What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-10-29 · 335 added, 493 removed, 469 unchanged (64% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(In thousands, except per share data) 2021 2020

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(In thousands)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

Net earnings $ 59,469 $ 51,761

3 unchanged sentences

Pension and postretirement adjustments, net of tax (2)

3,561 1,311 12,244 4,743

Other comprehensive income (loss), net of tax 1,640 ( 45,594 )

Comprehensive income $ 61,109 $ 6,167

(1) The tax benefit included in other comprehensive income for foreign currency translation adjustments for the three and nine months ended September 30, 2020 was $ 0.6 million and $ 1.0 million, respectively.

The tax benefit included in other comprehensive loss for foreign currency translation adjustments for both the three and nine months ended September 30, 2019 was $ 0.6 million.

(2) The tax expense included in other comprehensive income for pension and postretirement adjustments for the three and nine months ended September 30, 2020 was $ 1.3 million and $ 4.0 million, respectively.

The tax expense included in other comprehensive income for pension and postretirement adjustments for the three and nine months ended September 30, 2019 was $ 0.4 million and $ 1.5 million, respectively.

(1) The tax benefit (expense) included in foreign currency translation adjustments for the three months ended March 31, 2021 and 2020 was immaterial.

(2) The tax expense included in pension and postretirement adjustments for the three months ended March 31, 2021 and 2020 was $ 1.7 million and $ 1.3 million, respectively.

See notes to condensed consolidated financial statements

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(In thousands, except per share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets:

2 unchanged sentences

Inventories, net 446,632 428,879

Assets held for sale 27,055 27,584

Other current assets 48,484 57,395

8 unchanged sentences

Current liabilities:

Current portion of long-term debt $ 100,000 $ 100,000

Accounts payable 160,765 201,237

2 unchanged sentences

Deferred revenue 238,742 253,411

Liabilities held for sale 9,132 10,141

Other current liabilities 99,278 98,755

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Stockholders’ equity

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

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

outstanding shares were 41,502,026 as of September 30, 2020 and 42,680,215 as of December 31, 2019

Common stock, $ 1 par value, 100,000,000 shares authorized as of March 31, 2021 and December 31, 2020;

49,187,378 shares issued as of March 31, 2021 and December 31, 2020;

outstanding shares were 40,943,314 as of March 31, 2021 and 40,916,429 as of December 31, 2020

49,187 49,187

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Accumulated other comprehensive loss ( 309,216 ) ( 310,856 )

Common treasury stock, at cost ( 7,685,352 shares as of September 30, 2020 and 6,507,163 shares as of December 31, 2019)

Common treasury stock, at cost ( 8,244,064 shares as of March 31, 2021 and 8,270,949 shares as of December 31, 2020)

( 743,808 ) ( 743,620 )

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(In thousands) 2021 2020

1 unchanged sentence

Net earnings $ 59,469 $ 51,761

Adjustments to reconcile net earnings to net cash provided by operating activities

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

Depreciation and amortization 28,595 28,142

Gain on fixed asset disposals ( 370 ) ( 6,295 )

Gain on sale/disposal of long-lived assets ( 349 ) ( 387 )

Deferred income taxes 3,629 2,809

Share-based compensation 3,327 3,340

Foreign exchange loss on substantial liquidation of subsidiary 9,498 —

Non-cash restructuring charges 10,254 —

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

Inventory write-down — 1,205

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

Receivables, net ( 27,593 ) ( 1,614 )

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Deferred revenue ( 14,836 ) ( 23,298 )

Income taxes 9,409 2,676

Pension and postretirement benefits, net ( 150,674 ) ( 928 )

Income taxes payable 16,247 22,783

Pension and postretirement liabilities, net 1,182 ( 149,468 )

Other current and long-term assets and liabilities ( 5,573 ) ( 3,665 )

Net cash provided by operating activities 3,784 159,015

Net cash used for operating activities ( 26,603 ) ( 192,576 )

Cash flows from investing activities:

Proceeds from sales and disposals of long lived assets 2,476 10,099

Acquisition of intangible assets — ( 157 )

Proceeds from sale/disposal of long-lived assets 1,022 2,006

Additions to property, plant, and equipment ( 8,537 ) ( 18,637 )

Acquisition of businesses, net of cash acquired ( 82,053 ) ( 50,075 )

Acquisition of business, net of cash acquired — ( 51,043 )

Additional consideration paid on prior year acquisitions ( 5,340 ) —

Net cash used for investing activities ( 12,855 ) ( 67,674 )

1 unchanged sentence

Borrowings under revolving credit facility 65,301 188,724

Payments of revolving credit facility ( 389,398 ) ( 35,550 )

Borrowings of debt 300,000 —

Payment of revolving credit facility ( 65,301 ) ( 42,297 )

Repurchases of common stock ( 11,797 ) ( 112,013 )

Proceeds from share-based compensation 4,919 5,066

Dividends paid ( 14,160 ) ( 13,683 )

Other ( 229 ) ( 212 )

1 unchanged sentence

Effect of exchange-rate changes on cash ( 4,614 ) ( 12,294 )

Net increase in cash and cash equivalents 35,788 21,646

Net decrease in cash and cash equivalents ( 51,179 ) ( 233,276 )

Cash and cash equivalents at beginning of period 198,248 391,033

Cash and cash equivalents at end of period $ 147,069 $ 157,757

Supplemental disclosure of non-cash activities:

Capital expenditures incurred but not yet paid $ 1,668 $ 88

See notes to condensed consolidated financial statements

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(In thousands)

For the nine months ended September 30, 2020

For the three months ended March 31, 2020

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

1 unchanged sentence

Net earnings — — 51,761 — —

Other comprehensive income, net of tax — — — 14,383 —

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

Dividends declared — — ( 7,095 ) — —

Restricted stock — ( 4,115 ) — — 4,115

Stock options exercised — ( 1,364 ) — — 11,272

Employee stock purchase plan and stock options exercised — 350 — — 4,716

Share-based compensation — 3,123 — — 217

Repurchase of common stock (1)

— — — — ( 112,013 )

Other — ( 517 ) — — 517

September 30, 2020 $ 49,187 $ 121,797 $ 2,623,289 $ ( 310,891 ) $ ( 683,919 )

For the three months ended September 30, 2020

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

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

Net earnings — — 64,620 — —

Other comprehensive income, net of tax — — — 31,790 —

Dividends declared — — ( 7,058 ) — —

Stock options exercised — ( 1,470 ) — — 6,191

Share-based compensation — 4,800 — — ( 163 )

Repurchase of common stock — — — — ( 12,542 )

September 30, 2020 $ 49,187 $ 121,797 $ 2,623,289 $ ( 310,891 ) $ ( 683,919 )

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

For the nine months ended September 30, 2019

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

For the three months ended March 31, 2021

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

December 31, 2020 $ 49,187 $ 122,535 $ 2,670,328 $ ( 310,856 ) $ ( 743,620 )

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

Net earnings — — 59,469 — —

Other comprehensive loss, net of tax — — — ( 11,209 ) —

Other comprehensive income, net of tax — — — 1,640 —

Dividends declared — — ( 6,968 ) — —

Restricted stock — ( 6,407 ) — — 6,407

Stock options exercised — ( 2,720 ) — — 13,662

Employee stock purchase plan and stock options exercised — 411 — — 4,508

Share-based compensation — 3,230 — — 97

Repurchase of common stock (1)

— — — — ( 11,797 )

Other — ( 597 ) — — 597

September 30, 2019 $ 49,187 $ 120,219 $ 2,414,956 $ ( 325,913 ) $ ( 557,309 )

For the three months ended September 30, 2019

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

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

Net earnings — — 82,510 — —

Other comprehensive loss, net of tax — — — ( 23,423 ) —

Dividends declared — — ( 7,257 ) — —

Stock options exercised — ( 898 ) — — 6,429

Share-based compensation — 4,282 — — —

Repurchase of common stock — — — — ( 12,799 )

September 30, 2019 $ 49,187 $ 120,219 $ 2,414,956 $ ( 325,913 ) $ ( 557,309 )

March 31, 2021 $ 49,187 $ 119,172 $ 2,722,829 $ ( 309,216 ) $ ( 743,808 )

(1) For the three months ended March 31, 2021 and 2020, the Corporation repurchased approximately 0.1 million and 1.1 million shares of its common stock, respectively.

See notes to condensed consolidated financial statements

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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.

The unaudited condensed consolidated financial statements include the accounts of Curtiss-Wright and its majority-owned subsidiaries.

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Actual results may differ from these estimates.

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.

The most significant of these estimates includes the estimate of costs to complete using the over-time revenue recognition accounting method, pension plan and postretirement obligation assumptions, estimates for inventory obsolescence, fair value estimates around assets and assumed liabilities from acquisitions, estimates for the valuation and useful lives of intangible assets, legal reserves, and the estimate of future environmental costs.

Changes in estimates of contract sales, costs, and profits are recognized using the cumulative catch-up method of accounting.

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Accordingly, the effect of the changes on future periods of contract performance is recognized as if the revised estimate had been the original estimate.

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

During the three months ended March 31, 2021 and 2020, there were no significant changes in estimated contract costs.

In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in these financial statements.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2020 Annual Report on Form 10-K.

The results of operations for interim periods are not necessarily indicative of trends or of the operating results for a full year.

On January 1, 2020, the Corporation implemented an organizational change to align its reportable segments more closely with its 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.

On January 1, 2021, the Corporation implemented an organizational change to simplify its reportable segments and align its product sales with its end market structure.

As a result, the Corporation now operates under the following three reportable segments:

Aerospace & Industrial, Defense Electronics, and Naval & Power.

This change resulted in the transfer of the Corporation's valve-related operations into the new Naval & Power segment.

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

Recent accounting pronouncements adopted

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 .

This ASU added a current expected credit loss impairment model to U.S.

GAAP based on expected losses rather than incurred losses.

As the Corporation is not subject to material trade credit risk given that a significant portion of its sales are generated from contracts with agencies of or prime contractors to the U.S.

Government , the adoption of this standard did not result in any impact to its allowance for doubtful accounts balance as of January 1, 2020.

As a result of adoption, the Corporation utilizes current and historical collection data as well as assess current economic conditions in order to determine expected trade credit losses on a prospective basis.

The Corporation recognizes revenue when control of a promised good and/or service is transferred to a customer in an amount that reflects the consideration that the Corporation expects to be entitled to in exchange for that good and/or service.

Performance Obligations

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Corporation identifies a performance obligation for each promise in a contract to transfer a distinct good or service to the customer.

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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.

Point-in-time revenue is recognized at the point in time in which control is transferred to the customer, typically based upon the terms of delivery.

The following table illustrates the approximate percentage of revenue recognized for performance obligations satisfied over-time versus at a point-in-time for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

If a performance obligation does not qualify for over-time revenue recognition, revenue is then

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery.

The following table illustrates the approximate percentage of revenue recognized for performance obligations satisfied over-time versus at a point-in-time for the three months ended March 31, 2021 and 2020:

Three Months Ended

Over-time 52 % 52 %

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

Total backlog was approximately $ 2.2 billion as of September 30, 2020, of which the Corporation expects to recognize approximately 90 % as net sales over the next 12-36 months .

Total backlog was approximately $ 2.1 billion as of March 31, 2021, of which the Corporation expects to recognize approximately 88 % as net sales over the next 36 months .

The remainder will be recognized thereafter.

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

Total Net Sales by End Market & Customer Type Three Months Ended Nine Months Ended

September 30, September 30,

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

(In thousands) 2021 2020

Aerospace $ 121,987 $ 110,742 $ 333,120 $ 293,955

Ground 20,519 22,231 63,205 69,383

Naval 165,524 143,430 496,157 424,371

Total Defense Customers $ 308,030 $ 276,403 $ 892,482 $ 787,709

Aerospace $ 70,943 $ 109,015 $ 242,708 $ 320,237

Power Generation 80,509 88,543 241,059 278,194

Aerospace & Defense

Aerospace Defense $ 111,016 $ 101,827

Ground Defense 55,746 22,657

Naval Defense 177,905 165,693

Commercial Aerospace 57,269 100,680

Total Aerospace & Defense $ 401,936 $ 390,857

Power & Process 105,504 123,926

General Industrial 89,619 86,448

Total Commercial Customers $ 263,584 $ 338,477 $ 830,410 $ 1,044,481

Total Commercial $ 195,123 $ 210,374

Total $ 597,059 $ 601,231

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Timing of revenue recognition and cash collection may result in billed receivables, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the Condensed Consolidated Balance Sheet.

The Corporation’s contract assets

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

primarily relate to its rights to consideration for work completed but not billed as of the reporting date.

The Corporation’s contract assets primarily relate to its rights to consideration for work completed but not billed as of the reporting date.

Contract assets are transferred to billed receivables when the rights to consideration become unconditional.

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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 and nine months ended September 30, 2020 included in the contract liabilities balance as of January 1, 2020 was approximately $ 37 million and $ 197 million, respectively.

Revenue recognized during the three and nine months ended September 30, 2019 included in the contract liabilities balance as of January 1, 2019 was approximately $ 26 million and $ 159 million, respectively.

Revenue recognized during the three months ended March 31, 2021 and 2020 included in contract liabilities at the beginning of the respective years was approximately $ 77 million and $ 89 million, respectively.

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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

The Corporation has completed a number of acquisitions that have been accounted for as business combinations and have resulted in the recognition of goodwill in the Corporation's financial statements.

The Corporation has completed numerous acquisitions that have been accounted for as business combinations and have resulted in the recognition of goodwill in the Corporation's financial statements.

This goodwill arises because the acquisition purchase price reflects the future earnings and cash flow potential in excess of the earnings and cash flows attributable to the current product and customer set at the time of acquisition.

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

During the nine months ended September 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 nine months ended September 30, 2020 includes $ 12 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 nine months ended September 30, 2019 includes $ 8 million of total net sales and immaterial net earnings 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 nine months ended September 30, 2020 and 2019.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended March 31, 2021, the Corporation paid $ 5 million in regard to prior period acquisitions, which included a working capital adjustment on the acquisition of Pacific Star Communications, Inc.

(PacStar), as well as a portion of the purchase price on the acquisition of Dyna-Flo Control Valve Services Ltd.

(Dyna-Flo), which was initially held back in accordance with the terms of the Purchase Agreement.

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.

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

(In thousands) 2020

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Total purchase price $ 60,211

Cash paid to date, net of cash acquired $ 82,053 $ 50,075

Due to seller 7,602 —

Total purchase price $ 89,655 $ 50,075

Goodwill deductible for tax purposes 23,800

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 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 operates within the Commercial/Industrial segment.

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

2020 Acquisition

Tactical Communications Group (TCG)

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.

The acquired business operates within the Defense segment.

On February 28, 2020 , the Corporati on acquired 100% of the issued and outstanding share capital of Dyna- Flo for $ 60 million, net of cash acquired.

The 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 operates within the Naval & Power segment.

ASSETS HELD FOR SALE

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the fourth quarter of 2020, the Corporation committed to a plan to sell its industrial valve business in Germany, which is reported within its Naval & Power segment.

The business met the criteria to be classified as held for sale in the fourth quarter of 2020.

Accordingly, the assets and liabilities of the business are presented as held for sale in the Corporation's Condensed Consolidated Balance Sheet.

The aforementioned assets and liabilities classified as held for sale have been measured at the lower of carrying value or fair value less costs to sell, which resulted in an impairment loss of $ 33 million in the fourth quarter of 2020.

No impairment loss was recorded on the assets or liabilities held for sale during the three months ended March 31, 2021.

The aggregate components of assets and liabilities classified as held for sale are as follows:

(In thousands) March 31, 2021 December 31, 2020

Assets held for sale:

Receivables, net $ 8,871 $ 9,902

Inventories, net 16,807 16,401

Other current assets 1,829 1,798

Property, plant, and equipment, net 4,673 4,821

Reserve for assets held for sale ( 5,125 ) ( 5,338 )

Total assets held for sale, current $ 27,055 $ 27,584

Liabilities held for sale:

Accounts payable $ ( 2,219 ) $ ( 2,654 )

Accrued expenses ( 1,309 ) ( 1,375 )

Other current liabilities ( 173 ) ( 748 )

Accrued pension and other postretirement benefit costs ( 5,431 ) ( 5,364 )

Total liabilities held for sale, current $ ( 9,132 ) $ ( 10,141 )

Receivables primarily include amounts billed to customers, unbilled charges on long-term contracts consisting of amounts recognized as sales but not billed, and other receivables.

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The composition of receivables is as follows:

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(In thousands) March 31, 2021 December 31, 2020

Billed receivables:

Trade and other receivables $ 365,874 $ 361,460

Allowance for doubtful accounts

( 8,755 ) ( 8,733 )

Net billed receivables 377,343 410,235

Unbilled receivables (contract assets):

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Net unbilled receivables 259,201 235,018

Allowance for doubtful accounts

( 7,576 ) ( 7,760 )

Receivables, net $ 617,499 $ 588,718

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The composition of inventories is as follows:

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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) March 31, 2021 December 31, 2020

Raw materials $ 190,874 $ 177,828

7 unchanged sentences

Inventories, net $ 446,632 $ 428,879

(1) As of September 30, 2020 and December 31, 2019, this caption also includes capitalized contract development costs of $ 30.9 million and $ 39.1 million, respectively, related to certain aerospace and defense programs.

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

As of September 30, 2020 and December 31, 2019, capitalized development costs of $ 16.1 million and $ 23.7 million, respectively, are not currently supported by existing firm orders.

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

(In thousands) Commercial/Industrial Defense Power Consolidated

(1) As of March 31, 2021 and December 31, 2020, this caption also includes capitalized development costs of $ 28.5 million and $ 29.7 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, 2021 and December 31, 2020, capitalized development costs of $ 12.6 million and $ 13.0 million, respectively, are not currently supported by existing firm orders.

In connection with the change in reportable segments, the Corporation recast its previously reported goodwill balances as of December 31, 2020 on a relative fair value basis.

As a result, the Corporation performed an interim quantitative impairment assessment of each of its reporting units, and concluded that no impairment existed as of March 31, 2021.

Refer to Note 12 to the Condensed Consolidated Financial Statements for additional information on the Corporation’s reportable segments.

The changes in the carrying amount of goodwill for the three months ended March 31, 2021 are as follows:

(In thousands) Aerospace & Industrial Defense Electronics Naval & Power Consolidated

December 31, 2020

Acquisitions 29,233 14,679 — 43,912

$ 316,921 $ 703,915 $ 434,301 $ 1,455,137

Adjustments (1)

— 11,228 — 11,228

Foreign currency translation adjustment 432 ( 1,320 ) ( 253 ) ( 1,141 )

September 30, 2020 $ 459,943 $ 539,712 $ 208,226 $ 1,207,881

March 31, 2021 $ 317,353 $ 713,823 $ 434,048 $ 1,465,224

(1) Amount relates to post-closing adjustments on the Corporation's acquisition of PacStar in October 2020.

OTHER INTANGIBLE ASSETS, NET

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(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 nine months ended September 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 nine months ended September 30, 2020 was $ 43.3 million, as compared to $ 33.9 million in the comparable prior year period.

Total intangible amortization expense for the three months ended March 31, 2021 was $ 14.9 million as compared to $ 14.1 million in the comparable prior year period.

The estimated amortization expense for the five years ending December 31, 2021 through 2025 is $ 59.5 million, $ 55.3 million, $ 51.5 million, $ 48.1 million, and $ 45.5 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’s policy is to manage interest cost using a mix of fixed and variable rate debt.

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

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

As of March 31, 2021 and December 31, 2020, the fair values of the asset and liability derivative instruments were immaterial.

Effects on Condensed Consolidated Statements of Earnings

Undesignated hedges

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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

(In thousands) September 30, September 30,

Derivatives not designated as hedging instrument 2020 2019 2020 2019

Forward exchange contracts:

General and administrative expenses $ 1,730 $ ( 1,823 ) $ ( 5,702 ) $ ( 392 )

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 September 30, 2020.

The gains and losses on forward exchange derivative contracts not designated for hedge accounting are recognized to general and administrative expenses within the Condensed Consolidated Statements of Earnings.

The gain for the three months ended March 31, 2021 was immaterial.

The loss for the three months ended March 31, 2020 was $ 8.1 million.

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

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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.

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

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

19 unchanged sentences

Total debt, net $ 1,057,907 $ 1,103,595 $ 1,058,292 $ 1,131,414

On August 13, 2020, the Corporation issued $300 million Senior Notes (the “2020 Notes”), consisting of $150 million 3.10% Senior Notes that mature on August 13, 2030 and $150 million 3.20% Senior Notes that mature on August 13, 2032.

The 2020 Notes are senior unsecured obligations, equal in right of payment to the Corporation’s existing senior indebtedness.

The Corporation, at its option, can prepay at any time all or any part of the 2020 Notes, subject to a make-whole payment in accordance with the terms of the Note Purchase Agreement.

PENSION PLANS

Defined Benefit Pension Plans

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 and nine months ended September 30, 2020 and 2019 were as follows:

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

September 30, September 30,

The following table is a consolidated disclosure of all domestic and foreign defined pension plans as described in the Corporation’s 2020 Annual Report on Form 10-K.

The components of net periodic pension cost for the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended

(In thousands) 2021 2020

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Net periodic pension cost $ 3,076 $ 1,451

During the nine months ended September 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.

The Corporation does not expect to make any contributions to the Curtiss-Wright Pension Plan in 2021.

Contributions to the foreign benefit plans are not expected to be material in 2021.

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

Defined Contribution Retirement Plan

Effective January 1, 2014, all non-union employees who were not currently receiving final or career average pay benefits became eligible to receive employer contributions in the Corporation’s sponsored 401(k) plan.

The employer contributions include both employer match and non-elective contribution components up to a maximum employer contribution of 7 % of eligible compensation.

During the three and nine months ended September 30, 2020, the expense relating to the plan was $ 4.5 million and $ 14.8 million, respectively.

During the three and nine months ended September 30, 2019, the expense relating to the plan was $ 4.2 million and $ 13.8 million, respectively.

The Corporation made $ 16.5 million in contributions to the plan during the nine months ended September 30, 2020, and expects to make total contributions of $ 18.3 million in 2020.

The Company also maintains a defined contribution plan for all non-union employees who are not currently receiving final or career average pay benefits for its U.S.

subsidiaries.

The employer contributions include both employer match and non-elective contribution components up to a maximum employer contribution o f 7 % of eligible compensation.

During the three months ended March 31, 2021 and 2020, the expense relating to the plan was $ 5.3 million and $ 6.0 million, respectively.

The Corporation made $ 11.8 million in contributions to the plan during the three months ended March 31, 2021 and expects to make total contributions of $ 19.0 million in 2021.

EARNINGS PER SHARE

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

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(In thousands) 2021 2020

2 unchanged sentences

Diluted weighted-average shares outstanding 41,103 42,770

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

For the three months ended March 31, 2021, approximately 88,000 shares issuable under equity-based awards were excluded from the calculation of diluted earnings per share as they were anti-dilutive based on the average stock price during the period.

There were no anti-dilutive equity-based awards for three months ended March 31, 2020.

SEGMENT INFORMATION

The Corporation manages and evaluates its operations based on end markets to strengthen its ability to service customers and recognize certain organizational efficiencies.

Based on this approach, the Corporation has three reportable segments:

Prior to the first quarter of 2021, the Corporation reported its results of operations through three reportable segments:

Commercial/Industrial, Defense, and Power.

On January 1, 2021, the Corporation implemented an organizational change to simplify its reportable segments and align its product sales with its end market structure.

As a result, the Corporation now reports its results of operations through the following reportable segments:

Aerospace & Industrial, Defense Electronics, and Naval & Power.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Corporation’s measure of segment profit or loss is operating income.

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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 Nine Months Ended

September 30, September 30,

Three Months Ended

(In thousands) 2021 2020

Commercial/Industrial $ 222,734 $ 279,064 $ 701,048 $ 842,373

Defense 180,355 160,445 516,531 452,983

Power 168,976 176,162 506,664 539,616

Aerospace & Industrial $ 181,138 $ 227,021

Defense Electronics 182,298 140,311

Naval & Power 235,580 235,014

Intersegment revenues ( 1,957 ) ( 1,115 )

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Operating income (expense)

Commercial/Industrial $ 24,838 $ 43,641 $ 74,191 $ 130,222

Defense 41,550 40,241 98,126 93,580

Power 25,962 28,776 67,843 86,140

Corporate and eliminations (1)

Aerospace & Industrial $ 19,025 $ 32,140

Defense Electronics 36,623 24,063

Naval & Power 38,057 28,110

Corporate and other (1)

( 8,639 ) ( 11,867 )

Total consolidated $ 85,066 $ 72,446

(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.

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(In thousands) 2021 2020

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Earnings before income taxes $ 79,950 $ 70,489

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

(In thousands) March 31, 2021 December 31, 2020

Identifiable assets

Commercial/Industrial $ 1,391,570 $ 1,363,592

Defense 1,242,648 1,209,706

Power 875,745 885,727

Aerospace & Industrial $ 1,017,236 $ 1,020,294

Defense Electronics 1,544,100 1,542,686

Naval & Power 1,256,745 1,255,325

Corporate and Other 135,914 175,445

Assets held for sale 27,055 27,584

Total consolidated $ 3,981,050 $ 4,021,334

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— 17,649 17,649

Net current period other comprehensive loss 18,447 ( 29,017 ) ( 10,570 )

Cumulative effect from adoption of ASU 2018-02

$ ( 1,318 ) $ ( 24,939 ) $ ( 26,257 )

Net current period other comprehensive income (loss) 41,282 ( 26,864 ) 14,418

December 31, 2020 $ ( 88,737 ) $ ( 222,119 ) $ ( 310,856 )

1 unchanged sentence

( 3,960 ) 350 ( 3,610 )

Amounts reclassified from accumulated other comprehensive income

Amounts reclassified from accumulated other comprehensive income (loss) (1)

— 5,250 5,250

Net current period other comprehensive income 2,139 12,244 14,383

September 30, 2020 $ ( 127,880 ) $ ( 183,011 ) $ ( 310,891 )

Net current period other comprehensive income (loss) ( 3,960 ) 5,600 1,640

March 31, 2021 $ ( 92,697 ) $ ( 216,519 ) $ ( 309,216 )

(1) All amounts are after tax.

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

(In thousands) Amount reclassified from AOCI Affected line item in the Condensed Consolidated Statement of Earnings

(In thousands) Amount reclassified from AOCI Affected line item in the statement where net earnings is presented

Defined benefit pension and other postretirement benefit plans

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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 September 30, 2020 and December 31, 2019, there were $ 21.9 million and $ 32.6 million of stand-by letters of credit outstanding, respectively, and $ 6.6 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.

The Corporation has provided this financial assurance in the form of a $ 45.6 million surety bond.

As of March 31, 2021 and December 31, 2020, there were $ 19.7 million and $ 21.1 million of stand-by letters of credit outstanding, respectively.

As of both March 31, 2021 and December 31, 2020, there were $ 5.6 million of bank guarantees outstanding.

In addition, the Corporation is required to provide the Nuclear

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Regulatory Commission financial assurance demonstrating its ability to cover the cost of decommissioning its Cheswick, Pennsylvania facility upon closure, though the Corporation does not intend to close this facility.

The Corporation has provided this financial assurance in the form of a $ 45.6 million surety bond.

AP1000 Program

The Electro-Mechanical Division, which is within the Corporation’s Power segment, is the reactor coolant pump (RCP) supplier for the Westinghouse AP1000 nuclear power plants under construction in China and the United States.

The terms of the AP1000 China and United States contracts include liquidated damage penalty provisions for failure to meet contractual delivery dates if the Corporation caused the delay and the delay was not excusable.

On October 10, 2013, the Corporation received a letter from Westinghouse stating entitlements to the maximum amount of liquidated damages allowable under the AP1000 China contract from Westinghouse of approximately $ 25 million.

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 September 30, 2020, the Corporation has not met certain contractual delivery dates under its AP1000 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 September 30, 2020.

As of September 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.

Within the Corporation’s Naval & Power segment, Electro-Mechanical Division (EMD) is the RCP supplier for the Westinghouse Electric Company (WEC) AP1000 nuclear power plants in China and the United States.

The terms of the AP1000 China and U.S.

contracts include liquidated damage provisions for failure to meet contractual delivery dates if the Corporation caused the delay and the delay was not excusable.

The Corporation would be liable for liquidated damages if the Corporation was deemed responsible for not meeting the delivery dates.

The Corporation did not meet certain contractual delivery dates under its AP1000 U.S.

and China contracts;

however, there are significant counterclaims and uncertainties as to which parties are responsible for the delay.

In January 2021, the Corporation and WEC agreed to participate in formal non-binding mediation to settle all open disputes under both contracts.

The mediation is tentatively scheduled to start late in the second quarter of 2021.

As of March 31, 2021, the range of possible loss for liquidated damages on these two contracts is $ 0 to $ 55.5 million , consisting of $ 0 to $ 25 million on the China contract and $ 0 to $ 31 million on the U.S.

The Corporation believes that the ultimate resolution of these two matters will not have a material impact on its consolidated financial statements.

RESTRUCTURING COSTS

During the three and nine months ended September 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 $ 11 million and $ 29 million of pre-tax charges for the three and nine months ended September 30, 2020.

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 approximate ly $ 40 million ann ually.

The following tables summarize the respective accrual balances related to these restructuring activities:

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

Commercial/Industrial

Severance $ — $ 9,028 $ ( 3,939 ) $ 5,089

Facility closure and other exit costs — 2,496 ( 2,147 ) 349

Total Commercial/Industrial $ — $ 11,524 $ ( 6,086 ) $ 5,438

Severance $ — $ 3,015 $ ( 2,576 ) $ 439

Facility closure and other exit costs — 41 ( 41 ) —

Total Defense $ — $ 3,056 $ ( 2,617 ) $ 439

Severance $ — $ 3,001 $ ( 1,263 ) $ 1,738

Facility closure and other exit costs — 710 ( 710 ) —

Total Power $ — $ 3,711 $ ( 1,973 ) $ 1,738

Severance $ — $ 15,044 $ ( 7,778 ) $ 7,266

Facility closure and other exit costs — 3,247 ( 2,898 ) 349

Total consolidated $ — $ 18,291 $ ( 10,676 ) $ 7,615

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of total pre-tax restructuring charges is as follows:

Affected line item in the Condensed Consolidated Statement of Earnings

Three Months Ended Nine Months Ended

(In thousands) September 30, 2020 September 30, 2020

Inventory write-downs Cost of product sales $ 2,625 $ 7,815

Severance, facility closure, and other exit costs Restructuring expenses 7,690 18,291

Property, plant, and equipment & operating lease right of use asset impairments Restructuring expenses 851 2,439

$ 8,541 $ 20,730

Total restructuring charges Earnings before income taxes $ 11,166 $ 28,545

There were no such comparable charges for the three and nine months ended September 30, 2019.

SUBSEQUENT EVENTS

On September 24, 2020, the Corporation entered into an agreement to acquire the stock of Pacific Star Communications, Inc.

(PacStar) for $ 400 million.

PacStar is a provider of tactical communications solutions for battlefield network management.

For the year ending December 31, 2020, PacStar is expected to generate sales in excess of $ 120 million.

The transaction is anticipated to close in the fourth quarter, and is subject to customary closing conditions.

Upon close, the acquired business will operate within the Defense segment.

In October 2020, the Corporation announced that its Board of Directors has authorized an additional $ 200 million for future share repurchases, increasing total available authorization to $ 250 million.

The Corporation intends to use $ 50 million of the available authorization for opportunistic share repurchases through the remainder of the year.

The Corporation had previously completed a $ 100 million opportunistic share repurchase program executed in March 2020 and expects to complete its existing $ 50 million 10b5-1 share repurchase program authorized for 2020 by the end of the year.

During the year ended December 31, 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 included workforce reductions and consolidation of facilities, were substantially completed as of December 31, 2020.

As of March 31, 2021 and December 31, 2020, the restructuring liability associated with these restructuring activities was $ 4.1 million and $ 6.9 million, respectively, with such liability expected to be substantially settled as of December 31, 2021.

These balances are reported within Other Current Liabilities on the Condensed Consolidated Balance Sheet.

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 potential impacts from COVID-19, 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, including the impacts to supply and demand, and measures taken by governments and private industry in response, 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.

13 unchanged sentences

COMPANY ORGANIZATION

Curtiss-Wright Corporation is a diversified, multinational provider of highly engineered, technologically advanced, value-added products and services to a broad range of industries which are reported through our Commercial/Industrial, Defense, and Power segments.

Curtiss-Wright Corporation is a diversified, multinational provider of highly engineered, technologically advanced, value-added products and services to a broad range of industries which are reported through our Aerospace & Industrial, Defense Electronics, and Naval & Power segments.

We are positioned as a market leader across a diversified array of niche markets through engineering and technological leadership, precision manufacturing, and strong relationships with our customers.

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Approximately 55% of our 2021 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 resulted in significant travel restrictions and disruption of the financial markets, as well as negatively impacted our supply chains and production levels.

The pandemic has caused demand in the commercial aerospace and general industrial end markets 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 September 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.

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

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 August 2020, we took additional actions to strengthen our financial flexibility through the successful completion of a $300 million private placement debt offering.

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.

In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic.

Over the last twelve months, the pandemic has adversely affected certain elements of our business, including our supply chain and production levels, due to significant decreases in air traffic, temporary shutdowns of our customers’ and suppliers’ facilities, as well as decreased demand from our general industrial customers.

We have experienced, and expect to continue to experience, unpredictable volatility in demand in our commercial aerospace and general industrial end markets.

The extent to which COVID-19 continues to adversely impact our operations depends on future developments, including the impact of the global rollout of COVID-19 vaccines, as well as the emergence and impact of any new COVID-19 variants.

However, 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.

RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand the results of operations and financial condition of the Corporation for the three and nine month periods ended September 30, 2020.

The financial information as of September 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 financial information as of March 31, 2021 should be read in conjunction with the financial statements for the year ended December 31, 2020 contained in our Form 10-K.

The MD&A is organized into the following sections:

1 unchanged sentence

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, 2021, the Corporation implemented an organizational change to simplify its reportable segments and align its product sales with its end market structure.

As a result, the Corporation operates under the following three reportable segments:

Aerospace & Industrial, Defense Electronics, and Naval & Power.

This change resulted in the transfer of the Corporation's valve-related operations into the Naval & Power segment.

Analytical Definitions

2 unchanged sentences

The results of operations for acquisitions are incremental for the first twelve months from the date of acquisition.

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 effects of total restructuring charges and foreign currency translation.

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

Three Months Ended Nine Months Ended

September 30, September 30,

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

Commercial/Industrial $ 222,527 $ 278,967 (20 %) $ 700,543 $ 841,725 (17 %)

Defense 180,321 160,413 12 % 516,387 452,688 14 %

Power 168,766 175,500 (4 %) 505,962 537,777 (6 %)

Additionally, the results of operations of divested businesses are removed from the

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

comparable prior year period for purposes of calculating “organic” and “incremental” results.

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

Condensed Consolidated Statements of Earnings

Three Months Ended

(In thousands) 2021 2020 % change

Aerospace & Industrial $ 180,331 $ 226,728 (20 %)

Defense Electronics 181,212 139,581 30 %

Naval & Power 235,516 234,922 — %

Total sales $ 597,059 $ 601,231 (1 %)

Operating income

Commercial/Industrial $ 24,838 $ 43,641 (43 %) $ 74,191 $ 130,222 (43 %)

Defense 41,550 40,241 3 % 98,126 93,580 5 %

Power 25,962 28,776 (10 %) 67,843 86,140 (21 %)

Corporate and eliminations (7,777) (7,089) (10 %) (27,792) (26,643) (4 %)

Aerospace & Industrial $ 19,025 $ 32,140 (41 %)

Defense Electronics 36,623 24,063 52 %

Naval & Power 38,057 28,110 35 %

Corporate and other (8,639) (11,867) 27 %

Total operating income $ 85,066 $ 72,446 17 %

4 unchanged sentences

Net earnings $ 59,469 $ 51,761 15 %

Total restructuring charges $ 11,166 $ — NM $ 28,545 $ — NM

New orders $ 579,447 $ 569,801 2 %

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 Nine Months Ended

September 30, September 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Three Months Ended

Sales Operating Income

Organic (8 %) 15 %

Acquisitions 6 % 5 %

Restructuring — % (10 %) — % (10 %)

Foreign currency 1 % (3 %)

Total (1 %) 17 %

Sales in the third quarter decreased $43 million, or 7%, to $572 million, compared with the prior year period.

On a segment basis, sales from the Commercial/Industrial and Power segments decreased $56 million and $7 million, respectively, with sales from the Defense segment increasing $20 million.

Sales during the nine months ended September 30, 2020 decreased $109 million, or 6%, to $1,723 million, compared with the prior year period.

On a segment basis, sales from the Commercial/Industrial and Power segments decreased $141 million and $32 million, respectively, with sales from the Defense segment increasing $64 million.

Sales during the three months ended March 31, 2021 decreased $4 million, or 1%, to $597 million, compared with the prior year period.

On a segment basis, a sales increase of $42 million from the Defense Electronics segment was more than offset by lower sales of $46 million from the Aerospace & Industrial segment.

Sales from the Naval & Power segment were essentially flat against the prior year period.

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

Operating income in the third quarter decreased $21 million, or 20%, to $85 million, and operating margin decreased 240 basis points to 14.8% compared with the same period in 2019.

Operating income during the nine months ended September 30, 2020 decreased $71 million, or 25%, to $212 million and operating margin decreased 320 basis points to 12.3%, 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 segment as well as costs associated with our restructuring activities across all segments.

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 third quarter and nine months ended September 30, 2020 increased $1 million, or 10%, to $8 million, and $1 million, or 4%, to $28 million, respectively, from the comparable prior year periods.

These increases were primarily due to higher corporate costs.

Interest expense in the third quarter and nine months ended September 30, 2020 increased $1 million, or 14%, to $9 million and $2 million, or 8%, to $25 million, respectively, primarily due to the issuance of $300 million Senior Notes during the third quarter as well as the impact of borrowings under our revolving credit facility.

Other income, net in the third quarter of $5 million was essentially flat against the comparable prior year period.

During the nine months ended September 30, 2020, other income, net decreased $11 million, or 61%, to $7 million, 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 20.2% in the third quarter decreased compared to an effective tax rate of 20.6% in the prior year period.

This decrease was primarily due to additional withholding tax expense recognized during the prior year period.

The effective tax rate of 24.1% for the nine months ended September 30, 2020 increased as compared to an effective tax rate of 21.5% 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, as well as additional tax expense associated with the establishment of a valuation allowance against certain foreign deferred tax assets.

Comprehensive income in the third quarter was $96 million, compared to comprehensive income of $59 million in the prior year period.

The change was primarily due to the following:

• Net earnings decreased $18 million, primarily due to lower operating income.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

2 unchanged sentences

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

• Foreign currency translation adjustments in the third quarter resulted in a $28 million comprehensive gain, compared to a $25 million comprehensive loss in the prior year period.

The comprehensive gain during the current period was primarily attributed to increases in the British Pound.

Comprehensive income for the nine months ended September 30, 2020 was $162 million, compared to comprehensive income of $207 million in the prior year period.

Operating income during the three months ended March 31, 2021 increased $13 million, or 17%, to $85 million, compared with the prior year period, while operating margin increased 220 basis points to 14.2%, compared with the same period in 2020.

In the Defense Electronics segment, operating income and operating margin benefited from favorable overhead absorption on higher sales, a favorable shift in mix within our defense electronics products, and the benefits of our cost containment initiatives, partially offset by higher research and development costs.

Operating income and operating margin in the Naval & Power segment increased primarily due to a favorable shift in mix within our naval defense products, current year savings recognized as a result of our prior year restructuring actions, as well as the absence of prior period transition costs associated with our Dresser-Rand Government Business (DRG) facility.

These increases were partially offset by lower operating income and operating margin in the Aerospace & Industrial segment primarily due to unfavorable overhead absorption on lower sales in the commercial aerospace market, partially offset by current year savings recognized as a result of our prior year restructuring actions.

Non-segment operating expense during the three months ended March 31, 2021 decreased $3 million , or 27%, to $9 million , primarily due to lower foreign currency losses.

Interest expense during the three months ended March 31, 2021 increased $2 million , or 33%, to $10 million, primarily due to the issuance of $300 million Senior Notes in August 2020.

Other income, net of $5 million was essentially flat compared to the prior year period.

The effective tax rate for the three months ended March 31, 2021 of 25.6% decreased as compared to an effective tax rate of 26.6% 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 in the prior year period.

Comprehensive income for the three months ended March 31, 2021 was $61 million, compared to comprehensive income of $6 million in the prior year period.

The change was primarily due to the following:

• Net earnings decreased $71 million, primarily due to lower operating income and lower other income, net.

• Foreign currency translation adjustments for the nine months ended September 30, 2020 resulted in a $2 million comprehensive gain, compared to a $16 million comprehensive loss in the prior period.

New orders decreased $88 million during the third quarter from the comparable prior year period, primarily due to a decline in new orders for sensors and controls equipment as well as lower demand for surface treatment services in the Commercial/Industrial segment.

These decreases were partially offset by the timing of aerospace defense and naval defense orders in the Defense segment.

New orders decreased $245 million during the nine months ended September 30, 2020 from the comparable prior year period, primarily due to a decline in new orders for sensors and controls equipment as well as industrial vehicle and industrial valve products in the Commercial/Industrial segment.

In the Power segment, new orders were negatively impacted by the timing of naval defense orders.

These decreases were partially offset by the timing of aerospace defense and naval defense orders in the Defense segment.

• Net earnings increased $8 million, primarily due to higher operating income.

• Foreign currency translation adjustments for the three months ended March 31, 2021 resulted in a $4 million comprehensive loss, compared to a $50 million comprehensive loss in the prior period.

The comprehensive loss during the current period was primarily attributed to decreases in the Euro.

New orders increased $10 million during the three months ended March 31, 2021 from the comparable prior year period, primarily due to the incremental impact of our PacStar acquisition in the Defense Electronics segment.

This increase was partially offset by the timing of naval defense orders in the Naval & Power segment and a decline in new orders for sensors and controls equipment as well as surface treatment services in the Aerospace & Industrial segment.

RESULTS BY BUSINESS SEGMENT

Commercial/Industrial

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

Three Months Ended Nine Months Ended

September 30, September 30,

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

Aerospace & Industrial

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

Three Months Ended

(In thousands) 2021 2020 % change

Sales $ 180,331 $ 226,728 (20 %)

Operating income 19,025 32,140 (41 %)

Operating margin 11.2 % 15.6 % (440 bps) 10.6 % 15.5 % (490 bps)

Total restructuring charges $ 6,666 $ — NM 14,034 $ — NM

Operating margin 10.6 % 14.2 % (360 bps)

New orders $ 199,115 $ 204,339 (3 %)

NM - Not meaningful

Components of sales and operating income increase (decrease):

Three Months Ended Nine Months Ended

September 30, September 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Organic (22 %) (28 %) (18 %) (33 %)

Acquisitions 1 % — % 1 % — %

Restructuring — % (15 %) — % (11 %)

Foreign currency 1 % — % — % 1 %

Total (20 %) (43 %) (17 %) (43 %)

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

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FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

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 in the third quarter decreased $56 million, or 20%, to $223 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 $36 million, primarily due to lower sales of actuation and sensors equipment as well as surface treatment services.

Sales in the general industrial market decreased $27 million, primarily due to lower demand for industrial vehicle, industrial valve, and industrial control products.

These decreases were partially offset by higher sales in the aerospace defense market, primarily due to higher demand for actuation and sensors equipment on the F-35 fighter jet program.

Sales during the nine months ended September 30, 2020 decreased $141 million, or 17%, to $701 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 $66 million, primarily due to lower sales of actuation and sensors equipment as well as surface treatment services.

Sales in the general industrial market decreased $95 million, primarily due to lower demand for industrial vehicle, industrial valve, and industrial control products as well as surface treatment services.

These decreases were partially offset by higher sales of $13 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 third quarter decreased $19 million, or 43%, to $25 million from the prior year period, and operating margin decreased 440 basis points to 11.2%.

Operating income during the nine months ended September 30, 2020 decreased $56 million, or 43%, to $74 million from the prior year period, and operating margin decreased 490 basis points to 10.6%.

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 in the third quarter decreased $148 million from the comparable prior year period, primarily due to a decline in new orders for sensors and controls equipment as well as lower demand for surface treatment services.

New orders during the nine months ended September 30, 2020 decreased $295 million from the comparable prior year period, primarily due to a decline in new orders for sensors and controls equipment as well as industrial vehicle and industrial valve products.

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

Three Months Ended Nine Months Ended

September 30, September 30,

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

Three Months Ended

Sales Operating Income

Organic (22 %) (41 %)

Acquisitions — % — %

Foreign currency 2 % — %

Total (20 %) (41 %)

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

Sales during the three months ended March 31, 2021 decreased $46 million, or 20%, to $180 million from the prior year period, primarily due to the ongoing impact of the COVID-19 pandemic on the commercial aerospace market.

Sales in the commercial aerospace market decreased $44 million primarily due to lower sales of actuation and sensors equipment and surface treatment services, as well as the exit of our build-to-print actuation product line during the prior year.

Operating income decreased $13 million, or 41%, to $19 million during the three months ended March 31, 2021 compared to the prior year period, while operating margin decreased 360 basis points to 10.6%.

The decreases in operating income and operating margin were primarily due to unfavorable overhead absorption on lower sales in the commercial aerospace market, partially offset by current year savings recognized as a result of our prior year restructuring actions.

New orders during the three months ended March 31, 2021 decreased $5 million from the comparable prior year period.

This decrease was primarily due to a decline in new orders for sensors and controls equipment as well as surface treatment services, partially offset by higher demand for industrial vehicle products.

Defense Electronics

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

Three Months Ended

(In thousands) 2021 2020 % change

Sales $ 181,212 $ 139,581 30 %

Operating income 36,623 24,063 52 %

Operating margin 23.0 % 25.1 % (210 bps) 19.0 % 20.7 % (170 bps)

Total restructuring charges $ 609 $ — NM 3,056 — NM

Operating margin 20.2 % 17.2 % 300 bps

New orders $ 182,300 $ 147,901 23 %

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 Nine Months Ended

September 30, September 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Three Months Ended

Sales Operating Income

Organic 4 % 43 %

Acquisitions 25 % 16 %

Restructuring — % (1 %) — % (2 %)

Foreign currency 1 % (7 %)

Total 30 % 52 %

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 in the third quarter increased $20 million, or 12%, to $180 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 $18 million, primarily due to the incremental impact of our 901D acquisition, which contributed sales of $11 million.

Excluding the impact of 901D, the naval defense market benefited from the timing of production on various submarine and aircraft carrier programs.

In the aerospace defense market, sales increased $7 million primarily due to higher demand for embedded computing equipment on various unmanned aerial vehicle (UAV) platforms.

Sales during the nine months ended September 30, 2020 increased $64 million, or 14%, to $516 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 $66 million, primarily due to the incremental impact of our 901D acquisition, which contributed sales of $35 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 $24 million.

In the aerospace defense market, sales increased $26 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 $11 million in the commercial aerospace market, primarily due to lower demand for flight test instrumentation equipment.

Sales in the ground defense market decreased $7 million primarily due to lower demand on various domestic and international tank platforms.

Operating income in the third quarter increased $1 million, or 3%, to $42 million compared to the prior year period, while operating margin decreased 210 basis points from the prior year period to 23.0%.

Operating income during the nine months ended September 30, 2020 increased $5 million, or 5%, to $98 million, while operating margin decreased 170 basis points from the prior year period to 19.0%.

In the third quarter as well as during the nine months ended September 30, 2020, 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 third quarter increased $56 million from the comparable prior year period, primarily due to the timing of aerospace defense and naval defense orders.

New orders during the nine months ended September 30, 2020 increased $105 million from the comparable prior year period, primarily due to the timing of aerospace defense and naval defense orders.

New orders also benefited from higher demand for embedded computing equipment in the commercial aerospace market.

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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

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FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Three Months Ended Nine Months Ended

September 30, September 30,

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

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

Sales during the three months ended March 31, 2021 increased $42 million, or 30%, to $181 million from the prior year period.

Sales in the ground defense market increased $33 million primarily due to the incremental impact of our PacStar acquisition.

In the aerospace defense market, sales increased $10 million primarily due to higher demand for embedded computing equipment on various helicopter and Unmanned Aerial Vehicle (UAV) platforms, including the Blackhawk and Global Hawk.

Operating income during the three months ended March 31, 2021 increased $13 million, or 52%, to $37 million, and operating margin increased 300 basis points from the prior year period to 20.2%.

The increases in operating income and operating margin were primarily due to favorable overhead absorption on higher sales, a favorable shift in mix within our defense electronics products, and the benefits of our cost containment initiatives, partially offset by higher research and development costs.

New orders during the three months ended March 31, 2021 increased $34 million from the comparable prior year period, primarily due to the incremental impact of our PacStar acquisition.

Naval & Power

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

Three Months Ended

(In thousands) 2021 2020 % change

Sales $ 235,516 $ 234,922 — %

Operating income 38,057 28,110 35 %

Operating margin 15.4 % 16.4 % (100 bps) 13.4 % 16.0 % (260 bps)

Total restructuring charges $ 3,891 $ — NM $ 11,455 $ — NM

Operating margin 16.2 % 12.0 % 420 bps

New orders $ 198,032 $ 217,561 (9 %)

NM - Not meaningful

Components of sales and operating income increase (decrease):

Three Months Ended Nine Months Ended

September 30, September 30,

2019 2020 vs.

Sales Operating Income Sales Operating Income

Three Months Ended

Sales Operating Income

Organic (1 %) 38 %

Acquisitions 1 % (1 %)

Restructuring — % (13 %) — % (13 %)

Foreign currency — % (2 %)

Total — % 35 %

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

Sales in the third quarter decreased $7 million, or 4%, to $169 million from the prior year period, primarily due to lower sales of $6 million in the power generation market.

This decrease was primarily due to lower domestic and international aftermarket sales, partially offset by higher sales on the AP1000 China Direct program.

Sales during the nine months ended September 30, 2020 decreased $32 million, or 6%, to $506 million from the prior year period, primarily due to lower sales of $28 million in the power generation market.

This decrease was primarily due to lower domestic and international aftermarket sales of $22 million.

Operating income in the third quarter decreased $3 million, or 10%, to $26 million, and operating margin decreased 100 basis points from the prior year period to 15.4%.

The decreases in operating income and operating margin were primarily due to costs associated with our restructuring activities, partially offset by the benefits of our ongoing margin improvement initiatives.

Operating income during the nine months ended September 30, 2020 decreased $18 million, or 21%, to $68 million, and operating margin decreased 260 basis points from the prior year period to 13.4%.

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 third quarter and nine months ended September 30, 2020 increased $4 million and decreased $55 million, respectively, from the comparable prior year periods, primarily due to the timing of naval defense orders.

SUPPLEMENTARY INFORMATION

The table below depicts sales by end market.

End market sales help provide an enhanced understanding of our businesses and the markets in which we operate.

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

Sales in the Naval & Power segment are primarily to the power & process and naval defense markets.

Sales during the three months ended March 31, 2021 of $236 million were essentially flat against the comparable prior year period.

In the naval defense market, sales increased $18 million primarily due to higher production on the Virginia-class submarine and CVN-81 aircraft carrier programs, as well as higher foreign military sales.

This increase was essentially offset by lower sales of $17 million in the power & process market, primarily due to lower domestic aftermarket sales and lower demand for industrial valve products.

Operating income during the three months ended March 31, 2021 increased $10 million, or 35%, to $38 million, and operating margin increased 420 basis points from the prior year period to 16.2%.

The increases in operating income and operating margin were primarily due to current year savings recognized as a result of our prior year restructuring actions, a favorable shift in mix within our naval defense products, a nd the absence of prior period transition costs associated with our DRG facility.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

2 unchanged sentences

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Net Sales by End Market & Customer Type Three Months Ended Nine Months Ended

September 30, September 30,

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

Defense markets:

Aerospace $ 121,987 $ 110,742 10 % $ 333,120 $ 293,955 13 %

Ground 20,519 22,231 (8 %) 63,205 69,383 (9 %)

Naval 165,524 143,430 15 % 496,157 424,371 17 %

Total Defense $ 308,030 $ 276,403 11 % $ 892,482 $ 787,709 13 %

New orders decreased $20 million during the three months ended March 31, 2021 from the comparable prior year period, primarily due to the timing of naval defense orders.

SUPPLEMENTARY INFORMATION

The table below depicts sales by end market and customer type, as it helps provide an enhanced understanding of our businesses and the markets in which we operate.

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

Net Sales by End Market and Customer Type Three Months Ended

(In thousands) 2021 2020 % change

Aerospace & Defense markets:

Aerospace Defense $ 111,016 $ 101,827 9 %

Ground Defense 55,746 22,657 146 %

Naval Defense 177,905 165,693 7 %

Commercial Aerospace 57,269 100,680 (43 %)

Total Aerospace & Defense $ 401,936 $ 390,857 3 %

Commercial markets:

Aerospace $ 70,943 $ 109,015 (35 %) $ 242,708 $ 320,237 (24 %)

Power Generation 80,509 88,543 (9 %) 241,059 278,194 (13 %)

Power & Process 105,504 123,926 (15 %)

General Industrial 89,619 86,448 4 %

1 unchanged sentence

Total Curtiss-Wright $ 597,059 $ 601,231 (1 %)

Defense markets

Sales in the third quarter increased $32 million, or 11%, to $308 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 $11 million.

Excluding the impact of 901D, the naval defense market benefited from higher aircraft carrier program revenues.

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 nine months ended September 30, 2020 increased $105 million, or 13%, to $892 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 $35 million.

Excluding the impact of 901D, the naval defense market benefited from higher sales of $28 million on the Virginia-class and Columbia-class submarine programs.

Sales in the aerospace defense market increased primarily due to higher demand for embedded computing equipment supporting UAVs, which resulted in a sales increase of $16 million, as well as higher sales of $13 million on the F-35 fighter jet program.

Aerospace & Defense markets

Sales during the three months ended March 31, 2021 increased $11 million, or 3%, to $402 million, primarily due to higher sales in the ground defense, naval defense, and aerospace defense markets.

Sales in the ground defense market benefited $33 million due to the incremental impact of our PacStar acquisition.

Sales in the naval defense market increased primarily due to higher production on the Virginia-class submarine and CVN-81 aircraft carrier programs, as well as higher foreign military sales.

Sales in the aerospace defense market increased primarily d ue to higher demand for embedded computing equipment on various helicopter and UAV platforms, including the Blackhawk and Global Hawk.

These increases were partially offset by lower sales in the commercial aerospace market primarily due to a pandemic-driven decline in demand for sensors equipment and surface treatment services, as well as the exit of our build-to-print actuation product line during the prior year.

Commercial markets

Sales in the third quarter decreased $75 million, or 22%, to $264 million due to lower sales across all segments.

In the commercial aerospace market, we experienced lower demand for actuation and sensors equipment as well as surface treatment services.

Sales in the power generation market decreased primarily due to lower sales of domestic and international aftermarket products.

The general industrial market was negatively impacted by lower demand for industrial valve, industrial vehicle, and industrial control products.

Sales during the nine months ended September 30, 2020 decreased $214 million, or 20%, to $830 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 $49 million and $20 million, respectively.

Sales in the power generation market decreased primarily due to lower domestic and international aftermarket sales of $30 million.

Lower demand in the general industrial market for industrial vehicle, industrial valve, and industrial control products resulted in sales decreases of $40 million, $26 million, and $14 million, respectively.

Sales in the general industrial market were also negatively impacted by lower demand for surface treatment services, which resulted in a sales decrease of $16 million.

Sales during the three months ended March 31, 2021 decreased $15 million, or 7%, to $195 million, primarily due to lower domestic aftermarket sales and lower demand for industrial valve products in the power & process market.

This decrease was partially offset by higher demand for our industrial vehicle products in the general industrial market.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Use of Cash

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

We derive the majority of our operating cash inflow from receipts on the sale of goods and services and cash outflow for the procurement of materials and labor;

2 unchanged sentences

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

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.

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

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

PART I - ITEM 2

MANAGEMENT’S DISCUSSION and ANALYSIS of

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

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 Nine Months Ended

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

Cash provided by (used for):

Condensed Consolidated Statements of Cash Flows Three Months Ended

(In thousands) March 31, 2021 March 31, 2020

Cash provided by (used in):

Operating activities

5 unchanged sentences

Effect of exchange-rate changes on cash (4,614) (12,294)

Net increase in cash and cash equivalents 35,788 21,646

Net cash provided by operating activities decreased $155 million from the prior year period, primarily due to a voluntary pensi on contribution of $150 million as well as higher invent ory and timing of advanced cash receipts in t he current period.

These decreases were partially offset by a reduction in receivables during the current period.

Investing Activities

The Corporation acquired two businesses during the nine months ended September 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 nine months ended September 30, 2019 for approximately $50 million.

Capital Expenditures

Capital expenditures for the nine months ended September 30, 2020 and September 30, 2019 were $36 million and $50 million, respectively.

The decrease in capital expenditures was primarily due to additional investment related to the new DRG facility during the prior year period.

Net decrease in cash and cash equivalents (51,179) (233,276)

Net cash used in operating activities decreased $166 million from the prior year period, primarily due to a prior year voluntary pension contribution of $150 million and higher cash earnings during the current period.

Net cash used in investing activities decreased $55 million from the comparable prior year period, primarily due to a prior period acquisition and lower current period capital expenditures.

The Corporation acquired one business during the three months ended March 31, 2020 for approximately $60 million, inclusive of $51 million cash paid in the prior year period.

The Corporation did not make any acquisitions during the three months ended March 31, 2021.

Capital expenditures for the three months ended March 31, 2021 and March 31, 2020 were $9 million and $19 million, respectively, with the decrease primarily due to lower capital spending during the current period as well as lower current period investment related to the new DRG facility.

Financing Activities

The Corporation’s debt outstanding had an average interest rate of 3.3% and 3.4% for the three and nine months ended September 30, 2020, respectively.

The Corporation’s debt outstanding had an average interest rate of 3.6% and 3.7% for the three and nine months ended September 30, 2019, respectively.

The Corporation’s average debt outstanding was $939 million and $875 million for the three and nine months ended September 30, 2020, respectively, and $750 million for both the three and nine months ended September 30, 2019.

In August 2020, we issued $300 million Senior Notes, consisting of $150 million 3.10% Senior Notes that mature on August 13, 2030 and $150 million 3.20% Senior Notes that mature on August 13, 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 Corporation’s debt outstanding had an average interest rate of 3.5% and 3.6% for the three months ended March 31, 2021 and 2020, respectively.

The Corporation’s average debt outstanding was $1,057 million and $795 million for the three months ended March 31, 2021 and 2020, respectively.

Credit Agreement

As of March 31, 2021, the Corporation had no outstanding borrowings under the 2012 Senior Unsecured Revolving Credit Agreement (the “Credit Agreement” or “credit facility”) and $20 million in letters of credit supported by the credit facility.

The unused credit available under the Credit Agreement as of March 31, 2021 was $480 million which could be borrowed without violating any of our debt covenants.

Repurchase of common stock

During the three months ended March 31, 2021, the Corporation used $12 million of cash to repurchase approximately 0.1 million outstanding shares under its share repurchase program.

During the three months ended March 31, 2020, the Corporation used $112 million of cash to repurchase approximately 1.1 million 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.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

2 unchanged sentences

FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

Revolving Credit Agreement

As of September 30, 2020, the Corporation had no outstanding borrowings 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 facility.

The unused credit available under the Credit Agreement as of September 30, 2020 was $478 million which could be borrowed without violating any of our debt covenants.

Repurchase of common stock

During the nine months ended September 30, 2020, the Corporation used $137 million of cash to repurchase approximately 1,366,000 outstanding shares under its share repurchase program.

During the nine months ended September 30, 2019, the Corporation used $38 million of cash to repurchase approximately 322,000 outstanding shares under its share repurchase program.

The Corporation made dividend payments of $14 million during both the nine months ended September 30, 2020 and September 30, 2019, respectively.

Debt Compliance

1 unchanged sentence

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 September 30, 2020, we had the ability to borrow additional debt of $1.5 billion without violating our debt to capitalization covenant.

As of March 31, 2021, we had the ability to borrow additional debt of $1.6 billion without violating our debt to capitalization covenant.

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

8 unchanged sentences

A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2020 Annual Report on Form 10-K, filed with the U.S.

Securities and Exchange Commission on February 27, 2020, in the Notes to the

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

Securities and Exchange Commission on February 25, 2021, in the Notes to the 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, 2021.

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 2020 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