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Item 1. Business

2021-02-25 compared with 2020-02-27 · 76 added, 35 removed, 71 unchanged (61% of the section changed)

BUSINESS DESCRIPTION

Curtiss-Wright Corporation and its subsidiaries (we, 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 defense, general industrial, commercial aerospace, and power generation markets.

Curtiss-Wright Corporation and its subsidiaries (we, 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 defense, general industrial, power generation, and commercial aerospace markets.

We were formed in 1929 by the merger of companies founded by the Wright brothers and Glenn Curtiss, who were aviation pioneers.

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Our common stock is listed on the New York Stock Exchange (NYSE) and trades under the symbol CW.

We expect that the diversification and breadth of our portfolio should improve our competitive positions in our core markets, mitigate the impact of business cycle volatility, and allow us to drive growth in new products and markets.

We expect that the diversification and breadth of our portfolio should improve our competitive positions in our core markets, mitigate the impact of business cycle or economic volatility, and allow us to drive growth in new products and markets.

We seek to leverage and build upon our critical mass to expand our global manufacturing capabilities, sales channels, and customer relationships.

We strive for consistent organic sales growth, operating margin expansion, and free cash flow generation, while maintaining a disciplined capital deployment strategy in order to drive long-term shareholder value.

We strive for consistent sales growth, operating margin expansion, diluted earnings per share growth and free cash flow generation, while maintaining a disciplined capital deployment strategy in order to drive long-term shareholder value.

We are well positioned on high-performance platforms and critical applications that require our technical sophistication and benefit from decades of engineering expertise.

Our technologies are relied upon to improve safety, operating efficiency, and reliability, while meeting demanding performance requirements.

Our technologies are relied upon to improve safety, operating efficiency, and reliability, while meeting performance requirements in the most demanding environments.

Our ability to provide these advanced technologies on a cost-effective basis is fundamental to our strategy to drive increased value to our customers.

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The businesses in this segment provide a diversified offering of highly engineered products and services including:

industrial vehicle products, such as electronic throttle control devices, joysticks, and transmission shifters, sensors, controls, and electro-mechanical actuation components and utility systems used on commercial aircraft, severe-service valves to the industrial market, and surface technology services, such as shot peening, laser peening, coatings, and advanced analytical testing.

The industrial businesses within our Commercial/Industrial segment are impacted primarily by general economic conditions, which may include consumer consumption or commercial construction rates, as the nature of their products and services primarily support global industrial, oil and gas, commercial vehicles, medical, and transportation industries.

The commercial aerospace business, in particular, is impacted by OEM production rates of new aircraft, while the defense business is impacted by government funding and spending on new programs, primarily driven by the U.S.

(i.) industrial and specialty vehicle products, such as electronic throttle control devices, joysticks, and transmission shifters, (ii.) sensors, controls, and electro-mechanical actuation components used on commercial aircraft, (iii.) severe-service valves to the industrial market, and (iv.) surface technology services, such as shot peening, laser peening, and engineered coatings.

Certain industrial businesses within our Commercial/Industrial segment are impacted primarily by general economic conditions, which may include consumer consumption or commercial construction rates, as the nature of their products and services primarily support global industrial, commercial vehicles, oil and gas, medical, and transportation industries.

The commercial aerospace business is impacted by OEM production rates of new aircraft, while the defense business is impacted by government funding and spending on new programs, primarily driven by the U.S.

As commercial industrial businesses, production and service processes rest primarily within material modification, machining, assembly, and testing and inspection at commercial grade specifications.

The businesses distribute products through commercial sales and marketing channels.

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

The businesses in this segment provide a diversified offering of products including:

Commercial Off-the-Shelf (COTS) embedded computing board-level modules, data acquisition and flight test instrumentation equipment, integrated subsystems, instrumentation and control systems, turret aiming and stabilization products, and weapons handling systems.

The businesses within our Defense segment are impacted primarily by government funding and spending, driven primarily by the U.S.

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

The defense businesses in this segment provide a diversified offering of products including:

Commercial Off-the-Shelf (COTS) embedded computing board-level modules, data acquisition and flight test instrumentation equipment, integrated subsystems, valves, instrumentation and control systems, tactical communications solutions for battlefield network management, and electronic stabilization products.

The defense businesses within our Defense segment are impacted primarily by government funding and spending, driven primarily by the U.S.

Our products typically support government entities in the aerospace defense, ground defense, and naval defense industries.

As a result, we have varying degrees of content on most fighter jets, helicopters, unmanned aerial vehicles (UAVs), ground vehicle platforms, and nuclear and non-nuclear surface ships and submarines.

Additionally, we provide avionics and electronics, flight test equipment, and aircraft data management solutions to the commercial aerospace market.

Our defense businesses supporting government contractors typically utilize more advanced and ruggedized production and service processes

compared to our commercial businesses and have more stringent specifications and performance requirements.

As a result, we have varying degrees of content on fighter jets, helicopters, unmanned aerial vehicles (UAVs), ground vehicle platforms, and nuclear and non-nuclear surface ships and submarines.

Additionally, we provide avionics and electronics, flight test equipment, and aircraft data management solutions to the commercial aerospace market, and severe-service valves to the power generation market.

Our defense businesses supporting government contractors typically utilize more advanced and ruggedized production and service processes compared to our commercial businesses and have more stringent specifications and performance requirements.

The businesses in this segment typically market and distribute products through regulated government contracting channels.

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

For the commercial markets, we provide a diversified offering of products for commercial nuclear power plants and nuclear equipment manufacturers, including hardware, pumps, valves, fastening systems, specialized containment doors, airlock hatches, and spent fuel management products.

We also provide Reactor Coolant Pumps (RCPs) and control rod drive mechanisms for commercial nuclear power plants, most notably to support the Westinghouse AP1000 reactor design.

The businesses are dependent upon the need for ongoing maintenance, repair and overhaul of existing operating power plants, typically to U.S.

customers, as well as the construction of new power plants globally.

The businesses distribute products through commercial sales and marketing channels and are impacted by pricing and demand for various forms of energy (e.g.

coal, natural gas, oil, and nuclear) and also subject to changes in regulation which may impact demand, consumption, and underlying supply.

For the defense markets, our products support the naval defense market, in which we specifically provide naval propulsion and auxiliary equipment, including main coolant pumps, power-dense compact motors, generators, steam turbines, valves, and secondary propulsion systems, primarily to the U.S.

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

For the defense markets, we provide naval propulsion and auxiliary equipment, including main coolant pumps, power-dense compact motors, generators, steam turbines, valves, and secondary propulsion systems, primarily to the U.S.

We also provide ship repair and maintenance for the U.S.

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The defense businesses in this segment are impacted by government funding and spending on shipbuilding programs, primarily driven by the U.S.

For the commercial markets, we provide a diversified offering of products for commercial nuclear power plants and nuclear equipment manufacturers, including hardware, pumps, fastening systems, specialized containment doors, airlock hatches, and spent fuel management products supporting the continued performance, safety and modernization of operating reactors.

We also provide Reactor Coolant Pumps (RCPs) and control rod drive mechanisms for commercial nuclear power plants, most notably to support the Westinghouse AP1000 reactor design.

The businesses are dependent upon the need for ongoing maintenance, repair and overhaul of existing operating power plants, principally to U.S.

customers, as well as the construction of new power plants globally.

The businesses in this segment typically market and distribute products through regulated or government contracting channels.

OTHER INFORMATION

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For information regarding sales by geographic region, see Note 18 to the Consolidated Financial Statements contained in Part II, Item 8, of this Annual Report on Form 10-K.

In 2019, 2018, and 2017, our foreign operations as a percentage of pre-tax earnings were 31% , 39%, and 40%, respectively.

In 2020, 2019, and 2018, our foreign operations as a percentage of pre-tax earnings were 28% , 31%, and 39%, respectively, with 2020 adjusted to reflect the add-back of a $33 million impairment loss associated with our industrial valves business in Germany.

Government Sales

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(See Notes 1, 5, and 6 to the Consolidated Financial Statements, contained in Part II, Item 8, of this Annual Report on Form 10-K).

We have hundreds of customers in the various industries we serve.

We have hundreds of customers in the various industries that we serve.

No commercial customer accounted for more than 10% of our total net sales during 2020, 2019, or 2018.

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Officer Since

Adams Chairman and Chief Executive Officer

Chairman and Chief Executive Officer of the Corporation since January 2015.

Prior to this, he served as President and Chief Executive Officer of the Corporation from August 2013.

Adams Executive Chairman Executive Chairman of the Board of Directors since January 1, 2021.

Prior to this, he served as Chairman and Chief Executive Officer of the Corporation from January 1, 2015 until his resignation from that position on January 1, 2021.

He served as President and Chief Executive Officer of the Corporation from August 2013.

He also served as President and Chief Operating Officer of the Corporation from October 2012 and as Co-Chief Operating Officer of the Corporation from November 2008.

He has been a Director of the Corporation since August 2013.

Bamford President and Chief Executive Officer

President and Chief Executive Officer of the Corporation since January 1, 2021.

Prior to this, she served as President of the Defense and Power segments of the Corporation from January 2020.

She also served as Senior Vice President and General Manager of the Company’s Defense Solutions and Nuclear divisions from 2018, and Senior Vice President and General Manager of the Company’s Defense Solutions division from 2013.

She has held various leadership positions in the Corporation since 2004.

She has been a Director of the Corporation since January 1, 2021.

Quinly Vice President and Chief Operating Officer Vice President of the Corporation since November 2010 and Chief Operating Officer of the Corporation since October 2013.

He also served as President of Curtiss-Wright Controls, Inc.

Prior to this, he served as President of Curtiss-Wright Controls, Inc.

from November 2008.

Tynan Vice President and Chief Financial Officer Vice President and Chief Financial Officer of the Corporation since June 2002.

Effective March 1, 2020, Mr.

Quinly took a personal leave of absence, which is expected to last until his planned retirement on April 1, 2021.

Christopher Farkas Vice President and Chief Financial Officer Vice President and Chief Financial Officer of the Corporation since May 2020.

Prior to this, he served as Vice President of Finance from December 2017 and served as Vice President and Corporate Controller of the Corporation from September 2014.

He also served as Assistant Corporate Controller of the Corporation from May 2009.

Ferdenzi Vice President, General Counsel, and Corporate Secretary

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Prior to this, he served as Vice President-Human Resources of the Corporation from November 2011 and also served as Associate General Counsel and Assistant Secretary of the Corporation from June 1999 and May 2001, respectively.

Christopher Farkas Vice President of Finance and Corporate Controller Vice President of Finance since December 2017.

Prior to this, he served as Vice President and Corporate Controller of the Corporation from September 2014 and also served as Assistant Corporate Controller from May 2009.

Jakubowitz Vice President and Treasurer Vice President of the Corporation since May 2007 and Treasurer of the Corporation since September 2005.

At the end of 2019, we had approximately 9,100 employees, 7% of which are represented by labor unions and covered by collective bargaining agreements.

Ogilby Vice President and Corporate Controller Vice President and Controller of the Corporation since May 2020.

Prior to this, he served as Vice President of Finance and Administration of the Company’s Surface Technologies division from November 2016.

He also served as Assistant Corporate Controller of the Corporation from 2014.

Freda Vice President and Treasurer Vice President and Treasurer of the Corporation since January 2021.

Prior to this, he served as Assistant Corporate Controller of the Corporation from June 2017 and also served as Director of Finance from September 2006.

Available information

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The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including our filings.

These reports are also available free of charge through the Investor Relations section of our web site at www.curtisswright.com as soon as reasonably practicable after we electronically file.

These reports are also available free of

charge through the Investor Relations section of our website at www.curtisswright.com as soon as reasonably practicable after we electronically file.

Human Capital

At the end of 2020, we had approximately 8,200 employees in more than 20 countries, 7% of which are represented by labor unions and covered by collective bargaining agreements.

Set forth below are some of the key aspects of Curtiss-Wright’s human capital strategy:

Compensation Programs and Employee Benefits

Our success as an organization is ultimately dependent upon the success of our employees.

As a result, we have made significant investments in order to attract, develop, and retain talented personnel, inclusive of competitive pay, share-based compensation, benefits, training, and professional development opportunities.

Notable programs offered include the following:

• Employer 401(k) matching contributions;

• Employee Stock Purchase Plan;

• Employer-sponsored health insurance;

• Training and professional development

In addition to the above, we also offer equity compensation plans to certain employees through the issuance of performance share units, restricted stock units, and cash-based performance units.

Our equity compensation plans ultimately act as a key lever for rewarding and retaining key employees, while also aligning the interests of our key employees and external shareholders.

See Note 16 to the Consolidated Financial Statements for more information regarding our share-based compensation plans.

Diversity and Inclusion

Curtiss-Wright believes in an inclusive workforce, where diverse backgrounds are represented, engaged, and empowered to inspire and innovate.

We do business in more than 20 countries, and our employees operate across cultures, functions, language barriers, and time zones to solve the technical and logistical challenges presented by its worldwide customer base.

To foster a more diverse and inclusive culture, Curtiss-Wright is focused on (1) promoting a culture of diversity and inclusion that leverages the talents of all employees, and (2) implementing practices that attract, recruit, and retain diverse top talent.

Health and Safety

The health and safety of our employees is a top priority for the Corporation.

At the corporate level, we track total recordable rate (TRR) and days away, restriction and transfer rate (DART) for all sites worldwide.

For the year ended December 31, 2020, our TRR and DART rates were 0.98 and 0.65, respectively.

In response to the COVID-19 pandemic, we continue to execute safety measures at all of our facilities to protect the health and safety of our employees and visitors.

We have implemented rigorous hygiene and social distancing practices, inclusive of mask requirements and staggered shifts.

Additionally, 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 and controls.

Ethics and Integrity

Curtiss-Wright is deeply committed to ensuring that all of its employees conduct business with the highest levels of ethics and integrity.

In order to enhance understanding of and compliance with the Corporation’s code of conduct, all employees are required to complete a training program annually which details ethical business practices.

In addition, the Corporation maintains an ethics-related hotline through which employees can report any accounting or auditing concerns.

The hotline facilitates the communication of ethical concerns, and serves as the vehicle through which employees may communicate with the Audit Committee of the Board of Directors confidentially and anonymously.

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-K

Item 1. Business