What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-24 · 169 added, 227 removed, 1063 unchanged (27% of the section changed)

14 unchanged sentences

General and administrative expenses 324,093 326,140 303,288

Loss on divestiture 4,651 — —

Impairment of assets held for sale — 19,088 33,043

48 unchanged sentences

Accrued expenses 177,536 147,701

Income taxes payable 3,235 6,633

Deferred revenue 242,483 260,157

30 unchanged sentences

Depreciation and amortization 112,027 114,384 115,903

Loss on divestiture 4,651 — —

Impairment of assets held for sale — 19,088 33,043

(Gain) on sale/disposal of long-lived assets ( 4,671 ) ( 568 ) —

1 unchanged sentence

Share-based compensation 15,384 13,450 14,437

Impairment of assets held for sale 19,088 33,043 —

Foreign exchange loss on substantial liquidation of subsidiary — — 9,351

12 unchanged sentences

Proceeds from sales and disposals of long-lived assets 9,841 4,045 2,930

Purchases of investments ( 10,000 ) — —

Additions to property, plant, and equipment ( 38,217 ) ( 41,108 ) ( 47,499 )

24 unchanged sentences

January 1, 2020 $ 49,187 $ 116,070 $ 2,497,111 $ ( 325,274 ) $ ( 562,722 )

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

Net earnings — — 201,392 — —

Other comprehensive loss, net of tax — — — ( 10,570 ) —

Other comprehensive income, net of tax — — — 14,418 —

Dividends paid — — ( 28,175 ) — —

10 unchanged sentences

Restricted stock — ( 9,007 ) — — 9,007

Employee stock purchase plan and stock options exercised — ( 3,286 ) — — 14,434

Employee stock purchase plan — 877 — — 8,828

Share-based compensation — 13,296 — — 154

4 unchanged sentences

Net earnings — — 294,348 — —

Other comprehensive income, net of tax — — — 120,391 —

Other comprehensive loss, net of tax — — — ( 68,451 ) —

Dividends paid — — ( 28,779 ) — —

82 unchanged sentences

This balance is primarily affected by foreign currency exchange rate fluctuations.

Losses from foreign currency transactions are included in general and administrative expenses in the Consolidated Statement of Earnings, which amounted to $ 1.8 million, $ 3.9 million, and $ 7.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

(Gains) and losses from foreign currency transactions are included in general and administrative expenses in the Consolidated Statement of Earnings, which amounted to ($ 2.6 ) million, $ 1.8 million, and $ 3.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Forward Foreign Exchange and Currency Option Contracts

10 unchanged sentences

For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates.

Recently Issued Accounting Standards

Recent accounting standards adopted

ASU 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 have a material impact on the Corporation's consolidated financial statements as of January 1, 2020.

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

The Corporation accounts for revenues in accordance with ASC 606, Revenue from Contracts with Customers .

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As part of its assessment, the Corporation considers all goods and/or services promised in the contract, regardless of whether they are explicitly stated or implied by customary business practices.

The Corporation’s contracts may contain either a single performance obligation, including the promise to transfer individual goods or services that are not separately distinct within the context of the respective contracts, or multiple performance obligations.

The Corporation’s contracts may contain either a single performance obligation, including the promise to transfer individual goods or services that are not separately distinct

within the context of the respective contracts, or multiple performance obligations.

For contracts with multiple performance obligations, the Corporation allocates the overall transaction price to each performance obligation using standalone selling prices, where available, or utilizes estimates for each distinct good or service in the contract where standalone prices are not available.

49 unchanged sentences

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

For the year ended December 31, 2021, the Corporation did not complete any acquisitions.

However, the Corporation paid $ 5 million during the twelve months ended December 31, 2021 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.

For the year ended December 31, 2022, the Corporation acquired two businesses for an aggregate purchase price of $ 282 million, net of cash acquired.

The Corporation's current period acquisitions contributed $ 45 million of total net sales and $ 1 million of net losses for the year ended December 31, 2022 which are included in the Consolidated Statement of Earnings.

Also, the Corporation paid $ 5 million during the year ended December 31, 2022 for the final portion of the purchase price on the acquisition of Dyna-Flo Control Valve Services Ltd.

(Dyna-Flo), which was initially held back as security for potential indemnification claims against the seller in accordance with the terms of the Purchase Agreement.

For the year ended December 31, 2020, the Corporation acquired three businesses for an aggregate purchase price of $ 496 million, net of cash acquired.

The Corporation's prior period acquisitions contributed $ 40 million of total net sales and $ 5 million of net losses for the year ended December 31, 2020 which are included in the Consolidated Statement of Earnings.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated in 2020:

For the year ended December 31, 2021, the Corporation did not complete any acquisitions.

However, the Corporation paid $ 5 million during the year ended December 31, 2021 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 Dyna-Flo 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:

(In thousands) 2022

11 unchanged sentences

2022 Acquisitions

On October 30, 2020 , the Corporation acquired 100% of the issued and outstanding stock of PacStar for $ 406 million.

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.

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

The acquired business operates within the Defense Electronics segment.

Interactive Analysis and Display 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, including a portion of the purchase price deposited in escrow as security for potential indemnification claims against the seller.

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

The acquired product line operates within the Defense Electronics segment.

On February 28, 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 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.

Keronite Group Limited ("Keronite")

On November 15, 2022 , the Corporation completed the acquisition of Keronite for $ 34 million.

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

The acquired business is a provider of Plasma Electrolytic Oxidation surface treatment applications and will operate within the Aerospace & Industrial segment .

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

Safran Aerosystems Arresting Company ("arresting systems acquisition")

On June 30, 2022 , the Corporation completed its arresting systems acquisition for $ 249 million.

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

The acquired business is a designer and manufacturer of mission-critical, fixed-wing aircraft emergency arresting system, and operates within the Naval & Power segment .

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

ASSETS HELD FOR SAL E

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 Consolidated Balance Sheet as of December 31, 2021.

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 impairment losses of $ 19 million and $ 33 million for the years ended December 31, 2021 and 2020, respectively.

Such amounts have been reported in the "Impairment of assets held for sale" caption within the Corporation’s Consolidated Statement of Earnings.

The aggregate components of assets and liabilities classified as held for sale as of December 31 are as follows:

(In thousands) 2021 2020

Assets held for sale:

Receivables, net $ 11,038 $ 9,902

Inventories, net 18,373 16,401

Other current assets 1,181 1,798

Property, plant, and equipment, net 4,220 4,821

Reserve for assets held for sale ( 23,824 ) ( 5,338 )

Total assets held for sale, current $ 10,988 $ 27,584

Liabilities held for sale:

Accounts payable $ ( 4,450 ) ( 2,654 )

Accrued expenses ( 1,165 ) ( 1,375 )

Other current liabilities ( 2,631 ) ( 748 )

Accrued pension and other postretirement benefit costs ( 4,409 ) ( 5,364 )

Total liabilities held for sale, current $ ( 12,655 ) $ ( 10,141 )

During the fourth quarter of 2020, the Corporation committed to a plan to sell its industrial valve business in Germany, which met the criteria to be classified as held for sale at that time.

Accordingly, the assets and liabilities of the business were presented as held for sale in the Corporation's Consolidated Balance Sheet, which resulted in impairment losses of $ 19 million and $ 33 million for the years ended December 31, 2021 and 2020, respectively.

In January 2022, the Corporation completed the sale of its industrial valve business in Germany, which was presented as held for sale in the Corporation's Consolidated Balance Sheet as of December 31, 2021, for gross cash proceeds of $ 3 million.

The Corporation recorded a loss of $ 5 million upon sale closing during the first quarter of 2022.

Receivables include current notes, amounts billed to customers, claims, other receivables, and unbilled revenue on long-term contracts, which consists of amounts recognized as sales but not billed.

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Inventories, net $ 483,113 $ 411,567

(1) As of December 31, 2021 and 2020, this caption also includes capitalized development costs of $ 25.7 million and $ 29.7 million, respectively, related to certain aerospace and defense programs.

(1) As of December 31, 2022, this caption also includes capitalized development costs of $ 16.8 million related to certain aerospace and defense programs.

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

As of December 31, 2021 and 2020, capitalized development costs of $ 12.1 million and $ 13.0 million, respectively, are not currently supported by existing firm orders.

As of December 31, 2022, capitalized development costs of $ 11.0 million are not currently supported by existing firm orders.

PROPERTY, PLANT, AND EQUIPMENT

8 unchanged sentences

Depreciation expense for the years ended December 31, 2022, 2021, and 2020 was $ 51 million, $ 55 million, and $ 55 million, respectively.

In connection with the change in reportable segments on January 1, 2021, the Corporation recast its previously reported

goodwill balances as of December 31, 2020 and December 31, 2019 on a relative fair value basis.

Refer to Note 18 to the Consolidated Financial Statements for additional information on the Corporation’s reportable segments.

The changes in the carrying amount of goodwill for 2022 and 2021 are as follows:

1 unchanged sentence

December 31, 2020 $ 316,921 $ 703,915 $ 434,301 $ 1,455,137

Acquisitions — 256,733 28,467 285,200

Impairment on assets held for sale (1)

— — ( 9,598 ) ( 9,598 )

Adjustments (1)

— 12,943 — 12,943

Foreign currency translation adjustment ( 774 ) ( 2,844 ) ( 1,436 ) ( 5,054 )

December 31, 2021 $ 316,147 $ 714,014 $ 432,865 $ 1,463,026

Acquisitions 12,445 — 94,148 106,593

Adjustments — 967 — 967

— 12,943 — 12,943

Foreign currency translation adjustment ( 7,042 ) ( 12,195 ) ( 6,714 ) ( 25,951 )

December 31, 2022 $ 321,550 $ 702,786 $ 520,299 $ 1,544,635

(1) Amount relates to the Corporation's industrial valves business in Germany, which was classified as held for sale as of December 31, 2020.

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

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

Technology (2)

$ 306,160 $ ( 176,675 ) $ 129,485 $ 274,615 $ ( 164,077 ) $ 110,538

6 unchanged sentences

(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.

(2) During the year ended December 31, 2020, the Corporation recognized an impairment loss of $ 18 million pertaining to technology and customer-related intangibles of its industrial valve business in Germany, which was classified as held for sale during the fourth quarter of 2020.

During the year ended December 31, 2020, the Corporation acquired intangible assets of $ 204.4 million as a result of the Corporation's PacStar, IADS, and Dyna-Flo acquisitions, which included Customer-related intangibles of $ 159.9 million, Technology of $ 34.6 million, and Other intangible assets of $ 9.9 million.

During the year ended December 31, 2022, the Corporation acquired intangible assets of $ 147 million as a result of the Corporation's Keronite and arresting systems acquisitions, which included Customer-related intangibles of $ 106 million, Technology of $ 36 million, and Other intangible assets of $ 5 million.

The weighted average amortization periods for these aforementioned intangible assets are 16.1 years, 14.9 years, and 10.0 years, respectively.

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The Corporation conducts a portion of its operations from leased facilities, which include manufacturing and service facilities, administrative offices, and warehouses.

In addition, the Corporation leases vehicles, machinery, and office equipment under operating leases.

In addition, the Corporation leases machinery and office equipment under operating leases.

Our leases have remaining lease terms ranging from approximately 1 year to 15 years, some of which include options for renewals, escalations, or terminations.

64 unchanged sentences

As of December 31, 2021 and December 31, 2020, the Corporation did not have any active interest rate swaps.

Effects on Consolidated Balance Sheet

2 unchanged sentences

Undesignated hedges

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

The location and amount of losses recognized in income on forward exchange derivative contracts not designated for hedge accounting for the years ended December 31, were as follows:

(In thousands) 2022 2021 2020

11 unchanged sentences

Accrued compensation $ 87,835 $ 99,835

Accrued commissions 5,533 6,050

Accrued interest 16,412 13,092

Accrued commissions 6,807 5,533

Accrued insurance 6,418 6,202

Income taxes payable 38,187 3,235

Other 21,877 19,804

2 unchanged sentences

(In thousands) 2022 2021

Short-term lease liabilities $ 25,389 $ 27,263

Short-term operating lease liabilities $ 29,910 $ 25,389

Warranty reserves 18,147 15,268

WEC legal reserve 10,000 15,000

15,000 11,600

Pension and other postretirement liabilities 5,013 8,054

Restructuring liability 279 6,944

Other 19,325 39,003

Total other current liabilities $ 82,395 $ 102,714

(1) As of December 31, 2021, the Corporation reclassified prior year amounts associated with its ongoing legal matter with Westinghouse Electric Company (WEC) regarding the AP1000 program.

As a result, amounts previously captured within the "warranty reserves" and "other" captions were reclassified into the "WEC legal reserve" caption.

See Note 19 to the Consolidated Financial Statements for more information regarding the Corporation's WEC legal reserve.

2017 Tax Cuts and Jobs Act

1 unchanged sentence

The finalized transition tax of $ 23.6 million was to be paid over 8 years pursuant to the Tax Act.

The transition tax liability, which is expected to be paid in 2024 and 2025, was $ 7.4 million and $ 9.0 million as of December 31, 2021 and December 31, 2020, respectively.

The transition tax liability, which is expected to be paid in 2024 and 2025, was $ 7.4 million as of December 31, 2022 and December 31, 2021, respectively.

As of December 31, 2022, the Corporation reassessed its assertion around whether foreign undistributed earnings should continue to no longer be considered permanently reinvested.

Based on such assessment, Corporation revised its assertion with respect to prior and current earnings of a foreign subsidiary, which resulted in the reversal of $ 2.8 million of tax liabilities previously recorded.

Consistent with the prior year findings, the Corporation continues to not record a liability for withholding taxes of a foreign subsidiary, which resulted in the reversal in 2021 of $ 2.8 million of tax liabilities previously recorded.

The Corporation maintains its previous assertion for all other foreign subsidiaries, and has recorded a liability for withholding taxes that would arise upon distribution of the Corporation’s foreign undistributed earnings.

During the fourth quarter of 2020, the Corporation committed to a plan to sell its industrial valve business in Germany.

As a result, the tax consequences from those temporary differences resulting from the held for sale designation are no longer considered to be permanently reinvested.

However, the Corporation has not recorded any provision, as it expects under tax law to recover the outside basis difference in a tax-free manner.

With respect to the sale of the German industrial valves business in January 2022, the Corporation has determined that the global intangible low-taxed income (GILTI)-related impact associated with the sale is immaterial.

As a result, the tax consequences from those temporary differences resulting from the held for sale designation were no longer considered to be permanently reinvested.

However, the Corporation did not record any provision, as it expected under tax law to recover the outside basis difference in a tax-free manner as occurred upon sale of the business in the first quarter of 2022.

The global intangible low-taxed income (GILTI)-related impact associated with the sale is immaterial.

Except as noted above, the Corporation remains permanently reinvested to the extent of any outside basis differences in its foreign subsidiaries in excess of the amount of undistributed earnings as it is not practicable to determine the provision impact, if any, due to the complexities associated with this calculation.

4 unchanged sentences

$ 389,195 $ 354,510 $ 263,051

(1) The Corporation recognized pre-tax impairment losses of $ 19 million in 2021 and $ 33 million in 2020 pertaining to its industrial valve business in Germany, which was classified as held for sale during the fourth quarter of 2020.

(1) The Corporation recognized a pre-tax loss of $ 5 million during the first quarter of 2022 pertaining to the sale of its industrial valve business in Germany, as well as pre-tax impairment losses of $ 19 million and $ 33 million in 2021 and 2020, respectively.

The provision for income taxes for the years ended December 31 consists of:

15 unchanged sentences

State and local taxes, net of federal benefit 1.7 3.6 3.7

Foreign earnings (1)

0.7 0.2 ( 0.9 )

Foreign loss on sale 0.2 — —

Foreign asset impairment (held for sale) — 1.6 1.2

1 unchanged sentence

R&D tax credits ( 1.1 ) ( 1.3 ) ( 0.9 )

Foreign earnings (1)

0.2 ( 0.9 ) 1.4

Foreign-derived intangible income ( 1.2 ) ( 1.4 ) ( 2.8 )

7 unchanged sentences

Operating lease liabilities $ 34,977 $ 32,868

Capitalized R&D expenses 23,785 —

Inventories, net 21,992 17,237

2 unchanged sentences

Incentive compensation 8,531 6,936

Pension and other postretirement liabilities — 13,533

Legal reserves 2,864 6,991

21 unchanged sentences

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2021 in certain of the Corporation’s foreign locations.

Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth.

As of December 31, 2021, the Corporation increased its valuation allowance by $ 1.4 million to $ 2.6 million, in order to measure only the portion of the deferred tax asset that more likely than not will be realized.

As of December 31, 2022 the Corporation increased its valuation allowance by $ 2.9 million to $ 5.7 million, in order to measure only the portion of deferred tax assets that more likely than not will be realized.

As of December 31, 2022, $ 3.4 million of the total valuation allowance relates to foreign tax credits arising from branch operations that the Corporation believes it will be unable to utilize.

The Corporation recorded a tax provision of $ 2.7 million in the current year and $ 0.7 million in prior year related to the valuation allowance on branch foreign tax credits.

The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth.

As of December 31, 2021, the Corporation recorded a deferred tax asset of $ 4.4 million on net operating losses of $ 14.7 million related to the held for sale industrial valve business in Germany.

A provision of $ 0.7 million was recorded during the year ended December 31, 2021, resulting in a full valuation allowance against the deferred tax asset, as it is more likely than not that the losses will be forfeited.

This resulted in a full valuation allowance against the deferred tax asset, as it is more likely than not that the losses will be forfeited as a result of the divestiture.

Upon the closure of the sale of the industrial valve business in the first quarter of 2022, the Corporation removed both the deferred tax asset and associated valuation allowance, with no resulting tax impact.

Income tax payments, net of refunds, of $ 61.1 million, $ 107.1 million, and $ 54.0 million were made in 2022, 2021, and 2020, respectively.

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200,000 183,007 — —

4.64 % Senior notes due 2034

100,000 90,341 — —

Total debt 1,250,000 1,152,828 1,043,900 1,097,997

7 unchanged sentences

The weighted-average interest rate of the Corporation's Revolving Credit Agreement in 2022 and 2021 was 2.9 % and 1.0 %, respectively.

The Corporation's total debt outstanding had a weighted-average interest rate of 3.4 % in both 2021 and 2020.

The Corporation's total debt outstanding had a weighted-average interest rate of 3.4 % in both 2022 and 2021, respectively.

Aggregate maturities of debt are as follows:

(In thousands)

2023 $ 202,500

Thereafter 757,500

2 unchanged sentences

Revolving Credit Agreement

In October 2018, the Corporation amended the terms of its existing Credit Agreement (Credit Agreement) with a syndicate of financial institutions, led by Bank of America N.A., Wells Fargo, N.A., and JP Morgan Chase Bank, N.A..

The amended agreement, which provides the Corporation with a borrowing capacity of $ 500 million, extended the maturity date from November 2019 to October 2023 and expanded the accordion feature from $ 100 million to $ 200 million.

The proceeds available under the Credit Agreement are to be used for working capital, internal growth initiatives, funding of future acquisitions, and general corporate purposes.

As of December 31, 2021, the Corporation had $ 21 million in letters of credit supported by the credit facility and $ 94 million borrowings outstanding under the credit facility.

The unused credit available under the credit facility as of December 31, 2021 was $ 385 million, which the Corporation had the ability to borrow in full without violating its debt to capitalization covenant.

The Credit Agreement contains covenants that the Corporation considers usual and customary for an agreement of this type for comparable commercial borrowers, including a maximum consolidated debt to capitalization ratio of 60 %.

In May 2022, the Corporation terminated its existing credit agreement, which was set to expire in October 2023, and entered into a new credit agreement (“Credit Agreement”) with a syndicate of financial institutions.

The Credit Agreement, which is set to expire in May 2027, increases the size of the Corporation’s revolving credit facility to $ 750 million, and expands the accordion feature to $ 250 million.

The Corporation plans to use the Credit Agreement for general corporate purposes, which may include the funding of possible future acquisitions or supporting internal growth initiatives.

As of December 31, 2022, the Corporation had $ 17 million in letters of credit supported by the Credit Agreement and no outstanding borrowings under the Credit Agreement.

The unused credit available under the Credit Agreement as of December 31, 2022 was $ 733 million, which the Corporation had the ability to borrow in full without violating its debt to capitalization covenant.

The Credit Agreement has customary events of default, such as non-payment of principal when due;

1 unchanged sentence

cross-payment default and cross-acceleration.

Borrowings under the credit agreement accrue interest based on (i) Libor or (ii) a base rate of the highest of (a) the federal funds rate plus 0.5%, (b) BofA’s announced prime rate, or (c) the Eurocurrency rate plus 1%, plus a margin.

Borrowings under the credit agreement accrue interest based on (i) the Secured Overnight Financing Rate (SOFR) or (ii) a base rate of the highest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% and (c) the Adjusted Daily Term SOFR Rate.

The interest rate and level of facility fees are dependent on certain financial ratios, as defined in the Credit Agreement.

1 unchanged sentence

In connection with the Credit Agreement, the Corporation paid customary transaction fees that have been deferred and are being amortized over the term of the Credit Agreement.

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

On October 27, 2022 , the Corporation issued $ 300 million of Senior Notes (the "2022 Notes"), consisting of $ 200 million of 4.49 % notes that mature on October 27, 2032 and $ 100 million of 4.64 % notes that mature on October 27, 2034 .

The 2022 Notes are senior unsecured obligations, equal in right of payment to the Corporation’s existing senior indebtedness.

1 unchanged sentence

In connection with the issuance of the 2022 Notes, the Corporation paid customary fees that have been deferred and are being amortized over the term of the 2022 Notes.

Under the terms of the Note Purchase Agreements, the Corporation is required to maintain certain financial ratios, the most restrictive of which are a debt to capitalization limit of 60 % and an interest coverage ratio of less than 3 to 1.

Under the terms of the Note Purchase Agreements, the Corporation is required to maintain certain financial ratios, the most restrictive of which are a debt to capitalization limit of 60 % ( 65 % for four consecutive quarters following an acquisition greater than $100 million) and an interest coverage ratio not to be less than 3 to 1.

The debt to capitalization ratio (as defined per the Notes Purchase Agreement and Credit Agreement) is calculated using the same formula for all of the Corporation’s debt agreements and is a measure of the Corporation’s indebtedness to capitalization, where capitalization equals debt plus equity.

The 2022 Notes also contain a cross default provision with respect to the Corporation’s other senior indebtedness.

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.

In connection with the issuance of the 2020 Notes, the Corporation paid customary fees that have been deferred and are being amortized over the term of the 2020 Notes.

Under the terms of the Note Purchase Agreements, as amended, the Corporation is required to maintain certain financial ratios, the most restrictive of which are a debt to capitalization limit of 60 % ( 65 % for four consecutive quarters following an acquisition greater than $100 million) and an interest coverage ratio not to be less than 3 to 1.

The 2020 Notes also contain a cross default provision with respect to the Corporation’s other senior indebtedness.

On February 26, 2013 , the Corporation issued $ 500 million of Senior Notes (the “2013 Notes”).

3 unchanged sentences

The 2013 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 2013 Notes, subject to a make-whole payment in

accordance with the terms of the Note Purchase Agreement.

The Corporation, at its option, can prepay at any time all or any part of the 2013 Notes, subject to a make-whole payment in accordance with the terms of the Note Purchase Agreement.

In connection with the issuance of the 2013 Notes, the Corporation paid customary fees that have been deferred and are being amortized over the term of the 2013 Notes.

Under the terms of the Note Purchase Agreement, as amended, the Corporation is required to maintain certain financial ratios, the most restrictive of which are a debt to capitalization limit of 60 % ( 65 % for four consecutive quarters following an acquisition greater than $100 million) and an interest coverage ratio of less than 3 to 1.

The 2013 Notes also contain a cross default provision with respect to the Corporation’s other senior indebtedness.

4 unchanged sentences

In connection with the 2011 Notes, the Corporation paid customary fees that have been deferred and are being amortized over the term of the 2011 Notes.

Under the Note Purchase Agreement, the Corporation is required to maintain certain financial ratios, the most restrictive of which is a debt to capitalization limit of 60 %.

Under the terms of the Note Purchase Agreement, as amended, the Corporation is required to maintain certain financial ratios, the most restrictive of which is a debt to capitalization limit of 60 % ( 65 % for four consecutive quarters following an acquisition greater than $100 million) and an interest coverage ratio of less than 3 to 1.

The 2011 Notes also contain a cross default provision with our other senior indebtedness.

11 unchanged sentences

Basic earnings per share $ 267,159 40,417 $ 6.61

Dilutive effect of stock options and deferred stock compensation 261

Dilutive effect of deferred stock compensation 185

Diluted earnings per share $ 267,159 40,602 $ 6.58

11 unchanged sentences

Previous grants under the 2005 Stock Plans included non-qualified stock options.

Under our employee benefit program, the Corporation also provides an Employee

Stock Purchase Plan (ESPP) to most active employees.

Under our employee benefit program, the Corporation also provides an Employee Stock Purchase Plan (ESPP) to most active employees.

Certain awards provide for accelerated vesting if there is a change in control.

13 unchanged sentences

Stock Options

As of December 31, 2021, the Corporation's did not have any stock options outstanding.

The total intrinsic value of stock options exercised during 2020 and 2019 was $ 5.2 million, and $ 8.7 million, respectively.

As of December 31, 2022 and 2021, the Corporation did not have any stock options outstanding.

The total intrinsic value of stock options exercised during 2020 was $ 5.2 million.

Performance Share Units

The Corporation has granted performance share units to certain employees, whose three year cliff vesting is contingent upon the Corporation's total shareholder return over the three-year term beginning at the start of the fiscal year following the date of grant.

Performance is measured by determining the percentile rank of the total shareholder return of the Corporation's common stock in relation to the total shareholder return of the S&P Midcap 400 Index (for awards granted in 2020 through 2021) or compared to a self-constructed peer group (for awards granted in 2019).

Performance is measured by determining the percentile rank of the total shareholder return of the Corporation's common stock in relation to the total shareholder return of a self-constructed peer group (for awards granted in 2022) or compared to the S&P Midcap 400 Index (for awards granted in 2020 through 2021).

The non-vested shares are subject to forfeiture if established performance goals are not met or employment is terminated other than due to death, disability, or retirement.

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PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The Corporation maintains ten separate and distinct pension and other post-retirement defined benefit plans, consisting of three domestic plans and seven separate foreign pension plans.

The Corporation maintains nine separate and distinct pension and other post-retirement defined benefit plans, consisting of three domestic plans and six separate foreign pension plans.

The domestic plans include a qualified pension plan, a non-qualified pension plan, and a postretirement health-benefits plan.

The foreign plans consist of one defined benefit pension plan each in the United Kingdom, Canada, and Switzerland, two in Germany, and two in Mexico.

The foreign plans consist of one defined benefit pension plan each in the United Kingdom, France, Canada, and Switzerland, and two in Mexico.

Domestic Plans

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a non-contributory non-union and union formula for certain Curtiss-Wright (CW) employees, a contributory union and non-union benefit formula for employees at the EMD business unit, and two benefit formulas providing annuity benefits for participants in the former Williams Controls salaried and union plans.

CW non-union employees hired prior to February 1, 2010 receive a “traditional” benefit based on years of credited service, using the five highest consecutive years’ compensation during the last ten years of service.

CW non-union employees hired prior to February 1, 2010 receive a final average pay benefit based on years of credited service, using the five highest consecutive years’ compensation during the last ten years of service.

These employees became participants under the CW Pension Plan after one year of service and were vested after three years of service.

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CW union employees who have negotiated a benefit under the CW Pension Plan are entitled to a benefit based on years of service multiplied by a monthly pension rate.

The formula for EMD employees covers both union and non-union employees and is designed to satisfy the requirements of relevant collective bargaining agreements.

The formula for EMD employees is based on a career average pay benefit and covers both union and non-union employees and is designed to satisfy the requirements of relevant collective bargaining agreements.

Employee contributions are withheld each pay period and are equal to 1.5 % of salary.

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As of December 31, 2022, and 2021, the Corporation had a noncurrent pension asset of $ 209.9 million and $ 233.8 million, respectively.

The change in balance was primarily due to a higher return on plan assets during 2021.

The change in balance was primarily due to a lower return on plan assets during 2022.

Nonqualified Pension Plan

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The Corporation expects to contribute $ 1.7 million to the plan during 2023.

Activity associated with the postretirement benefit liability for the years ended December 31, 2022 and 2021 was immaterial.

Foreign Plans

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As of December 31, 2022 the Corporation had a net pension asset of $ 9.8 million.

As of December 31, 2020, the Corporation had a net pension liability of $ 2.6 million.

As of December 31, 2021, the Corporation had a net pension asset of $ 12.9 million.

The Corporation's contributions to the foreign plans are expected to be $ 2.0 million in 2023.

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The net pension and net postretirement benefit costs consisted of the following:

Pension Benefits Postretirement Benefits

Pension Benefits

(In thousands) 2022 2021 2020

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Amortization of prior service cost ( 318 ) ( 251 ) ( 269 )

Recognized net actuarial loss/(gain) 28,905 23,062 9,310 — ( 5 ) ( 198 )

Special termination benefits 52 — — 367 — —

Recognized net actuarial loss 17,198 28,905 23,062

Cost of settlements/curtailments 4,499 3,310 2,395

Special termination benefits — 52 —

Net periodic benefit cost $ 10,664 $ 15,884 $ 7,831

The cost of settlements/curtailments indicated above represents events that are accounted for under guidance on employers’ accounting for settlements and curtailments of defined benefit pension plans.

In 2021, special termination benefits were recognized as a result of early retirement benefits offered to employees in the US and Switzerland.

In addition, the Company recognized settlement charges in 2021 related to the retirement of former executives.

In 2022 and 2021, the Company recognized settlement charges related to the retirement of former executives.

In 2020, settlement charges were incurred in Mexico and Switzerland.

In addition, a curtailment was recognized in Mexico in 2020 as a result of the Corporation's restructuring initiatives.

The following table outlines the Corporation's consolidated disclosure of the pension benefits and postretirement benefits information described previously.

The following table outlines the Corporation's consolidated disclosure of the pension benefits information described previously.

The Corporation had no foreign postretirement plans.

All plans were valued using a December 31, 2022 measurement date.

Pension Benefits Postretirement Benefits

Pension Benefits

(In thousands) 2022 2021

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Plan participants’ contributions 1,229 1,304

Amendments ( 477 ) — 309 —

Actuarial (gain) loss ( 201,592 ) ( 37,825 )

Benefits paid ( 75,770 ) ( 68,965 )

Special Termination Benefits 52 — 367 —

Actual expenses ( 1,681 ) ( 1,491 )

Curtailments — 1,636 — —

Settlements — ( 3,867 ) — —

Acquisitions 496 —

Divestitures ( 4,341 ) —

Amendments — ( 477 )

Special termination benefits — 52

Currency translation adjustments ( 8,117 ) ( 1,717 )

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Actual expenses ( 1,681 ) ( 1,491 )

Settlements — ( 3,867 ) — —

Currency translation adjustments ( 10,038 ) ( 1,388 )

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Funded status $ 179,268 $ 177,546

Pension Benefits Postretirement Benefits

Pension Benefits

(In thousands) 2022 2021

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Information for plans with an accumulated benefit obligation in excess of plan assets:

Projected benefit obligation $ 101,667 $ 114,297 $ 25,193 N/A

Accumulated benefit obligation 95,755 111,807 25,193 N/A

Fair value of plan assets 22,792 28,217 — N/A

(1) As of December 31, 2021 and 2020, this caption includes accrued pension and other postretirement benefit costs of $ 4.4 million and $ 5.4 million, respectively, reflected in the "Liabilities held for sale" caption within the Consolidated Balance Sheet.

Projected benefit obligation $ 64,669 $ 101,667

Accumulated benefit obligation 61,368 95,755

Fair value of plan assets 21,311 22,792

(1) As of December 31, 2021, this caption includes accrued pension and other postretirement benefit costs of $ 4.4 million, reflected in the "Liabilities held for sale" caption within the Consolidated Balance Sheet.

Plan Assumptions

Pension Benefits Postretirement Benefits

2021 2020 2021 2020

Pension Benefits

Weighted-average assumptions in determination of benefit obligation:

Discount rate 4.95 % 2.72 %

Rate of compensation increase 3.40 % 3.41 % N/A N/A

Rate of compensation increase 3.34 % 3.40 %

Health care cost trends:

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Ultimate rate reached in 2032

N/A N/A 4.50 % 4.50 %

Weighted-average assumptions in determination of net periodic benefit cost:

Discount rate 2.72 % 2.36 %

Expected return on plan assets 6.18 % 7.11 % N/A N/A

Rate of compensation increase 3.41 % 3.46 % N/A N/A

Expected return on plan assets 5.47 % 6.18 %

Rate of compensation increase 3.40 % 3.41 %

Health care cost trends:

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Ultimate rate reached in 2032

N/A N/A 4.50 % 4.50 %

The Corporation applies the spot rate, or full yield curve, approach for developing discount rates.

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The overall objective for plan assets is to earn a rate of return over time to meet anticipated benefit payments in accordance with plan provisions.

The long-term investment objective of the domestic retirement plans is to achieve a total rate of return, net of fees, which exceeds the actuarial overall expected return on asset assumptions used for funding purposes and which provides an appropriate premium over inflation.

The intermediate-term objective of the domestic retirement plans, defined as three to five years, is to outperform each of the capital markets in which assets are invested, net of fees.

The long-term investment objective of the domestic retirement plan is to achieve a total rate of return, net of fees, which exceeds the actuarial overall expected return on asset assumptions used for funding purposes and which provides an appropriate premium over inflation.

The intermediate-term objective of the domestic retirement plan, defined as three to five years, is to outperform each of the capital markets in which assets are invested, net of fees.

During periods of extreme market volatility, preservation of capital takes a higher precedence than outperforming the capital markets.

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The Corporation maintains the funds of the CW Pension Plan under a trust that is diversified across investment classes and among investment managers to achieve an optimal balance between risk and return.

As a part of its diversification strategy, the Corporation has established target allocations for each of the following assets classes:

domestic equity securities, international equity securities, and debt securities.

Below are the Corporation’s actual and established target allocations for the CW Pension Plan, representing 90 % of consolidated assets:

In the first quarter of 2022, the Corporation implemented an asset de-risking strategy in recognition of the strong funded status of the plan and a desire to reduce volatility as the plan approaches the cessation of accruals in 2028.

As a part of its strategy shift, the Corporation transitioned to an Outsourced Chief Investment Officer (“OCIO”) model that introduces asset allocation constraints that increase the fixed income allocation over time and with changes in the funded status.

Accordingly, our established target allocations for each of the following asset classes:

domestic equity securities, international equity securities, and debt securities have changed.

the Corporation’s actual and current target allocations for the CW Pension Plan, representing 91 % of consolidated assets:

As of December 31, Target Expected

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It is comprised of U.S.

securities benchmarked against the S&P 500 index and Russell 2000 index, international mutual funds benchmarked against the MSCI EAFE index, global equity index mutual funds associated with our U.K.

securities benchmarked against the S&P 500 index and Russell Mid Cap and Russell 2000 indices, international mutual funds benchmarked against the MSCI EAFE and EM indices, global equity index mutual funds associated with our U.K.

based pension plans, and balanced funds associated with the U.K.

and Canadian based pension plans.

(2) This category consists of domestic and international bonds.

The domestic fixed income securities are benchmarked against the Bloomberg Barclays Capital Aggregate Bond index, actively-managed bond mutual funds comprised of domestic investment grade debt, fixed income derivatives, and below investment-grade issues, U.S.

mortgage backed securities, asset backed securities, municipal bonds, and convertible debt.

International bonds consist of bond mutual funds for institutional investors associated with the CW Pension Plan, Switzerland, and U.K.

(2) This category consists of This category consists of domestic and international bonds.

The domestic fixed income securities consist of a portfolio of investment grade corporate debt, below investment-grade issues, fixed income exchange traded funds, and U.S.

Treasury securities of intermediate and long-term duration for liability matching fixed income.

International bonds consist of bond mutual funds for institutional investors associated with the Switzerland and U.K.

based pension plans.

(3) This category consists primarily of real estate investment trusts in Switzerland.

(3) This category consists of a domestic real estate fund and real estate investment trusts in Switzerland.

Equity securities and exchange-traded equity and bond mutual funds are valued using a market approach based on the quoted market prices of identical instruments.

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cash is valued using a market approach based on quoted market prices of identical instruments.

The following table presents a reconciliation of Level 3 assets held during the years ended December 31, 2021 and 2020:

(In thousands) Insurance

Contracts Real

Estate Other Total

December 31, 2019 $ — $ 4,224 $ — $ 4,224

Actual return on plan assets:

Relating to assets still held at the reporting date 5 ( 20 ) — ( 15 )

Relating to assets sold during the period — ( 58 ) — ( 58 )

Purchases, sales, and settlements 523 ( 680 ) — ( 157 )

Foreign currency translation adjustment 49 359 — 408

December 31, 2020 577 3,825 — 4,402

Actual return on plan assets:

Relating to assets still held at the reporting date — 125 16 141

Relating to assets sold during the period 32 — — 32

Purchases, sales, and settlements ( 592 ) 226 464 98

Foreign currency translation adjustment ( 17 ) ( 102 ) ( 11 ) ( 130 )

December 31, 2021 — 4,074 469 4,543

Activity associated with Level 3 assets held during the years ended December 31, 2022 and 2021 was immaterial.

Benefit Payments

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(In thousands) Pension

Plans Postretirement

2023 $ 49,927

2028 — 2032 281,544

2024 60,035 1,645 61,680

2025 55,531 1,602 57,133

2026 56,269 1,532 57,801

2027 — 2031 285,666 7,065 292,731

Defined Contribution Retirement Plans

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Cumulative contributions of approximately $ 107 million are expected to be made from 2023 through 2027.

In addition, the Corporation had foreign pension costs under various defined contribution plans of $ 5.4 million in 2021, and $ 5.3 million in both 2020 and 2019.

SEGMENT INFORMATION

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.

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.

The Corporation’s segments are composed of similar product groupings that serve the same or similar end markets.

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

Aerospace & Industrial, Defense Electronics, and Naval & Power, as described below in further detail.

The Aerospace & Industrial reportable segment is comprised of businesses that provide a diversified offering of highly engineered products and services supporting critical applications primarily across the commercial aerospace and general industrial markets.

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To date, the Corporation has not been found liable for or paid any material sum of money in settlement in any asbestos-related case.

The Corporation believes its minimal use of asbestos in its past operations and the relatively non-friable condition of asbestos in its products make it unlikely that it will face material liability in any asbestos litigation, whether individually or in the aggregate.

The Corporation

believes its minimal use of asbestos in its past operations and the relatively non-friable condition of asbestos in its products make it unlikely that it will face material liability in any asbestos litigation, whether individually or in the aggregate.

The Corporation maintains insurance coverage for these potential liabilities and believes adequate coverage exists to cover any unanticipated asbestos liability.

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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.

There were $ 21.1 million of stand-by letters of credit outstanding for both December 31, 2021 and 2020.

As of December 31, 2021 and 2020 there were $ 4.5 million and $ 5.6 million of bank guarantees outstanding, respectively.

As of December 31, 2022 and 2021, there were $ 17 million and $ 21 million of stand-by letters of credit outstanding, respectively, and $ 3 million and $ 5 million of bank guarantees outstanding, respectively.

The Corporation, through its Electro-Mechanical Division (EMD) business unit, has three Pennsylvania Department of Environmental Protection (PADEP) radioactive materials licenses that are utilized in the continued operation of the EMD business.

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AP1000 Program

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

EMD is the reactor coolant pump (RCP) supplier for the Westinghouse Electric Company (WEC) AP1000 nuclear power plants in China and the United States.

The terms of the AP1000 U.S.

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

In February 2022, the Corporation and WEC reached an agreement to settle all open claims and counterclaims under the AP1000 U.S.

In February 2022, the Corporation and WEC executed a settlement agreement to resolve all open claims and counterclaims under the AP1000 U.S.

and China contracts.

The settlement agreement requires the Corporation to pay WEC $ 15 million during the first quarter of 2022 and $ 10 million during the first quarter of 2023 in exchange for the Corporation's full release from all open claims under such contracts, whether known or unknown, as well as negotiating and executing a right of first refusal for all future AP1000 projects.

As a result of the settlement, the Corporation recorded charges of $ 13 million related to this matter for the year ended December 31, 2021.

Under the terms of the settlement agreement, the Corporation paid WEC $ 15 million in March 2022 and is required to pay WEC a final amount of $ 10 million in the first quarter of 2023 in exchange for the Corporation’s full release from all open claims under such contracts, whether known or unknown.

Under the settlement, the parties also negotiated and executed a right of first refusal for all future AP1000 projects.

As of December 31, 2021, the Corporation was adequately accrued regarding this matter.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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— 16,237 16,237

Net current period other comprehensive income (loss) ( 10,829 ) 131,220 120,391

Net current period other comprehensive loss ( 61,241 ) ( 7,210 ) ( 68,451 )

December 31, 2022 $ ( 160,807 ) $ ( 98,109 ) $ ( 258,916 )

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Total reclassifications $ ( 16,237 ) $ ( 24,009 ) Net earnings

RESTRUCTURING COSTS

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, 2021.

As of December 31, 2021 and 2020, the restructuring liability associated with these restructuring activities was $ 0.3 million and $ 6.9 million, respectively.

This balance is reported within Other Current Liabilities on the Consolidated Balance Sheet.

SUBSEQUENT EVENTS

On January 21, 2022, the Corporation announced that it has entered into an agreement to acquire the assets that comprise the Safran Aerosystems Arresting Company ("SAA") for $ 240 million in cash.

SAA is a designer and manufacturer of aircraft emergency arresting systems with more than 5,000 systems worldwide.

For the year ended December 31, 2021, SAA generated sales of approximately $ 70 million.

The acquisition is expected to close in the third quarter of 2022, subject to regulatory approval and other closing conditions.

Upon close, the acquired business will operate within the Corporation's Naval & Power segment.

On January 28, 2022, the Corporation completed the sale of its industrial valve business in Germany, which was classified as held for sale as of December 31, 2021, for approximately $ 3 million of gross cash proceeds.

Report of the Corporation

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Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of Curtiss-Wright Corporation

To the stockholders and the Board of Directors of Curtiss-Wright Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Curtiss-Wright Corporation and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, cash flows and shareholders' equity, for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Curtiss-Wright Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive income, cash flows and stockholders' equity, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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Critical Audit Matter

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue – Over-Time Basis – Refer to Note 2 to the financial statements

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill – Certain Reporting Units – Refer to Notes 1 and 8 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue when control of a promised good and/or service is transferred to a customer.

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

Contracts that qualify for over-time revenue recognition are generally associated with the design, development, and manufacture of highly engineered industrial products used in commercial and defense applications and generally span between 2-5 years in duration.

The Company uses over-time revenue recognition based on the utilization of an input measure used to measure progress of performance obligations, such as costs incurred to date relative to total estimated costs.

Application of an over-time revenue recognition method requires the use of reasonable and dependable estimates of costs that will be incurred to complete production of goods or provision of services.

As of December 31, 2021, revenue was $2.506 billion, of which 50% relates to over-time revenue.

Certain of the Company’s contracts have limited amount of historical data available requiring the Company to make judgments to estimate future costs that will be incurred for these contracts.

Related to these contracts, auditing these estimates required both extensive audit effort due to a high degree of auditor judgment, especially given the limited historical data for certain contracts, when performing audit procedures and evaluating the results of those procedures.

The Company tests for goodwill impairment annually, at the reporting unit level, in the fourth quarter.

Additionally, goodwill is tested for impairment when an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The goodwill balance was $1.5 billion as of December 31, 2022, of which amounts were assigned to two reporting units which were subject to a quantitative assessment to assess if the fair value of the respective reporting unit exceeded its carrying value.

When performing the quantitative assessment, the Company considered both comparative market multiples as well as estimated discounted cash flows for the reporting units.

The significant estimates and assumptions include, but are not limited to, revenue growth rates, operating margins, and future economic and market conditions.

The discount rates are based upon the reporting unit’s weighted average cost of capital.

The estimated fair values of these reporting units exceeded their carrying amounts and there was no impairment of goodwill.

We identified goodwill for these two reporting units as a critical audit matter because of the significant judgments made by management to estimate their fair value.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to forecasts of future revenue growth rates, operating margins, and future economic and market conditions, and the selection of market multiples and discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs that will be incurred for certain of the contracts (as discussed above) included the following:

• We tested the effectiveness of controls over the long-term contract revenue, including those over the estimates of total costs for the performance obligation.

• We performed the following:

◦ Evaluated the appropriateness and consistency of the methods and assumptions used by management to develop the estimates of future costs that will be incurred for contracts with limited historical experience.

◦ Evaluated management’s ability to achieve the estimates of costs that will be incurred by performing corroborating inquiries with the Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts.

◦ Tested the accuracy and completeness of the costs incurred to date.

◦ Compared the actual costs incurred to date to management’s estimated costs to be incurred to date.

◦ Due to the limited historical data available for certain contracts, we tested changes in management’s total cost estimates.

◦ Tested the mathematical accuracy of management’s estimates of future costs to be incurred.

◦ Tested the mathematical accuracy of management’s calculation of revenue for the contract.

Our audit procedures related to the forecasts of future revenue growth rates, operating margins, and future economic and market conditions (the “forecasts”), and the selection of market multiples and discount rates for these two reporting units included the following:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value, such as controls related to forecasts and management’s selection of market multiples and discount rates.

• We evaluated management’s ability to accurately forecast future revenue growth rates, operating margins, and future economic and market conditions by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to:

– Historical operating results of the reporting unit.

– Internal communications to senior management.

– Third-party industry reports for similar products.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the selected (1) market multiples and (2) discount rates by:

– Researching and analyzing valuation market multiples for guideline public companies.

– Testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculations.

– Developing a range of independent estimates and comparing those to the discount rates selected by management.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

Morristown, New Jersey

February 22, 2023

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Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of Curtiss-Wright Corporation

To the stockholders and the Board of Directors of Curtiss-Wright Corporation

Opinion on Internal Control over Financial Reporting

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 22, 2023, expressed an unqualified opinion on those financial statements.

As described in Management’s Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Safran Aerosystems Arresting Company, and Keronite Group Limited, which were acquired on June 30, 2022 and November 15, 2022, respectively, and whose financial statements constitute 2% of total net sales and 3% of total assets of the consolidated financial statement amounts (excluding acquired intangible assets and goodwill) as of and for year ended December 31, 2022.

Accordingly, our audit did not include the internal control over financial reporting at Safran Aerosystems Arresting Company, and Keronite Group Limited.

Basis for Opinion

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/s/ Deloitte & Touche LLP

Parsippany, New Jersey

Morristown, New Jersey

February 22, 2023

1 unchanged sentence

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 8. Financial Statements and Supplementary Data