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Item 1. Business

2022-02-24 compared with 2021-02-25 · 69 added, 60 removed, 87 unchanged (60% of the section changed)

BUSINESS DESCRIPTION

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

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

We are incorporated under the laws of the State of Delaware and headquartered in Davidson, North Carolina.

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

Curtiss-Wright Corporation and its subsidiaries (we, the Corporation, or the Company) is a global integrated business that provides highly engineered products, solutions, and services mainly to aerospace & defense markets, as well as critical technologies in demanding commercial power, process, and industrial markets.

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

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

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

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

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

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

We believe we are well positioned in the markets in which we operate as we seek to leverage and build upon our critical mass to e xpand our global engineering, sales, support and manufacturing footprint.

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

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

Our ability to provide mission critical, niche products and services on a cost-effective basis is fundamental to our strategy to drive increased value to our customers.

We compete globally, primarily based on technology and pricing.

We strive for consistent growth in sales, operating margin, diluted earnings per share and free cash flow, steady reinvestment back into the business, and a disciplined capital deployment strategy consisting of acquisitions and returns to shareholders, to drive long-term shareholder value.

Business Segments

We manage and evaluate our operations based on the products and services we offer and the different markets we serve.

Based on this approach, we operate through three segments:

Commercial/Industrial, Defense, and Power.

Our principal domestic manufacturing facilities are located in Arizona, New York, North Carolina, Ohio, Pennsylvania, and South Carolina, and internationally in Canada, Mexico, and the United Kingdom.

Commercial / Industrial

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

Based on this approach, we operate through three reportable segments:

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

Our principal domestic manufacturing facilities are located in Arizona, California, New York, North Carolina, Ohio, Pennsylvania, and South Carolina, and internationally in Canada, Mexico, and the United Kingdom.

Aerospace & Industrial

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

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

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

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

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

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

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

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

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

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

The businesses distribute products through commercial sales and marketing channels.

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

Defense Electronics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Naval & Power

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

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

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

Navy’s Atlantic and Pacific fleets through three service centers.

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

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

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

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

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

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

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

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

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

In addition, we furnish specialized and innovative severe-service valve technologies and services, heat exchanger repair, and piping test and isolation products to the oil and gas, chemical, petrochemical and industrial markets worldwide.

The businesses in this segment are dependent upon the need for ongoing maintenance, repair and overhaul of existing power plants, as well as the construction of new power plants globally, and typically market and distribute products through regulated or government contracting channels.

OTHER INFORMATION

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

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

In 2021, 2020, and 2019, our foreign operations as a percentage of pre-tax earnings were 27%, 28%, and 31%, respectively, adjusted for impairment losses associated with our industrial valves business in Germany in 2021 and 2020.

Government Sales

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(In thousands) 2021 2020 2019

Commercial/Industrial $ 164,583 $ 146,263 $ 123,938

Defense 576,948 439,754 408,880

Power 377,787 350,688 282,182

Aerospace & Industrial $ 155,276 $ 156,981 $ 142,666

Defense Electronics 600,085 470,949 367,923

Naval & Power 499,486 491,388 426,116

Government sales $ 1,254,847 $ 1,119,318 $ 936,705

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

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

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

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

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

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

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

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

from November 2008.

Effective March 1, 2020, Mr.

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

Rayment Vice President and Chief Operating Officer Vice President & Chief Operating Officer of the Corporation since April 1, 2021.

Prior to this, he served as President of the Aerospace & Industrial segment (f/k/a Commercial/Industrial) of the Corporation from January 2020.

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

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

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Vice President, General Counsel, and Corporate Secretary of the Corporation since March 2014.

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

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

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

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

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

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

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

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

Available information

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

These reports are also available free of

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

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

Human Capital

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

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

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

Notable programs offered include the following:

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• Employer-sponsored health insurance;

• Tuition reimbursement program;

• Training and professional development

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

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

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

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

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

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

Diversity and Inclusion

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

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

Discrimination is not tolerated at Curtiss-Wright.

We are committed to high ethical standards and equal employment opportunities in all personnel actions without regard to race, color, religion, gender, national origin, citizenship status, age, marital status, gender identity or expression, sexual orientation, physical or mental disability, or veteran status.

We maintain a Code of Conduct, an anti-harassment policy, and an equal employment opportunity policy, and provide training on these policies annually.

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

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

Our succession plans are geared at retaining and promoting our existing employees to provide equal opportunity and access to promotion within the organization.

Health and Safety

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

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

The health and safety of our employees is a top priority for Curtiss-Wright.

We take steps to ensure that we comply with applicable legal, regulatory, and other requirements in all material respects related to preventing pollution, injury, and ill health, and employ industry-leading, technologically sound, and economically feasible control mechanisms, procedures, and processes.

In addition, we provide training, education, safety monitoring and auditing, and health-awareness programs in our offices and factories.

We track total recordable rate (TRR) and days away, restriction and transfer rate (DART) for all sites worldwide.

For the year ended December 31, 2021, our TRR and DART rates were 1.49 and 0.99, respectively.

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

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

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

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

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

Additionally, we implemented requirements regarding mandatory vaccines for U.S.

based covered employees, subject to approved exemptions.

Furthermore, a significant portion of our non-manufacturing employees are currently working remotely on a hybrid basis, where practicable to do so, in an effort to minimize any potential spread of COVID-19.

These working conditions have been designed to allow for the continuation of key business-critical operations and controls.

Ethics and Integrity

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

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

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

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

Curtiss-Wright is deeply committed to ensuring that all of its employees conduct business with the highest levels of ethics and integrity and to complying with all laws and regulations applicable to Curtiss-Wright’s businesses.

To support and articulate our commitment and responsibility in this regard, Curtiss-Wright has adopted a Code of Conduct (the “Code”).

The Code addresses several topics, including conflicts of interest, safeguarding assets, financial reporting, the protection of confidential information, insider trading, and general adherence to laws and regulations.

All employees, including executive officers, must comply with the Code.

The Code is available within the Corporate Governance section of the Company’s website at https://investors.curtisswright.com/governance/governance-documents .

In order to enhance understanding of and compliance with the Code, all employees are required to complete a training program annually which details ethical business practices, an inclusive workforce, and respectful treatment of our employees.

In addition, the Corporation maintains an ethics-related global hotline through which employees can report any issues of concern.

The hotline facilitates the communication of ethical, financial, discrimination, and health and safety concerns and serves as the vehicle through which employees may communicate with the Audit Committee of the Board of Directors confidentially and anonymously regarding any accounting, internal controls, or auditing concerns.

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

What changed 10-K

Item 1. Business