Curtiss-wright reports second quarter 2022 financial results and raises full-year 2022 guidance
Davidson, n.c.--(business wire)--curtiss-wright corporation (nyse: cw) reports financial results for the second quarter ended june 30, 2022. second quarter 2022 highlights: reported sales of $609 million, operating income of $98 million, operating margin of 16.1%, and diluted earnings per share (eps) of $1.83; adjusted operating margin of 16.1%, up 50 basis points; adjusted diluted eps of $1.83, up 18%; new orders of $776 million, up 13%, reflecting strong aerospace & defense (a&d) market demand, and book-to-bill of 1.27; backlog of $2.4 billion, up 9% year-to-date; reported free cash flow (fcf) of $22 million; and share repurchases of approximately $12 million. full-year 2022 adjusted guidance: full-year 2022 guidance updated to include the acquisition of the safran aerospace arresting systems business (saa) that was completed on june 30, 2022; the business is expected to generate partial year sales of approximately $40 million within the naval & power segment and also be accretive to full-year adjusted diluted eps; sales increased to new range of 4% to 6% growth (previously 3% to 5%); adjusted operating income increased to new range of 5% to 7% growth (previously 3% to 6%) to reflect organic improvements and the contribution from saa; maintained adjusted operating margin range of 17.1% to 17.3%, up 10 to 30 basis points compared with the prior year; adjusted diluted eps increased by $0.05 to new range of $8.10 to $8.30, up 10% to 13%; and maintained free cash flow range of $345 to $365 million, reflecting greater than 110% fcf conversion. "curtiss-wright delivered solid second quarter results, as overall sales were in-line with our expectations and our ongoing focus on operational execution enabled us to generate 50 basis points in operating margin expansion. as a result, adjusted diluted eps of $1.83 exceeded our expectations in the second quarter," said lynn m. bamford, chair and ceo of curtiss-wright corporation. "we also experienced strong order activity, as bookings increased 13% year over year, yielding a book-to-bill of 1.27, driven by increased demand in our defense and commercial aerospace markets." "looking ahead to the remainder of 2022, although near-term headwinds from ongoing supply chain disruption continue to impact the timing of revenue within our defense markets, we are encouraged by the improving trends in our commercial markets which provides confidence in achieving our full-year outlook. we raised our full-year 2022 guidance for total sales growth to a new range of 4% to 6% to reflect the contribution of the recently completed saa acquisition, and we continue to anticipate solid organic growth of 3% to 5% in our a&d and commercial markets. we also expect continued operating margin expansion and double-digit adjusted diluted eps growth of 10% to 13%, as we successfully execute on our pivot to growth strategy to drive long-term shareholder value.” financing of $300 million in senior notes: on july 29, 2022, the company priced a private placement debt offering of $300 million for senior notes, consisting of $200 million 4.49% notes due 2032 and $100 million 4.64% notes due 2034; the offering is expected to close in the fourth quarter; and curtiss-wright maintains a flexible and conservative capital structure, and has significant capacity for acquisitions, returns to shareholders and other corporate needs. second quarter 2022 operating results (in millions) q2-2022 q2-2021 change reported sales $ 609 $ 621 (2 %) operating income $ 98 $ 95 4 % operating margin 16.1 % 15.2 % 90 bps adjusted (1) sales $ 609 $ 609 0 % operating income $ 98 $ 95 3 % operating margin 16.1 % 15.6 % 50 bps (1) reconciliations of reported to adjusted operating results are available in the appendix. adjusted sales of $609 million were flat compared with the prior year; total a&d market sales decreased 3%, while total commercial market sales increased 6%; in our a&d markets, we experienced reduced sales in our defense markets due to ongoing supply chain headwinds principally for defense electronics components and the timing of naval defense revenues, which were partially offset by modest growth in the commercial aerospace market; in our commercial markets, we experienced solid sales growth within the power & process market, despite the wind down on the china direct ap1000 program, as well as solid mid-single-digit growth in the general industrial market; and adjusted operating income of $98 million increased 3%, while adjusted operating margin increased 50 basis points to 16.1%, principally driven by increased profitability in the naval & power segment, as well as the benefits of our ongoing company-wide operational excellence initiatives; these increases were partially offset by unfavorable overhead absorption on lower revenues in our defense electronics segment. second quarter 2022 segment performance aerospace & industrial (in millions) q2-2022 q2-2021 change reported sales $ 209 $ 200 4 % operating income $ 32 $ 32 2 % operating margin 15.6 % 16.0 % (40 bps) adjusted (1) sales $ 209 $ 194 8 % operating income $ 32 $ 30 7 % operating margin 15.6 % 15.7 % (10 bps) (1) reconciliations of reported to adjusted operating results are available in the appendix. adjusted sales of $209 million, up $15 million, or 8%; higher commercial aerospace market revenue reflected strong demand for actuation and sensors products, as well as surface treatment services, on numerous narrowbody and widebody platforms; higher general industrial market revenue was driven by increased sales of industrial vehicle products, principally serving off-highway and specialty platforms; lower aerospace defense market revenue principally reflected reduced sales of actuation and sensors products on various fighter jet programs; and adjusted operating income was $32 million, up 7% from the prior year, while adjusted operating margin decreased 10 basis points to 15.6%, as favorable absorption on strong commercial market sales and the benefits of our ongoing operational excellence initiatives were offset by higher research and development investments. defense electronics (in millions) q2-2022 q2-2021 change reported sales $ 150 $ 162 (8 %) operating income $ 24 $ 29 (16 %) operating margin 16.4 % 18.0 % (160 bps) adjusted (1) sales $ 150 $ 163 (8 %) operating income $ 24 $ 31 (21 %) operating margin 16.4 % 18.9 % (250 bps) (1) reconciliations of reported to adjusted operating results are available in the appendix. adjusted sales of $150 million, down $14 million, or 8%, principally reflected the timing of sales within our aerospace and ground defense markets due to ongoing supply chain headwinds and the delayed signing of the fy22 defense budget; higher naval defense market revenue primarily reflected increased revenues on the virginia-class submarine program; lower commercial aerospace market revenue reflected decreased sales of avionics and flight test equipment on various domestic and international platforms; and adjusted operating income was $24 million, down 21% from the prior year, while adjusted operating margin decreased 250 basis points to 16.4%, primarily reflecting unfavorable absorption on lower a&d revenues. naval & power (in millions) q2-2022 q2-2021 change reported sales $ 251 $ 259 (3 %) operating income $ 50 $ 43 16 % operating margin 19.9 % 16.6 % 330 bps adjusted (1) sales $ 251 $ 252 0 % operating income $ 50 $ 43 15 % operating margin 19.9 % 17.2 % 270 bps (1) reconciliations of reported to adjusted operating results are available in the appendix. adjusted sales of $251 million were essentially flat compared with the prior year period; naval defense market revenue declines primarily reflected lower revenues on the cvn-80 aircraft carrier and virginia-class submarine programs, partially offset by higher revenues on the cvn-81 aircraft carrier and columbia-class submarine programs; higher power & process market revenues reflected strong growth in industrial valve sales in the process market as well as higher nuclear aftermarket revenues supporting the maintenance of existing operating reactors; those increases were partially offset by the timing of production on the china direct ap1000 program; and adjusted operating income was $50 million, up 15% from the prior year, while adjusted operating margin increased 270 basis points to 19.9%, primarily driven by favorable mix in the naval defense and process markets, as well as the benefits of our ongoing operational excellence initiatives. free cash flow (in millions) q2-2022 q2-2021 change net cash provided by operating activities $ 31 $ 75 (59 %) capital expenditures (9 ) (9 ) (7 %) reported free cash flow $ 22 $ 66 (66 %) adjusted free cash flow (1) $ 22 $ 66 (66 %) (1) a reconciliation of reported to adjusted free cash flow is available in the appendix. reported free cash flow of $22 million decreased $43 million, primarily due to the timing of defense revenues and higher working capital; adjusted free cash flow of $22 million; and capital expenditures were essentially flat compared with the prior year. new orders and backlog new orders of $776 million increased 13% and generated a strong book-to-bill of 1.27, principally driven by strong demand for naval defense and commercial aerospace products within our a&d markets, and for nuclear aftermarket and process products within our commercial markets; and backlog of $2.4 billion, up 9% from december 31, 2021, reflects higher demand in both our a&d and commercial markets. share repurchase and dividends during the second quarter, the company repurchased 87,412 shares of its common stock for approximately $12 million; and the company also declared and paid a quarterly dividend of $0.19 a share, an increase of 6% from the previous quarter. full-year 2022 guidance the company is updating its full-year 2022 adjusted financial guidance(1) as follows: ($ in millions, except eps) 2022 adjusted non-gaap guidance (prior) 2022 adjusted non-gaap guidance (current) % chg vs 2021 total sales $2,530 - $2,580 $2,570 - $2,620 up 4% - 6% operating income $432 - $446 $439 - $452 up 5% - 7% operating margin 17.1% - 17.3% 17.1% - 17.3% up 10 - 30 bps diluted eps $8.05 - $8.25 $8.10 - $8.30 up 10% - 13% free cash flow $345 - $365 $345 - $365 up 0% - 5% (1) reconciliations of reported to adjusted 2021 operating results and 2022 financial guidance are available in the appendix. adjusted guidance includes the contribution from the saa acquisition to the company's second half 2022 performance. ********** a more detailed breakdown of the company’s 2022 financial guidance by segment and by market, as well as all reconciliations of reported gaap amounts to adjusted non-gaap amounts, can be found in the accompanying schedules. historical financial results are available in the investor relations section of curtiss-wright’s website. conference call & webcast information the company will host a conference call to discuss second quarter 2022 financial results and updates to 2022 guidance at 10:00 a.m. et on thursday, august 4, 2022. a live webcast of the call and the accompanying financial presentation, as well as a replay of the call, will be made available on the internet by visiting the investor relations section of the company’s website at www.curtisswright.com. (tables to follow) curtiss-wright corporation and subsidiaries condensed consolidated statements of earnings (unaudited) ($'s in thousands, except per share data) three months ended six months ended june 30, june 30, 2022 2021 2022 2021 product sales $ 505,416 $ 515,392 $ 958,837 $ 1,024,367 service sales 103,941 106,103 209,981 194,187 total net sales 609,357 621,495 1,168,818 1,218,554 cost of product sales 316,389 331,881 610,916 661,335 cost of service sales 64,454 64,895 127,986 122,743 total cost of sales 380,843 396,776 738,902 784,078 gross profit 228,514 224,719 429,916 434,476 research and development expenses 23,868 23,194 44,417 45,057 selling expenses 30,407 29,564 58,499 59,160 general and administrative expenses 76,134 77,378 163,734 150,610 loss on divestiture — — 4,651 — operating income 98,105 94,583 158,615 179,649 interest expense 9,788 10,180 19,318 20,139 other income, net 4,555 440 7,552 5,283 earnings before income taxes 92,872 84,843 146,849 164,793 provision for income taxes (22,000 ) (23,435 ) (35,292 ) (43,916 ) net earnings $ 70,872 $ 61,408 $ 111,557 $ 120,877 net earnings per share: basic earnings per share $ 1.84 $ 1.50 $ 2.90 $ 2.95 diluted earnings per share $ 1.83 $ 1.49 $ 2.89 $ 2.94 dividends per share $ 0.19 $ 0.18 $ 0.37 $ 0.35 weighted-average shares outstanding: basic 38,429 40,915 38,438 40,921 diluted 38,654 41,088 38,657 41,092 curtiss-wright corporation and subsidiaries condensed consolidated balance sheets (unaudited) ($'s in thousands, except par value) june 30, december 31, 2022 2021 assets current assets: cash and cash equivalents $ 171,414 $ 171,004 receivables, net 699,632 647,148 inventories, net 482,790 411,567 assets held for sale — 10,988 other current assets 84,584 67,101 total current assets 1,438,420 1,307,808 property, plant, and equipment, net 348,062 360,031 goodwill 1,531,999 1,463,026 other intangible assets, net 638,873 538,077 operating lease right-of-use assets, net 145,325 143,613 prepaid pension asset 263,719 256,422 other assets 36,130 34,568 total assets $ 4,402,528 $ 4,103,545 liabilities current liabilities: current portion of long-term debt $ 202,500 $ — accounts payable 171,589 211,640 accrued expenses 133,706 147,701 deferred revenue 215,188 260,157 liabilities held for sale — 12,655 due to seller 247,215 — other current liabilities 89,009 102,714 total current liabilities 1,059,207 734,867 long-term debt 1,006,577 1,050,610 deferred tax liabilities, net 149,213 147,349 accrued pension and other postretirement benefit costs 84,404 91,329 long-term operating lease liability 126,006 127,152 long-term portion of environmental reserves 13,100 13,656 other liabilities 96,382 112,092 total liabilities 2,534,889 2,277,055 stockholders' equity common stock, $1 par value $ 49,187 $ 49,187 additional paid in capital 126,316 127,104 retained earnings 3,006,164 2,908,827 accumulated other comprehensive loss (227,872 ) (190,465 ) less: cost of treasury stock (1,086,156 ) (1,068,163 ) total stockholders' equity 1,867,639 1,826,490 total liabilities and stockholders' equity $ 4,402,528 $ 4,103,545 use and definitions of non-gaap financial information (unaudited) the corporation supplements its financial information determined under u.s. generally accepted accounting principles (gaap) with certain non-gaap financial information. curtiss-wright believes that these adjusted (non-gaap) measures provide investors with improved transparency in order to better measure curtiss-wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. these non-gaap measures should not be considered in isolation or as a substitute for the related gaap measures, and other companies may define such measures differently. curtiss-wright encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. reconciliations of “reported” gaap amounts to “adjusted” non-gaap amounts are furnished within this release. the following definitions are provided: adjusted sales, operating income, operating margin, net earnings and diluted eps these adjusted financials are defined as reported sales, operating income, operating margin, net earnings and diluted earnings per share under gaap excluding: (i) the impact of first year purchase accounting costs associated with acquisitions, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) the sale or divestiture of a business or product line; (iii) pension settlement charges; and (iv) significant legal settlements, impairment costs, and costs associated with shareholder activism, as applicable. curtiss-wright corporation and subsidiaries reconciliation of as reported to adjusted (unaudited) ($'s in thousands) three months ended three months ended june 30, 2022 june 30, 2021 % change as reported adjustments adjusted as reported adjustments adjusted as reported adjusted sales: aerospace & industrial (1) $ 208,572 $ — $ 208,572 $ 199,713 $ (5,784 ) $ 193,929 4 % 8 % defense electronics (2) 149,549 — 149,549 162,351 1,080 163,431 (8 )% (8 )% naval & power (3) 251,236 — 251,236 259,431 (7,413 ) 252,018 (3 )% — % total sales $ 609,357 $ — $ 609,357 $ 621,495 $ (12,117 ) $ 609,378 (2 )% — % operating income (expense): aerospace & industrial (1) $ 32,464 $ — $ 32,464 $ 31,977 $ (1,506 ) $ 30,471 2 % 7 % defense electronics (2) 24,460 — 24,460 29,271 1,592 30,863 (16 )% (21 )% naval & power (3) 50,001 — 50,001 43,095 366 43,461 16 % 15 % total segments $ 106,925 $ — $ 106,925 $ 104,343 $ 452 $ 104,795 2 % 2 % corporate and other (8,820 ) — (8,820 ) (9,760 ) — (9,760 ) 10 % 10 % total operating income $ 98,105 $ — $ 98,105 $ 94,583 $ 452 $ 95,035 4 % 3 % operating margins: as reported adjusted as reported adjusted as reported adjusted aerospace & industrial 15.6 % 15.6 % 16.0 % 15.7 % (40 bps) (10 bps) defense electronics 16.4 % 16.4 % 18.0 % 18.9 % (160 bps) (250 bps) naval & power 19.9 % 19.9 % 16.6 % 17.2 % 330 bps 270 bps total curtiss-wright 16.1 % 16.1 % 15.2 % 15.6 % 90 bps 50 bps segment margins 17.5 % 17.5 % 16.8 % 17.2 % 70 bps 30 bps (1) excludes our build-to-print actuation product line supporting the boeing 737 max program, which we substantially exited in the fourth quarter of 2020. (2) excludes first year purchase accounting adjustments in the prior period. (3) excludes the results of operations from our german valves business, which was sold in january 2022. curtiss-wright corporation and subsidiaries reconciliation of as reported to adjusted (unaudited) ($'s in thousands) six months ended six months ended june 30, 2022 june 30, 2021 % change as reported adjustments adjusted as reported adjustments adjusted as reported adjusted sales: aerospace & industrial (1) $ 399,684 $ — $ 399,684 $ 380,044 $ (8,383 ) $ 371,661 5 % 8 % defense electronics (2) 292,618 — 292,618 343,563 2,160 345,723 (15 )% (15 )% naval & power (3) 476,516 — 476,516 494,947 (12,996 ) 481,951 (4 )% (1 )% total sales $ 1,168,818 $ — $ 1,168,818 $ 1,218,554 $ (19,219 ) $ 1,199,335 (4 )% (3 )% operating income (expense): aerospace & industrial (1) $ 57,317 $ — $ 57,317 $ 51,002 $ (1,982 ) $ 49,020 12 % 17 % defense electronics (2) 47,750 — 47,750 65,894 3,197 69,091 (28 )% (31 )% naval & power (3) 77,289 5,427 82,716 81,152 2,955 84,107 (5 )% (2 )% total segments $ 182,356 $ 5,427 $ 187,783 $ 198,048 $ 4,170 $ 202,218 (8 )% (7 )% corporate and other (4) (23,741 ) 4,876 (18,865 ) (18,399 ) — (18,399 ) (29 )% (3 )% total operating income $ 158,615 $ 10,303 $ 168,918 $ 179,649 $ 4,170 $ 183,819 (12 )% (8 )% operating margins: as reported adjusted as reported adjusted as reported adjusted aerospace & industrial 14.3 % 14.3 % 13.4 % 13.2 % 90 bps 110 bps defense electronics 16.3 % 16.3 % 19.2 % 20.0 % (290 bps) (370 bps) naval & power 16.2 % 17.4 % 16.4 % 17.5 % (20 bps) (10 bps) total curtiss-wright 13.6 % 14.5 % 14.7 % 15.3 % (110 bps) (80 bps) segment margins 15.6 % 16.1 % 16.3 % 16.9 % (70 bps) (80 bps) (1) excludes our build-to-print actuation product line supporting the boeing 737 max program, which we substantially exited in the fourth quarter of 2020. (2) excludes first year purchase accounting adjustments in the prior period. (3) excludes the results of operations from our german valves business, which was sold in january 2022, and the loss on divestiture in the current period. (4) excludes costs associated with shareholder activism in the current period. curtiss-wright corporation and subsidiaries reconciliation of as reported sales to adjusted sales by end market (unaudited) ($'s in thousands) three months ended three months ended june 30, 2022 june 30, 2021 % change as reported adjustments adjusted sales as reported adjustments adjusted sales change in as reported sales change in adjusted sales aerospace & defense markets: aerospace defense $ 94,545 $ — $ 94,545 $ 99,977 $ — $ 99,977 (5 %) (5 %) ground defense (1) 44,393 — 44,393 48,221 1,080 49,301 (8 %) (10 %) naval defense 172,786 — 172,786 177,724 — 177,724 (3 %) (3 %) commercial aerospace (2) 68,192 — 68,192 71,555 (5,784 ) 65,771 (5 %) 4 % total aerospace & defense $ 379,916 $ — $ 379,916 $ 397,477 $ (4,704 ) $ 392,773 (4 %) (3 %) commercial markets: power & process (3) 125,355 — 125,355 125,333 (7,414 ) 117,919 0 % 6 % general industrial 104,086 — 104,086 98,685 — 98,685 5 % 5 % total commercial $ 229,441 $ — $ 229,441 $ 224,018 $ (7,414 ) $ 216,604 2 % 6 % total curtiss-wright $ 609,357 $ — $ 609,357 $ 621,495 $ (12,118 ) $ 609,377 (2 %) 0 % six months ended six months ended june 30, 2022 june 30, 2021 % change as reported adjustments adjusted sales as reported adjustments adjusted sales change in as reported sales change in adjusted sales aerospace & defense markets: aerospace defense $ 192,549 $ — $ 192,549 $ 210,993 $ — $ 210,993 (9 %) (9 %) ground defense (1) 83,501 — 83,501 103,967 2,160 106,127 (20 %) (21 %) naval defense 335,753 — 335,753 355,629 — 355,629 (6 %) (6 %) commercial aerospace (2) 129,084 — 129,084 128,824 (8,383 ) 120,441 0 % 7 % total aerospace & defense $ 740,887 $ — $ 740,887 $ 799,413 $ (6,223 ) $ 793,190 (7 %) (7 %) commercial markets: power & process (3) 230,143 — 230,143 230,837 (12,996 ) 217,841 0 % 6 % general industrial 197,788 — 197,788 188,304 — 188,304 5 % 5 % total commercial $ 427,931 $ — $ 427,931 $ 419,141 $ (12,996 ) $ 406,145 2 % 5 % total curtiss-wright $ 1,168,818 $ — $ 1,168,818 $ 1,218,554 $ (19,219 ) $ 1,199,335 (4 %) (3 %) (1) excludes first year purchase accounting adjustments in the prior period. (2) excludes our build-to-print actuation product line supporting the boeing 737 max program, which we substantially exited in the fourth quarter of 2020. (3) excludes the prior period results of our german valves business, which was sold in january 2022. curtiss-wright corporation and subsidiaries reconciliation of as reported to adjusted diluted earnings per share (unaudited) three months ended six months ended june 30, june 30, 2022 2021 2022 2021 diluted earnings per share - as reported $ 1.83 $ 1.49 $ 2.89 $ 2.94 divested german valves business — — 0.11 0.04 costs associated with shareholder activism — — 0.10 — former executive pension settlement expense — 0.06 0.04 0.06 first year purchase accounting adjustments — 0.03 — 0.06 exit of build-to-print actuation product line — (0.02 ) — (0.03 ) diluted earnings per share - adjusted (1) $ 1.83 $ 1.56 $ 3.14 $ 3.07 (1) all adjustments are presented net of income taxes. organic sales and organic operating income the corporation discloses organic sales and organic operating income because the corporation believes it provides investors with insight as to the company’s ongoing business performance. organic sales and organic operating income are defined as sales and operating income, excluding contributions from acquisitions made during the last twelve months, loss on divestiture of the german valves business, and foreign currency fluctuations. three months ended june 30, 2022 vs. 2021 aerospace & industrial defense electronics naval & power total curtiss-wright sales operating income sales operating income sales operating income sales operating income as reported 4% 2% (8%) (16%) (3%) 16% (2%) 4% less: acquisitions 0% 0% 0% 0% 0% 0% 0% 0% foreign currency 3% 0% 1% (5%) 0% (1%) 1% (2%) organic 7% 2% (7%) (21%) (3%) 15% (1%) 2% six months ended june 30, 2022 vs. 2021 aerospace & industrial defense electronics naval & power total curtiss-wright sales operating income sales operating income sales operating income sales operating income as reported 5% 12% (15%) (28%) (4%) (5%) (4%) (12%) less: acquisitions 0% 0% 0% 0% 0% 0% 0% 0% loss on divestiture 0% 0% 0% 0% 0% 7% 0% 4% foreign currency 2% 2% 1% (1%) 0% 0% 1% (1%) organic 7% 14% (14%) (29%) (4%) 2% (3%) (9%) free cash flow and free cash flow conversion the corporation discloses free cash flow because it measures cash flow available for investing and financing activities. free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. free cash flow is defined as net cash provided by operating activities less capital expenditures. adjusted free cash flow for 2022 excludes: (i) payments associated with the westinghouse legal settlement and (ii) executive pension payments. the corporation discloses adjusted free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as adjusted free cash flow divided by adjusted net earnings. curtiss-wright corporation and subsidiaries non-gaap financial data (unaudited) ($'s in thousands) three months ended six months ended june 30, june 30, 2022 2021 2022 2021 net cash provided by (used for) operating activities $ 31,044 $ 75,079 $ (93,271 ) $ 48,476 capital expenditures (8,596 ) (9,234 ) (19,492 ) (17,771 ) free cash flow $ 22,448 $ 65,845 $ (112,763 ) $ 30,705 westinghouse legal settlement — — 15,000 — pension payment to former executive — — 8,214 — adjusted free cash flow $ 22,448 $ 65,845 $ (89,549 ) $ 30,705 adjusted free cash flow conversion 32 % 101 % (74 %) 24 % curtiss-wright corporation 2022 guidance as of august 3, 2022 ($'s in millions, except per share data) 2021 reported (gaap) 2021 adjustments (non- gaap)(1) 2021 adjusted (non- gaap)(1) 2022 reported guidance (gaap) 2022 adjustments (non-gaap)(2,3) 2022 adjusted guidance (non-gaap)(1,2,3) low high low high 2022 chg vs 2021 adjusted sales: aerospace & industrial $ 786 $ (11 ) $ 775 $ 820 $ 840 $ — $ 820 $ 840 6 - 8% defense electronics 724 4 728 720 735 — 720 735 (1) - 1% naval & power 995 (30 ) 965 1,030 1,045 — 1,030 1,045 7 - 8% total sales $ 2,506 $ (37 ) $ 2,468 $ 2,570 $ 2,620 $ — $ 2,570 $ 2,620 4 to 6% operating income: aerospace & industrial $ 122 $ (2 ) $ 120 $ 133 $ 137 $ — $ 133 $ 137 11 - 14% defense electronics 159 5 164 160 165 — 160 165 (3) - 0% naval & power 142 34 176 171 175 15 186 190 6 - 8% total segments 423 38 460 464 477 15 479 492 corporate and other (40 ) — (40 ) (44 ) (45 ) 5 (39 ) (40 ) total operating income $ 383 $ 38 $ 420 $ 420 $ 432 $ 20 $ 439 $ 452 5 to 7% interest expense $ (40 ) $ — $ (40 ) $ (44 ) $ (45 ) $ — $ (44 ) $ (45 ) other income, net 12 3 15 8 9 9 17 18 earnings before income taxes 355 41 395 384 396 29 412 424 provision for income taxes (87 ) (10 ) (97 ) (92 ) (95 ) (7 ) (99 ) (102 ) net earnings $ 267 $ 31 $ 298 $ 291 $ 301 $ 22 $ 313 $ 323 diluted earnings per share $ 6.58 $ 0.76 $ 7.34 $ 7.54 $ 7.74 $ 0.56 $ 8.10 $ 8.30 10 to 13% diluted shares outstanding 40.6 40.6 38.6 38.8 38.6 38.8 effective tax rate 24.6 % 24.6 % 24.0 % 24.0 % 24.0 % 24.0 % operating margins: aerospace & industrial 15.5 % 15.5 % 16.2 % 16.4 % 16.2 % 16.4 % 70 to 90 bps defense electronics 22.0 % 22.6 % 22.2 % 22.4 % 22.2 % 22.4 % (20 to 40 bps) naval & power 14.2 % 18.2 % 16.6 % 16.7 % 18.0 % 18.2 % (20) to 0 bps total operating margin 15.3 % 17.0 % 16.3 % 16.5 % 17.1 % 17.3 % 10 to 30 bps free cash flow $ 347 $ 347 $ 306 $ 326 $ 39 $ 345 $ 365 notes: full year amounts may not add due to rounding. (1) 2021 adjusted financials excludes the impact of first year purchase accounting adjustments; our build-to-print actuation product line supporting the boeing 737 max program; the results of operations and related impairments from our german valves business; pension settlement charges related to the retirement of two former executives (within non-operating income); and one-time legal settlement costs. (2) 2022 adjusted financials exclude the impact of first year purchase accounting adjustments, the loss on sale of our german valves business, costs associated with shareholder activism and pension settlement charges related to the retirement of two former executives. (3) free cash flow is defined as cash flow from operations less capital expenditures. 2022 adjusted free cash flow guidance excludes executive pension settlement payments of $24 million and a legal settlement payment of $15 million. curtiss-wright corporation 2022 sales growth guidance by end market as of august 3, 2022 2022 % change vs. 2021 adjusted(1)(2) prior current % total sales aerospace & defense markets aerospace defense 0 - 2% 9 - 11% 19% ground defense 2 - 4% (1 - 3%) 8% naval defense 1 - 3% 1 - 3% 28% commercial aerospace 9 - 11% 9 - 11% 11% total aerospace & defense 2 - 4% 4 - 6% 66% commercial markets power & process 1 - 3% 4 - 6% 18% general industrial 6 - 8% 6 - 8% 16% total commercial 4 - 6% 5 - 7% 34% total curtiss-wright sales 3 - 5% 4 - 6% 100% (1) 2021 adjusted sales exclude the impact of first year purchase accounting adjustments; our build-to-print actuation product line supporting the boeing 737 max programs; and the results of operations from our german valves business. (2) 2022 sales include the contribution from the saa acquisition to the company's second half 2022 performance. about curtiss-wright corporation curtiss-wright corporation (nyse:cw) 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 leverage a workforce of approximately 8,000 highly skilled employees who develop, design and build what we believe are the best engineered solutions to the markets we serve. building on the heritage of glenn curtiss and the wright brothers, curtiss-wright has a long tradition of providing innovative solutions through trusted customer relationships. for more information, visit www.curtisswright.com. ### certain statements made in this press release, including statements about future revenue, financial performance guidance, quarterly and annual revenue, net income, operating income growth, future business opportunities, cost saving initiatives, the successful integration of the company’s acquisitions, and future cash flow from operations, are forward-looking statements within the meaning of the private securities litigation reform act of 1995. these statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. such risks and uncertainties include, but are not limited to: a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. such factors are detailed in the company's annual report on form 10-k for the fiscal year ended december 31, 2021, and subsequent reports filed with the securities and exchange commission. this press release and additional information are available at www.curtisswright.com.
