Curtiss-Wright(CW) - 2025 Q4 - Annual Report

Sales and Revenue Growth - In 2025, sales to the U.S. Government and foreign government end use represented 58% of total net sales, up from 56% in 2023[31] - Total U.S. Government sales reached $1,647,019 thousand in 2025, an increase from $1,314,770 thousand in 2023, reflecting a growth of 25.3%[34] - The Defense Electronics segment generated $761,926 thousand in sales for 2025, compared to $638,597 thousand in 2023, marking a growth of 19.3%[34] - The Naval & Power segment's sales increased to $704,051 thousand in 2025 from $529,968 thousand in 2023, representing a growth of 32.8%[34] - Approximately 47% of total net sales in 2025 were derived from or related to U.S. defense programs[73] - Total sales increased by $377 million, or 12%, to $3,498 million in 2025 compared to 2024, driven by growth in all segments: Aerospace & Industrial (5%), Defense Electronics (12%), and Naval & Power (18%)[177] - Sales in the Defense Electronics segment increased by $108 million, or 12%, to $1,018.61 million, with operating income up 24% to $278.02 million[191][192] - Sales in the Naval & Power segment rose by $225 million, or 18%, to $1,503.00 million, with new orders increasing by 23% to $2,040.66 million[196][198] Strategic Focus and Growth Initiatives - The company’s strategy focuses on maximizing revenue, operating income, and free cash flow growth to drive shareholder value[20] - The company aims to deepen customer relationships and expand global manufacturing capabilities as part of its growth strategy[21] - The Operational Growth Platform is designed to drive margin expansion and support ongoing investments in research and development[22] - The company maintains a strong balance sheet to prioritize acquisitions and returns to shareholders through share repurchases and dividends[22] Employee and Workplace Initiatives - At the end of 2025, Curtiss-Wright had approximately 9,100 employees across more than 20 countries, with about 6% represented by labor unions[37] - The company has made significant investments in employee compensation programs, including equity-based incentive compensation plans to align the interests of employees and shareholders[38] - Curtiss-Wright emphasizes a culture of inclusivity and ethical standards, with annual training programs on various compliance topics for all employees[40][48] - The company offers a range of employee wellness programs, including free annual biometric screenings and mental health support services[50] - Curtiss-Wright's talent management strategy includes regular succession and career development reviews to ensure a diverse pipeline of talent[44] - The company maintains a Code of Conduct that mandates compliance with laws and regulations, addressing conflicts of interest and financial reporting[41][48] - Curtiss-Wright's leadership development programs aim to cultivate skills and experiences critical to the company's future talent needs[45] Financial Position and Capital Management - As of December 31, 2025, the company had approximately $1.0 billion of debt outstanding, which could significantly impact cash flows and operational flexibility[105] - The company had goodwill and other intangible assets of approximately $2.2 billion, representing about 43% of total assets, which are subject to impairment tests[104] - The company paid quarterly dividends in 2025, with the fourth quarter dividend at $0.24 per share, up from $0.21 in 2024[134] - The company has significant discretionary funding capacity through operating cash flows and access to credit markets, although global macroeconomic uncertainty poses risks[115] - The company has consistently focused on mitigating inflation through pricing initiatives and operational excellence, successfully offsetting cost increases in many cases[114] Risks and Challenges - The company expects to incur additional costs to comply with increased cybersecurity protections and information control requirements[53] - Supply chain constraints and improving economic conditions have led to sustained increases in prices for many components and raw materials[59] - The company is facing higher labor costs due to increased competition for personnel and general inflationary conditions[59] - The company’s ability to perform obligations as a prime contractor may be adversely affected if suppliers fail to provide agreed-upon supplies in a timely manner[59] - The company may face risks associated with its acquisition strategy, including integration challenges and unexpected liabilities[64] - U.S. defense spending is subject to cyclical changes and may be impacted by various external factors, potentially affecting the company’s revenues[73] - The company may not be able to fully protect its intellectual property rights, which could lead to increased litigation costs[71] - The company is involved in periodic litigation and regulatory proceedings, which could result in substantial costs and distract management from operations[94] Market and Economic Conditions - The commercial aircraft market is cyclical and can be adversely affected by factors such as passenger traffic levels, fuel costs, and geopolitical events, which could impact financial condition and results of operations[76] - The airline industry is heavily regulated, and failure to comply with applicable requirements could adversely affect business and financial condition[88] - Climate change regulations could require costly changes in manufacturing processes and increase operational costs, impacting overall financial performance[95] - Changes in foreign currency exchange rates could adversely affect results, particularly with significant exposure to the British Pound, Euro, and Canadian dollar[99] - The implementation of new tariffs and trade restrictions could increase material costs and impact pricing strategies, potentially reducing demand[112] Backlog and Future Opportunities - The backlog as of December 31, 2025, was approximately $4.1 billion, but it is subject to reduction and cancellation, which could negatively impact revenues and results of operations[77] - Backlog fluctuations may not necessarily indicate future sales, and project delays could impact timing and revenue recognition[77] - The company is expanding its presence in the government nuclear sector by providing equipment and systems to key customers, including the Idaho National Laboratory[167] - The nuclear industry anticipates a demand for over 90 gigawatts of nuclear power to support decarbonization goals, translating to the potential for 300 new SMRs by 2050[169] - More than 70 new reactors are under construction globally, with nearly 120 additional reactors planned and over 300 proposed in the coming decades[168]