019

Condensed Consolidated Statements of Cash Flows Six Months Ended

(In thousands) June 30, 2020 June 30, 2019

Cash provided by (used in):

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Net decrease in cash and cash equivalents (235,650) (59,722)

Net cash used for operating activities increased $141 million from the prior year period, primarily due to a voluntary pension contribution of $150 million in the current period.

Net cash used for investing activities increased $3 million from the comparable prior year period primarily due to higher cash used for acquisitions and capital expenditures in the current period.

The Corporation acquired one business during the three months ended March 31, 2020 for approximately $60 million, inclusive of $51 million cash paid plus a $9 million holdback for potential indemnification claims against the seller.

The Corporation acquired one business during the three months ended March 31, 2019 for approximately $49 million.

Capital expenditures for the three months ended March 31, 2020 and March 31, 2019 were $19 million and $17 million, respectively, with the increase primarily due to additional investments in our DRG facility.

Net cash used in operating activities increased $93 million from the prior year period, primarily due to a voluntary pensi on contribution of $150 million as well as higher inventory in the current period.

This increase was partially offset by a reduction in receivables during the current period.

Net cash used in investing activities increased $34 million from the comparable prior year period primarily due to higher cash used for acquisitions in the current period.

The Corporation acquired two businesses during the six months ended June 30, 2020 for approximately $90 million, inclusive of $82 million cash paid plus an $8 million holdback for potential indemnification claims against the seller.

The Corporation acquired one business during the six months ended June 30, 2019 for approximately $50 million.

Financing Activities

The Corporation’s debt outstanding had an average interest rate of 3.6% and 3.7% for the three months ended March 31, 2020 and 2019, respectively.

The Corporation’s average debt outstanding was $795 million and $750 million for the three months ended March 31, 2020 and 2019, respectively.

Credit Agreement

As of March 31, 2020, the Corporation had outstanding borrowings of $146 million under the 2012 Senior Unsecured Revolving Credit Agreement (the “Credit Agreement” or “credit facility”) and $30 million in letters of credit supported by the credit facility.

The unused credit available under the Credit Agreement as of March 31, 2020 was $324 million which could be borrowed without violating any of our debt covenants.

Repurchase of common stock

During the three months ended March 31, 2020, the Corporation used $112 million of cash to repurchase approximately 1,100,000 outstanding shares under its share repurchase program.

During the three months ended March 31, 2019, the Corporation used $12 million of cash to repurchase approximately 110,000 outstanding shares under its share repurchase program.

Cash Utilization

Management continually evaluates cash utilization alternatives, including share repurchases, acquisitions, and increased dividends to determine the most beneficial use of available capital resources.

We believe that our cash and cash equivalents, cash flow from operations, available borrowings under the credit facility, and ability to raise additional capital through the credit markets are sufficient to meet both the short-term and long-term capital needs of the organization.

The Corporation’s debt outstanding had an average interest rate of 3.3% and 3.4% for the three and six months ended June 30, 2020, respectively, and 3.7% for both the three and six months ended June 30, 2019.

The Corporation’s average debt outstanding was $890 million and $842 million for the three and six months ended June 30, 2020, respectively, and $750 million for both the three and six months ended June 30, 2019.

In May 2020, we announced the pricing of a private placement debt offering of $300 million for senior notes, consisting of $150 million 3.10% notes due in August 2030 and $150 million 3.20% notes due in August 2032.

We expect to use the net proceeds from the offering for general corporate purposes, which may include reducing outstanding indebtedness under our revolving credit facility, possible future acquisitions, or funding internal growth initiatives.

The offering is expected to close no later than August 13, 2020, subject to customary closing conditions.

Revolving Credit Agreement

As of June 30, 2020, the Corporation had outstanding borrowings of $75 million under the 2018 Senior Unsecured Revolving Credit Agreement (the “Credit Agreement” or “credit facility”) and $22 million in letters of credit supported by the credit

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

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FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

The unused credit available under the Credit Agreement as of June 30, 2020 was $403 million which could be borrowed without violating any of our debt covenants.

Repurchase of common stock

During the six months ended June 30, 2020, the Corporation used $125 million of cash to repurchase approximately 1,230,000 outstanding shares under its share repurchase program.

During the six months ended June 30, 2019, the Corporation used $25 million of cash to repurchase approximately 220,000 outstanding shares under its share repurchase program.

The Corporation made dividend payments of $7 million and $6 million during the six months ended June 30, 2020 and June 30, 2019, respectively.

Debt Compliance

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The debt to capitalization limit is a measure of our indebtedness (as defined per the notes purchase agreement and credit facility) to capitalization, where capitalization equals debt plus equity, and is the same for and applies to all of our debt agreements and credit facility.

As of March 31, 2020, we had the ability to borrow additional debt of $1.5 billion without violating our debt to capitalization covenant.

As of June 30, 2020, we had the ability to borrow additional debt of $1.6 billion without violating our debt to capitalization covenant.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

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Consolidated Financial Statements, Note 1, and the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk during the three months ended March 31, 2020.

Information regarding market risk and market risk management policies is more fully described in item “7A.Quantitative and Qualitative Disclosures about Market Risk” of our 2019 Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements