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What changed in CURTISS WRIGHT CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CURTISS WRIGHT CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+291 added−289 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-22)

Top changes in CURTISS WRIGHT CORP's 2023 10-K

291 paragraphs added · 289 removed · 223 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

43 edited+10 added−1 removed35 unchanged
Biggest changeIt is built upon a strong foundation of operational and financial excellence where we strive for consistent growth in sales, operating margin, diluted earnings per share and free cash flow. Curtiss-Wright is differentiated because we have strength in the combined portfolio benefiting from long-term stability in our defense businesses and agility in our commercial businesses.
Biggest changeOur Strategy Curtiss-Wright's Pivot to Growth strategy focuses on maximizing revenue, operating income, and free cash flow growth for our shareholders. It is built upon a strong foundation of operational and financial excellence where we strive for consistent growth in sales, operating margin, diluted earnings per share, and free cash flow.
Amidst the evolving and, at times, challenging hiring environment, we apply agile recruiting methods as we work to adapt to the changing labor marketplace and to ensure employees and candidates have an exceptional experience. Diversity and Inclusion 9 Curtiss-Wright believes in a diverse and inclusive workforce, where diverse backgrounds are represented, engaged, and empowered to inspire and innovate.
Amidst the evolving and, at times, challenging hiring environment, we apply agile recruiting methods as we work to adapt to the changing labor marketplace and to ensure employees and candidates have an exceptional experience. Diversity and Inclusion Curtiss-Wright believes in a diverse and inclusive workforce, where diverse backgrounds are represented, engaged, and empowered to inspire and innovate.
In the event of a termination for convenience by the government, there generally are provisions for recovery of our allowable incurred costs and a proportionate share of the profit or fee on the work completed, consistent with regulations of the U.S. Government. Fixed-price redeterminable contracts usually provide that we absorb the majority of any cost overrun.
In the event of a termination for convenience by the government, there generally are provisions for recovery of our allowable incurred costs and a proportionate share of the profit or fee on the work completed, consistent with regulations of the U.S. Government. Fixed-price contracts usually provide that we absorb the majority of any cost overrun.
Nearly hundreds of leaders have honed their skills leveraging various learning modalities, including virtual and in-person instructor-led, web-based training and micro-courses to support our managers. Our employee development programs are designed to strengthen employee skills that align to our current and future business needs, encourage knowledge sharing and support career progression and growth.
Hundreds of leaders have honed their skills leveraging various learning modalities, including virtual and in-person instructor-led, web-based training and micro-courses to support our managers. Our employee development programs are designed to strengthen employee skills that align to our current and future business needs, encourage knowledge sharing and support career progression and growth.
The defense businesses in this segment provide a diversified offering of products including: commercial off-the-shelf (COTS) embedded computing board-level modules, data acquisition and flight test instrumentation equipment, integrated subsystems, instrumentation and control systems, tactical communications solutions for battlefield network management, and electronic stabilization products.
The defense businesses in this segment provide a diversified offering of products including commercial off-the-shelf (COTS) embedded computing board-level modules and processing equipment, data acquisition and flight test instrumentation equipment, integrated subsystems, instrumentation and control systems, tactical communications solutions for battlefield network management, and electronic stabilization products.
Our defense businesses supporting government contractors 5 typically utilize more advanced and ruggedized production and service processes compared to our commercial businesses and have more stringent specifications and performance requirements based on their support of key Department of Defense (DoD) priorities such as cyber, security and the net-centric connected battlefield.
Our defense businesses supporting government contractors typically utilize more advanced and ruggedized production and service processes compared to our commercial businesses and have more stringent specifications and performance requirements based on their support of key Department of Defense (DoD) priorities such as cyber, security and the net-centric connected battlefield.
Our equity compensation plans ultimately act as a key lever for rewarding and retaining key employees, while also aligning the interests of our key employees and shareholders. See Note 16 to the Consolidated Financial Statements for more information regarding our equity-based compensation plans.
Our equity-based incentive compensation plans ultimately act as a key lever for rewarding and retaining key employees, while also aligning the interests of our key employees and shareholders. See Note 16 to the Consolidated Financial Statements for more information regarding our equity-based incentive compensation plans.
We also provide Reactor Coolant Pumps (RCPs) and control rod drive mechanisms for commercial nuclear power plants, most notably to support the Generation III+ Westinghouse AP1000 reactor design, as well as various nuclear reactor technologies supporting the deployment of Generation IV advanced Small Modular Reactors (SMRs).
We also provide Reactor Coolant Pumps (RCPs) and control rod drive mechanisms for commercial nuclear power plants, most notably to support the Generation III+ Westinghouse AP1000 reactor design, as well as various nuclear reactor technologies supporting the design and deployment of numerous advanced Small Modular Reactors (SMRs).
Prior to this, he served as Vice President of Human Resources of the Corporation from November 2011 and also served as Associate General Counsel and Assistant Secretary of the Corporation from June 1999 and May 2001, respectively. 55 2011 Robert F. Freda Vice President and Treasurer Vice President and Treasurer of the Corporation since January 2021.
Prior to this, he served as Vice President of Human Resources of the Corporation from November 2011 and also served as Associate General Counsel and Assistant Secretary of the Corporation from June 1999 and May 2001, respectively. 56 2011 Robert F. Freda Vice President and Treasurer Vice President and Treasurer of the Corporation since January 2021.
Prior to this, he served as Vice President of Finance and Administration of the Company’s Surface Technologies division from November 2016. He also served as Assistant Corporate Controller of the Corporation from 2014. 41 2020 John C. Watts Vice President of Strategy and Corporate Development Vice President of Strategy and Corporate Development of the Corporation since May 2022.
Prior to this, he served as Vice President of Finance and Administration of the Company’s Surface Technologies division from November 2016. He also served as Assistant Corporate Controller of the Corporation from 2014. 42 2020 John C. Watts Vice President of Strategy and Corporate Development Vice President of Strategy and Corporate Development of the Corporation since May 2022.
We utilize our Leaning Management System to provide our employees online career-specific tools and resources and we also support development opportunities through educational institutions with our Tuition Assistance Program. Our early-in-career rotation program for new business leaders develops talent pipelines with both depth of skills and breadth of experiences that are critical to the company’s future talent needs.
We utilize our Learning Management System to provide our employees online career-specific tools, training, and resources, and we also support development opportunities through educational institutions with our Tuition Assistance Program. Our early-in-career rotation program for new business leaders develops talent pipelines with both depth of skills and breadth of experiences that are critical to the company’s future talent needs.
Our Technical Fellows program and our Innovative Council program is uniquely designed to cultivate technical, domain expertise and collaborative thought leadership for early through advanced career levels. As our company continues to grow, we rely on an integrated talent acquisition approach. The company strategically attracts, identifies, and onboards candidates in support of business needs and priorities.
Our 9 Technical Fellows program and our Innovation Council program is uniquely designed to cultivate technical, domain expertise and collaborative thought leadership for early through advanced career levels. As our Company continues to grow, we rely on an integrated talent acquisition approach. The Company strategically attracts, identifies, and onboards candidates in support of business needs and priorities.
Prior to this, he served as Assistant Corporate Controller of the Corporation from June 2017 and also served as Director of Finance from September 2006. 55 2021 Gary A. Ogilby Vice President and Corporate Controller Vice President and Corporate Controller of the Corporation since May 2020.
Prior to this, he served as Assistant Corporate Controller of the Corporation from June 2017 and also served as Director of Finance from September 2006. 56 2021 Gary A. Ogilby Vice President and Corporate Controller Vice President and Corporate Controller of the Corporation since May 2020.
In the general industrial market, we have long-standing customer relationships and maintain a broad portfolio of products and services promoting efficiency, safety, reduced emission and longevity.
In the general industrial market, we have long-standing customer relationships and maintain a broad portfolio of products and services promoting efficiency, safety, reduced emissions, and longevity.
We maintain a Code of Conduct, an anti-harassment policy, and an equal employment opportunity policy, and provide training on these policies annually. We do business in more than 20 countries, and our employees operate across cultures, functions, language barriers, and time zones to solve the technical and logistical challenges presented by its worldwide customer base.
We maintain a Code of Conduct, an anti-harassment policy, and an equal employment opportunity policy, and provide training on these policies annually. We do business in more than 20 countries, and our employees operate across multiple cultures, functions, languages, and time zones to solve the technical and logistical challenges presented by its worldwide customer base.
We have built upon those long-standing and deep customer relationships and are deeply embedded in our customers workflows today. We hold competitive positions in the majority of our key defense and commercial end markets through engineering and technological leadership, and precision manufacturing.
We have built upon those long-standing customer relationships and are deeply embedded in our customers workflows today. We hold competitive positions in the majority of our key defense and commercial end markets through engineering and technological leadership, precision manufacturing, and strong relationships with our customers.
As a result, we have varying degrees of platform-level content on fighter jets, helicopters, unmanned aerial vehicles (UAVs), ground vehicles, and nuclear and non-nuclear surface ships and submarines, including a presence on more than 325 platforms and more than 3,000 programs over the past 10 years.
As a result, we have varying degrees of platform-level content on fighter jets, helicopters, unmanned aerial vehicles (UAVs), ground combat equipment, tactical vehicles, and nuclear and non-nuclear surface ships and submarines, including a presence on more 5 than 325 platforms and more than 3,000 programs over the past 10 years.
Government Sales Our sales to the U.S. Government and foreign government end use represented 54%, 55%, and 53% of total net sales during 2022, 2021, and 2020, respectively. In accordance with normal U.S. Government business practices, contracts and orders are subject to partial or complete termination at any time at the option of the customer.
Government Sales Our sales to the U.S. Government and foreign government end use represented 56%, 54%, and 55% of total net sales during 2023, 2022, and 2021, respectively. In accordance with normal U.S. Government business practices, contracts and orders are subject to partial or complete termination at any time at the option of the customer.
Curtiss-Wright has been involved in a number of “firsts” in industry, and since the origin of many of our markets, including commercial aerospace (our history dates back to the Wright Brothers and their historical first manned flight), naval nuclear power (presence on the first nuclear naval vessel) and commercial power (where we were in the first commercial nuclear power plant).
Curtiss-Wright has been involved in a number of “firsts” in industry, and since the origin of many of our markets, including commercial aerospace (our history dates back to the Wright Brothers and their historical first manned flight), naval nuclear power (presence on the first nuclear naval vessel) and commercial power (Curtiss-Wright’s products were in the first commercial nuclear power plant).
Ethics and Integrity Curtiss-Wright is deeply committed to ensuring that all of its employees conduct business with the highest levels of ethics and integrity and to complying with all laws and regulations applicable to Curtiss-Wright’s businesses. To support and articulate our commitment and responsibility in this regard, Curtiss-Wright has adopted a Code of Conduct (the “Code”).
Ethics and Integrity Curtiss-Wright is deeply committed to ensuring that all of its employees conduct business with the highest levels of ethics and integrity and to complying with all laws and regulations applicable to Curtiss-Wright’s businesses. To support and articulate our commitment and responsibility in this regard, Curtiss-Wright maintains a Code of Conduct.
Prior to this, he served as Vice President of Strategy and Communications of the Corporation from April 2015, and as Director and Vice President of Business Development from 2006. 53 2022 Available information We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy statements for our annual stockholders’ meetings, as well as any amendments to those reports, with the Securities and Exchange Commission (SEC).
Prior to this, he served as Vice President of Strategy and Communications of the Corporation from April 2015, and as Director and Vice President of Business Development for the Corporation’s former Controls division from 2006. 54 2022 Available information We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy statements for our annual stockholders’ meetings, as well as any amendments to those reports, with the Securities and Exchange Commission (SEC).
These reports are also available free of charge through the Investor Relations section of our website at www.curtisswright.com as soon as reasonably practicable after we electronically file. 8 Human Capital At the end of 2022, we had approximately 8,100 employees in more than 20 countries, 7% of which are represented by labor unions and covered by collective bargaining agreements.
These reports are also available free of charge through the Investor Relations section of our website at www.curtisswright.com as soon as reasonably practicable after we electronically file. 8 Human Capital At the end of 2023, we had approximately 8,600 employees in more than 20 countries, 6% of which are represented by labor unions and covered by collective bargaining agreements.
The businesses in this segment provide a diversified offering of highly engineered products and services including: (i.) industrial and specialty vehicle products, such as electronic throttle control devices, joysticks, and transmission shifters, (ii.) sensors, controls, and electro-mechanical actuation components used on commercial and military aircraft, and (iii.) surface technology services, such as shot peening, laser peening, and engineered coatings utilized in both commercial and defense end market applications.
The businesses in this segment provide a diversified offering of highly engineered products and services including: (i.) industrial and specialty vehicle products, such as power management electronics, traction inverters, transmission shifters, and control systems, (ii.) sensors, controls, and electro-mechanical actuation components used on commercial and military aircraft, and (iii.) surface technology services, such as shot peening, laser peening, and engineered coatings utilized in both commercial and defense end market applications.
In 2022, 2021, and 2020, our foreign operations as a percentage of pre-tax earnings were 39%, 27%, and 28%, respectively, adjusted for the loss on sale of our industrial valves business in Germany in 2022, along with impairments on assets held for sale related to the German industrial valves business in 2021 and 2020.
In 2023, 2022, and 2021, our foreign operations as a percentage of pre-tax earnings were 35% , 39%, and 28%, respectively, adjusted for the loss on sale of our industrial valves business in Germany in 2022, along with an impairment on assets held for sale related to the German industrial valves business in 2021.
Government sales $ 1,209,408 $ 1,254,847 $ 1,119,318 Patents We own and license a number of United States and foreign patents and patent applications, which have been obtained or filed over a period of years. We also license intellectual property to and from third parties. Specifically, the U.S.
Government sales $ 1,314,770 $ 1,209,408 $ 1,249,677 Patents We own and license a number of United States and foreign patents and patent applications, which have been obtained or filed over a period of years. We also license intellectual property to and from third parties. Specifically, the U.S.
Our ability to provide mission critical, niche products and services on a cost-effective basis is fundamental to our strategy to drive increased value to our customers, which include defense prime contractors, commercial aerospace original equipment manufacturers (OEMs), and numerous energy and manufacturing companies.
Our ability to provide mission critical, niche products and services on a cost-effective basis is fundamental to our strategy to drive increased value to our customers, which include 4 defense prime contractors, commercial aerospace original equipment manufacturers (OEMs), and numerous energy and manufacturing companies. We compete globally, primarily based on technology and pricing.
For the power & process markets, we provide a diversified offering of products for commercial nuclear power plants and nuclear equipment manufacturers, including hardware, valves, fastening systems, specialized containment doors, airlock hatches, and spent fuel management products supporting the continued performance, safety and modernization of operating reactors.
For the power & process markets, we provide a diversified offering of products for commercial nuclear power plants and nuclear equipment manufacturers, including hardware, valves, fastening systems, specialized containment doors, airlock hatches, and spent fuel management products supporting the continued performance, safety and modernization of operating reactors worldwide, though the majority of our products today support the maintenance of U.S. nuclear reactors.
Prior to this, he served as Vice President of Finance from December 2017 and served as Vice President and Corporate Controller of the Corporation from September 2014. He also served as Assistant Corporate Controller of the Corporation from May 2009. 54 2014 Paul J.
Prior to this, he served as Vice President of Finance from December 2017 and served as Vice President and Corporate Controller of the Corporation from September 2014. He also served as Assistant Corporate Controller of the Corporation from May 2009. 55 2014 Kevin M.
We believe we are well positioned in the markets in which we operate as we seek to leverage and build upon our critical mass to expand our global engineering, sales, support and manufacturing footprint.
We believe we are well positioned in the markets in which we operate as we seek to leverage and build upon our critical mass to expand our global manufacturing capabilities, sales channels and customer relationships.
For the year ended December 31, 2022, our TRR and DART rates were 1.69 and 1.04 , respectively. For the year ended December 31, 2021, our TRR and DART rates were 1.49 and 0.99, respectively.
For the year ended December 31, 2023, our TRR and DART rates were 1.32 and 0.86 , respectively. For the year ended December 31, 2022, our TRR and DART rates were 1.69 and 1.04, respectively.
We take steps to ensure that we comply with applicable legal, regulatory, and other requirements in all material respects related to preventing pollution, injury, and ill health, and employ industry-leading, technologically sound, and economically feasible control mechanisms, procedures, and processes. In addition, we provide training, education, safety monitoring and auditing, and health-awareness programs in our offices and factories.
We take steps to ensure that we comply with applicable legal, regulatory, and other requirements in all material respects related to preventing pollution, injury, and ill health, and employ industry-leading, technologically sound, and economically feasible control mechanisms, procedures, and processes that improve our efforts.
Prior to this, he served as President of the Aerospace & Industrial segment (f/k/a Commercial/Industrial) of the Corporation from January 2020. He has held various leadership positions in the Corporation since 2004. 53 2021 K. Christopher Farkas Vice President and Chief Financial Officer Vice President and Chief Financial Officer of the Corporation since May 2020.
Rayment Vice President and Chief Operating Officer Vice President and Chief Operating Officer of the Corporation since April 1, 2021. Prior to this, he served as President of the Aerospace & Industrial segment (f/k/a Commercial/Industrial) of the Corporation from January 2020. He has held various leadership positions in the Corporation since 2004. 54 2021 Paul J.
Our succession plans are geared at retaining and promoting our existing employees to provide equal opportunity and access to promotion within the organization. Health and Safety The health and safety of our employees is a top priority for Curtiss-Wright.
Our succession plans are geared at retaining and promoting our existing employees to provide equal opportunity and access to promotion within the organization. Environmental, Health, and Safety The health, safety, and well-being of our employees, together with protection of the environment in the communities in which we operate, is a top priority for Curtiss-Wright.
No customer accounted for more than 10% of our total net sales during 2022, 2021, or 2020. Approximately 47% of our total net sales for 2022, 50% for 2021, and 47% for 2020 were derived from contracts with agencies of, and prime contractors to, the U.S. Government. Information on our sales to the U.S.
Approximately 46% of our total net sales for 2023, 47% for 2022, and 50% for 2021 were derived from contracts with agencies of, and prime contractors to, the U.S. Government. Information on our sales to the U.S.
Government, including both direct sales as a prime contractor and indirect sales as a subcontractor, is as follows: Year Ended December 31, (In thousands) 2022 2021 2020 Aerospace & Industrial $ 151,528 $ 155,276 $ 156,981 Defense Electronics 548,878 600,085 470,949 Naval & Power 509,002 499,486 491,388 Total U.S.
Government, including both direct sales as a prime contractor and indirect sales as a subcontractor, is as follows: Year Ended December 31, (In thousands) 2023 2022 2021 Aerospace & Industrial $ 146,205 $ 151,528 $ 155,276 Defense Electronics 638,597 548,878 600,085 Naval & Power 529,968 509,002 494,316 Total U.S.
We have continued opportunities within our Operational Growth Platform for margin expansion which allows us to maintain steady investments in research and development (R&D) to fuel both innovation and organic growth.
Our Operational Growth Platform accelerates the Pivot to Growth strategy by driving continued opportunities for margin expansion and savings across the portfolio which allows us to maintain steady investments in research and development (R&D) to fuel both innovation and organic growth.
The Code addresses several topics, including conflicts of interest, safeguarding assets, financial reporting, the protection of confidential information, insider trading, and general adherence to laws and regulations. All employees, including executive officers, must comply with the Code. The Code is available within the Corporate Governance section of the Company’s website at https://curtisswright.com/investor-relations/governance/governance-documents/default.aspx .
The Code addresses several topics, including conflicts of interest, safeguarding assets, financial reporting, the protection of confidential information, insider trading, and general adherence to laws and regulations. All employees, including executive officers, must comply with the Code.
In order to enhance understanding of and compliance with the Code, all employees are required to complete a training program annually which details ethical business practices, an inclusive workforce, and respectful treatment of our employees. In addition, the Corporation maintains an ethics-related global hotline through which employees can report any issues of concern.
In order to enhance understanding of and compliance with the Code, all employees are required to complete a training program annually which details ethical business practices, an inclusive workforce, and respectful treatment of our employees, and certify to their commitment to comply with the Code.
She has held various leadership positions in the Corporation since 2004. She has been a Director of the Corporation since January 1, 2021. 59 2021 Kevin M. Rayment Vice President and Chief Operating Officer Vice President and Chief Operating Officer of the Corporation since April 1, 2021.
She has held various leadership positions in the Corporation since 2004. She has been a Director of the Corporation since January 1, 2021. 60 2021 K. Christopher Farkas Vice President and Chief Financial Officer Vice President and Chief Financial Officer of the Corporation since May 2020.
We also have inherent synergies with significant potential to build upon crossover applications for our defense and commercial technologies that leverage our teams’ collaborative efforts and the strength of our combined portfolio. Curtiss-Wright maintains a unique presence on high-performance platforms and critical applications that require our technical sophistication and benefit from decades of engineering expertise and knowledge transfer.
Through One Curtiss-Wright, we also have inherent synergies with significant potential to build upon crossover applications for our defense and commercial technologies that leverage our teams’ collaborative efforts and the strength of our combined portfolio.
Government generally has control of the materials and work in process allocable or chargeable to the respective contracts. (See Notes 1, 5, and 6 to the Consolidated Financial Statements, contained in Part II, Item 8, of this Annual Report on Form 10-K). Customers 6 We have hundreds of customers in the various industries that we serve.
(See Notes 1, 5, and 6 to the Consolidated Financial Statements, contained in Part II, Item 8, of this Annual Report on Form 10-K). 6 Customers We have hundreds of customers in the various industries that we serve. No customer accounted for more than 10% of our total net sales during 2023, 2022, or 2021.
In the event that there is a cost underrun, the customer recoups a portion of the underrun based upon a formula in which the customer’s portion increases as the underrun exceeds certain established levels. Generally, long-term contracts with the U.S. Government require us to invest in and carry significant levels of inventory.
In the event that there is a cost underrun, the customer typically recoups a portion of the underrun based upon an agreed-upon formula. Generally, long-term contracts with the U.S. Government require us to invest in and carry significant levels of inventory. However, where allowed, we utilize progress payments and other interim billing practices, to reduce working capital requirements.
However, where allowed, we utilize progress payments and other interim billing practices, to reduce working capital requirements. It is our policy to seek customary progress payments on certain contracts. Where we obtain such payments under U.S. Government prime contracts or subcontracts, the U.S.
It is our policy to seek customary progress payments on certain contracts. Where we obtain such payments under U.S. Government prime contracts or subcontracts, the U.S. Government generally has control of the materials and work in process allocable or chargeable to the respective contracts.
Removed
We compete globally, primarily based on technology and pricing. 4 Our Strategy Curtiss-Wright's Pivot to Growth strategy focuses on maximizing revenue, operating income and free cash flow growth for our shareholders.
Added
Curtiss-Wright maintains a unique presence on high-performance platforms and critical applications that require our technical sophistication, and we benefit from decades of engineering expertise and knowledge transfer.
Added
Curtiss-Wright is differentiated because we have strength in the combined portfolio benefiting from long-term stability in our defense businesses and agility in our commercial businesses.
Added
Culture We believe that our culture at Curtiss-Wright is just as essential as our products and services. Our culture impacts the quality of the employees we hire, the way we communicate and interact with our customers and each other, and our performance standards.
Added
Our culture is the cornerstone representing our values, our behaviors, our way of working, and how we approach our business, which is based on strong relationships and a dedication to taking care of one another and our customers.
Added
We operate according to Curtiss-Wright’s Code of Conduct (the Code), which mandates full compliance with applicable laws and regulations and helps to preserve the integrity of our Company. The Code is available within the Corporate Governance section of the Company’s website at https://curtisswright.com/investor-relations/governance/default.aspx.
Added
In addition, we provide training, education, safety monitoring and auditing, and health-awareness programs in our offices and factories. We also provide several channels for all employees to speak up, ask for guidance, and report concerns related to ethics or safety violations, and we address those concerns and take appropriate actions.
Added
The Corporation also requires employees to complete annual training programs covering such topics as data privacy management, anti-bribery/trade compliance (including the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act), fraud, harassment, and cybersecurity.
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In addition, the Corporation maintains an ethics-related global, multi-lingual hotline that is available at all times through which employees can report anonymously any issues of concern.
Added
Employee Wellness 10 We are committed to the physical and mental health and wellness of our employees. We provide our employees and their families with access to a variety of health and wellness programs.
Added
We provide free annual biometric screening and health assessments at work or offsite, annual free flu shot clinics, a tobacco cessation program, weight management programs, and an employee assistance program, which offers advice on mental health, legal, and financial issues.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

69 edited+24 added−35 removed105 unchanged
Biggest changeOur business and facilities are subject to numerous federal, state, local, and foreign laws and regulations relating to the use, manufacture, storage, handling, and disposal of hazardous materials and other waste products. W e may also be subject to increasingly stringent environmental standards in the future, particularly as greenhouse gas emissions and climate change regulations and initiatives increase.
Biggest changeW e may also be subject to increasingly stringent environmental standards in the future, particularly as greenhouse gas emissions and climate change regulations and initiatives increase. Regulatory bodies may decide in the future to limit or ban certain materials we use in our manufacturing process due to potentially significant health and safety risks to people or the environment.
Item 1A. Risk Factors. We have summarized the known, material risks to our business below. Our business, financial condition, and results of operations and cash flows could be materially and adversely impacted if any of these risks materialize.
Item 1A. Risk Factors. We have summarized the known, material risks to our business below. Our business, financial condition, results of operations and cash flows could be materially and adversely impacted if any of these risks materialize.
This would result 13 in these customers supplying their own products or services and competing directly with us for sales of these products or services, all of which could significantly reduce our revenues. Furthermore, we are facing increased international competition and cross-border consolidation of competition.
This would result in these customers supplying their own products or 13 services and competing directly with us for sales of these products or services, all of which could significantly reduce our revenues. Furthermore, we are facing increased international competition and cross-border consolidation of competition.
Furthermore, we are subject to other risks in connection with government contracts, including without limitation: 15 • the frequent need to bid on programs prior to completing the necessary design, which may result in unforeseen technological difficulties and/or cost overruns; • the difficulty in forecasting long-term costs and schedules and the potential obsolescence of products related to long-term, fixed price contracts; • contracts with varying fixed terms that may not be renewed or followed by follow-on contracts upon expiration; • cancellation of the follow-on production phase of contracts if program requirements are not met in the development phase; and • the fact that government contract wins can be contested by other contractors.
Furthermore, we are subject to other risks in connection with government contracts, including without limitation: • the frequent need to bid on programs prior to completing the necessary design, which may result in unforeseen technological difficulties and/or cost overruns; • the difficulty in forecasting long-term costs and schedules and the potential obsolescence of products related to long-term, fixed price contracts; • contracts with varying fixed terms that may not be renewed or followed by follow-on contracts upon expiration; • cancellation of the follow-on production phase of contracts if program requirements are not met in the development phase; and • the fact that government contract wins can be contested by other contractors.
Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for several reasons, including: • Encountering difficulties identifying and executing acquisitions; • Increased competition for targets, which may increase acquisition costs; • Consolidation in our industry, reducing the number of acquisition targets; • Competition laws and regulations preventing us from making certain acquisitions; and • Acquisition financing not being available on acceptable terms, or at all.
Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for several reasons, including: 12 • Encountering difficulties identifying and executing acquisitions; • Increased competition for targets, which may increase acquisition costs; • Consolidation in our industry, reducing the number of acquisition targets; • Competition laws and regulations preventing us from making certain acquisitions; and • Acquisition financing not being available on acceptable terms, or at all.
Therefore, we may not be able to retain our existing management and technical personnel or fill new management or technical positions or vacancies created by expansion or turnover at our existing compensation levels. Although we have entered into change of control agreements with some members of senior management, 19 we do not have employment contracts with our key executives.
Therefore, we may not be able to retain our existing management and technical personnel or fill new management or technical positions or vacancies created by expansion or turnover at our existing compensation levels. Although we have entered into change of control agreements with some members of senior management, we do not have employment contracts with our key executives.
These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks, or filing false claims. We have been, and expect to continue to be, subjected to audits, reviews, and investigations by government agencies.
These fines and penalties could be imposed for example, by failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks, or filing false claims. We have been, and expect to continue to be, subjected to audits, reviews, and investigations by government agencies.
In addition, on those contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could terminate a prime contract under which we are a subcontractor, irrespective of the quality of our services as a subcontractor. Our U.S. Government contracts typically span one or more base years and multiple option years. The U.S.
In addition, on those contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could terminate a prime contract under which we are a subcontractor, irrespective of the quality of our services as a subcontractor. 15 Our U.S. Government contracts typically span one or more base years and multiple option years. The U.S.
RISKS RELATED TO OUR STRATEGY Implementing our acquisition strategy involves risks, and our failure to successfully implement this strategy could have a material adverse effect on our business. 12 As part of our capital allocation strategy, we aim to grow our business by selectively pursuing acquisitions and technologies that supplement our organic growth.
RISKS RELATED TO OUR STRATEGY Implementing our acquisition strategy involves risks, and our failure to successfully implement this strategy could have a material adverse effect on our business. As part of our capital allocation strategy, we aim to grow our business by selectively pursuing acquisitions and technologies that supplement our organic growth.
If an accident were to be caused by one of our products, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers may be materially adversely affected. We are subject to liability under warranty obligations .
If an accident were to be caused by one of our products, or if we were to 11 otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers may be materially adversely affected. We are subject to liability under warranty obligations .
Our business benefits from free trade agreements such as the United States-Mexico-Canada Trade Agreement (USMCA) and relies on various U.S. corporate tax provisions related to international commerce as we build, market, and sell our products globally.
Our business benefits from free trade agreements such as the United States-Mexico-Canada Trade Agreement (USMCA) and relies on 20 various U.S. corporate tax provisions related to international commerce as we build, market, and sell our products globally.
There has been, and may continue to be, significant volatility in global stock markets and foreign currency exchange rates that result in the strengthening of the U.S. dollar against foreign currencies in which we conduct business.
There has been, and may continue to be, significant volatility in global stock markets and foreign currency exchange rates that could result in the strengthening of the U.S. dollar against foreign currencies in which we conduct business.
Potential product liability risks exist from the products that we sell. 11 We may be exposed to liabilities for personal injury, death, or property damage due to the failure of a product that we have sold.
Potential product liability risks exist from the products that we sell. We may be exposed to liabilities for personal injury, death, or property damage due to the failure of a product that we have sold.
Despite our concerted effort to minimize risk to our production capabilities and corporate information systems and to reduce the effect of unforeseen interruptions through insurance or other risk transfer mechanisms, such as our business continuity planning and disaster recovery plans, we could be adversely impacted by terror attacks, war (including the Russia-Ukraine conflict), natural disasters such as earthquakes, hurricanes, floods, tornadoes, ice storms, climate change-related events, pandemic diseases such as COVID-19, or other events such as strikes by the workforce of a significant customer or supplier.
Despite our concerted effort to minimize risk to our production capabilities and corporate information systems and to reduce the effect of unforeseen interruptions through insurance or other risk transfer mechanisms, such as our business continuity planning and disaster recovery plans, we could be adversely impacted by terror attacks, war (including the Russia-Ukraine war and Israel-Hamas war), natural disasters such as earthquakes, hurricanes, floods, tornadoes, ice storms, climate change-related events, pandemic diseases such as COVID-19, or other events such as strikes by the workforce of a significant customer or supplier.
A violation of specific laws and regulations could result in the imposition of fines and penalties, the termination of our contracts, or debarment from bidding on contracts.
A violation of specific laws and regulations could also result in the imposition of fines and penalties, the termination of our contracts, or debarment from bidding on contracts.
Doing business in foreign countries is subject to numerous risks, including without limitation: (a) political and economic instability and potential for social unrest; (b) the uncertainty of the ability of non-U.S. customers to finance purchases; (c) restrictions on the repatriation of funds; (d) restrictive trade policies; (e) tariff regulations; (f) difficulties in obtaining export and import licenses; (g) government financed competition; (h) changes in the local labor-relations climate; (i) economic conditions in local markets, including changes in inflation; (j) health concerns (including the COVID-19 pandemic); (k) complying with foreign regulatory and tax requirements that are subject to change; and (l) limitations on our ability to enforce legal rights and remedies.
Doing business in foreign countries is subject to numerous risks, including without limitation: (a) political and economic instability and potential for social unrest; (b) the uncertainty of the ability of non-U.S. customers to finance purchases; (c) restrictions on the repatriation of funds; (d) restrictive trade policies; (e) tariff regulations; (f) difficulties in obtaining export and import licenses; (g) government financed competition; (h) changes in the local labor-relations climate; (i) economic conditions in local markets, including changes in inflation; (j) health concerns (including COVID-19 or any of its variants); (k) complying with foreign regulatory and tax requirements that are subject to change; and (l) limitations on our ability to enforce legal rights and remedies.
For example, assumptions must be made regarding the length of time to complete the contract, as costs also include expected increases in wages and prices for materials. Similarly, assumptions must be made regarding the future impact of efficiency initiatives and cost reduction efforts.
For example, assumptions must be made regarding the length of time to complete the contract, as costs also include expected increases in wages and prices for materials and allocated fixed costs. Similarly, assumptions must be made regarding the future impact of efficiency initiatives and cost reduction efforts.
However, it is possible that we may not be able to prevent all intrusions. Such intrusions could result in our network security or computer systems being compromised and possibly result in the misappropriation or corruption of sensitive information or cause disruptions in our services.
However, it is possible that we may not be able to prevent all intrusions. Such intrusions could result in our network security or computer systems being compromised and possibly result in the misappropriation or corruption of sensitive information, including intellectual property, or cause disruptions in our services.
Additionally, we have incurred, and expect to continue to occur, additional costs to comply with increased cybersecurity protections for our customers, including the U.S. government.
Additionally, we have incurred, and expect to continue to incur, additional costs to comply with increased cybersecurity protections for our customers, including the U.S. government.
In addition, from time to time, we may acquire or make an investment in a business that will require us to record goodwill based on the purchase price and the value of the acquired assets.
In addition, from time to time, we may acquire or make an investment in a business that will require us to record goodwill based on the difference between the purchase price and the fair value of the acquired assets.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases. Certain provisions of the IRA will become effective beginning in fiscal 2023.
On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases. Certain provisions of the IRA became effective in the beginning of fiscal 2023.
RISKS RELATED TO MARKET CONDITIONS A substantial portion of our revenues and earnings depends upon the continued willingness of the U.S. Government and other customers in the defense industry to buy our products and services. In 2022, approximately 47% of our total net sales were derived from or related to U.S. defense programs.
RISKS RELATED TO MARKET CONDITIONS A substantial portion of our revenues and earnings depends upon the continued willingness of the U.S. Government and other customers in the defense industry to buy our products and services. In 2023, approximately 46% of our total net sales were derived from or related to U.S. defense programs.
Approximately 7% of our workforce is employed under collective bargaining agreements, which from time to time are subject to renewal and negotiation.
Approximately 6% of our workforce is employed under collective bargaining agreements, which from time to time are subject to renewal and negotiation.
For example, i n response to Russia’s invasion of Ukraine, the United States, along with the European Union, has imposed restrictive sanctions on Russia, Russian entities, and Russian citizens. We are subject to these governmental sanctions and export controls, which may subject us to liability if we are not in 17 full compliance with applicable laws.
For example, in response to Russia’s invasion of Ukraine, the United States, along with the European Union, have imposed restrictive sanctions on Russia, Russian entities, and Russian citizens. We are subject to these governmental sanctions and export controls, which may subject us to liability if we are not in full compliance with applicable laws.
See “Critical Accounting Estimates and Policies” in Part II, Item 7 of this Form 10-K. Our future financial results could be adversely impacted by asset impairment charges. 18 As of December 31, 2022, we had goodwill and other intangible assets, net of accumulated amortization, of approximately $2.2 billion, which represented approximately 49% of our total assets.
See “Critical Accounting Estimates and Policies” in Part II, Item 7 of this Form 10-K. Our future financial results could be adversely impacted by asset impairment charges. As of December 31, 2023, we had goodwill and other intangible assets, net of accumulated amortization, of approximately $2.1 billion, which represented approximately 46% of our total assets.
Furthermore, we are experiencing higher labor costs due to increased competition for personnel in many regions in which we operate as well as general inflationary conditions, including higher shipping costs, labor shortages, and rising energy prices. We expect inflationary pressures to persist in 2023 .
Furthermore, we are experiencing higher labor costs due to increased competition for personnel in many regions in which we operate as well as general inflationary conditions, including higher shipping costs, labor shortages, and rising energy prices.
These companies may also price their products and services below our selling prices, which could exert downward pressure on our product pricing and margins. As a result, they may be better able to withstand the effects of periodic economic downturns, including withstanding the current global pandemic.
These companies may also price their products and services below our selling prices, which could exert downward pressure on our product pricing and margins. As a result, they may be better able to withstand the effects of periodic economic downturns.
Our sales to large commercial aircraft manufacturers are cyclical in nature, and can be adversely affected by a number of factors, including current and future passenger traffic levels, increasing fuel and labor costs, environmental concerns (inclusive 14 of climate change), intense price competition, the retirement of older aircraft, regulatory changes, outbreak of infectious disease such as the COVID-19 pandemic, terrorist attacks, geopolitical events, conflicts and wars (including the Russia-Ukraine conflict), general economic conditions (including cost inflation), worldwide airline profits, and backlog levels, all of which can be unpredictable and are outside our control.
A downturn in the aircraft market could adversely affect our business. 14 Our sales to large commercial aircraft manufacturers are cyclical in nature, and can be adversely affected by a number of factors, including current and future passenger traffic levels, increasing fuel and labor costs, environmental concerns (inclusive of climate change), intense price competition, the retirement of older aircraft, regulatory changes, outbreak of infectious disease such as COVID-19, terrorist attacks, geopolitical events, conflicts and wars (including the Russia-Ukraine war and the Hamas-Israel war), general economic conditions (including cost inflation), worldwide airline profits, and backlog levels, all of which can be unpredictable and are outside our control.
Our goodwill is subject to an impairment test on an annual basis and is also tested whenever events and circumstances indicate that goodwill may be impaired. Intangible assets (other than goodwill) are generally amortized over the useful life of such assets.
Our goodwill is subject to an impairment test on an annual basis, or more frequently, whenever events and circumstances indicate that goodwill may be impaired. Intangible assets (other than goodwill) are generally amortized over the useful life of such assets.
Environmental laws generally impose liability for investigation, remediation, and removal of hazardous materials and other waste products on property owners and those who dispose of materials at waste sites, whether or not the waste was disposed of legally at the time in question.
The formulation changes could also impact the utility of our products. Environmental laws generally impose liability for investigation, remediation, and removal of hazardous materials and other waste products on property owners and those who dispose of materials at waste sites, whether or not the waste was disposed of legally at the time in question.
Our customers may also require us to implement environmental, social, or governance responsibility procedures or standards before they continue to do business with us. Additionally, we may face reputational challenges if our environmental, social, or governance responsibility procedures or standards do not meet the standards set by certain constituencies.
Our customers may also require us to implement environmental, social, or governance responsibility procedures or standards before they continue to do business with us. Additionally, we may face reputational challenges if our ESG procedures or standards do not meet the standards set by certain constituencies, which are often inconsistent in approach .
Future terror attacks, war (including the Russia-Ukraine conflict), natural disasters, climate change-related events, pandemic diseases (including the COVID-19 pandemic), or other events beyond our control could adversely impact our businesses.
Future terror attacks, war (including the Russia-Ukraine war and Israel-Hamas war), natural disasters, climate change-related events, pandemic diseases (such as COVID-19), or other events beyond our control could adversely impact our businesses.
In the event that one or more of our programs are reduced, delayed, or terminated for which we provide products and services, we may experience a reduction in our revenues and earnings and a material adverse effect on our business, financial condition, and results of operations. The BBA also temporarily suspended the public debt limit through July 31, 2021.
In the event that one or more of our programs are reduced, delayed, or terminated for which we provide products and services, we may experience a reduction in our revenues and earnings and a material adverse effect on our business, financial condition, and results of operations.
In addition, various privacy and cybersecurity laws and regulations, both in the U.S. and globally, require us to manage and protect sensitive and confidential information, including personal data of our employees, from disclosure.
Our ability to effectively manage our business depends on the security, reliability, and adequacy of our information systems. In addition, various privacy and cybersecurity laws and regulations, both in the U.S. and globally, require us to manage and protect sensitive and confidential information, including personal data of our employees, from disclosure.
In addition, there are potential risks associated with growing our business through acquisitions, including the failure to successfully integrate and realize the expected benefits of an acquisition, which could be exacerbated by the impact of the COVID-19 pandemic.
In addition, there are potential risks associated with growing our business through acquisitions, including the failure to successfully integrate and realize the expected benefits of an acquisition.
Any liability for which third-party indemnification is not available and not covered by insurance could have a material adverse effect on our business, financial condition, and results of operations. In addition, an accident caused by one of our products could damage our reputation for selling quality products.
Any liability for which third-party indemnification is not available and not covered by insurance could have a material adverse effect on our business, financial condition, and results of operations.
Our businesses depend on suppliers and subcontractors for raw materials and components. At times subcontractors perform services that we provide to our customers. Our supply chain has been and may continue to be impacted by the COVID-19 pandemic as well as other geo-political events, such as China’s relationship with the United States and Taiwan.
Our businesses depend on suppliers and subcontractors for raw materials and components. At times subcontractors perform services that we provide to our customers. Our supply chain has been and may continue to be impacted by a wide variety of factors, including labor and material shortages as well as geopolitical events, such as China’s relationship with the United States and Taiwan.
Although we currently generate significant operating cash flows, which combined with access to the credit markets provides us with significant discretionary funding capacity, global macroeconomic uncertainty, including the economic downturn caused by the COVID-19 pandemic, the ongoing trade disputes between the United States and China, the United Kingdom’s withdrawal from the European Union, the Russia-Ukraine conflict (including related sanctions as well as measures taken in response to 20 such sanction), inflationary pressures, global supply chain disruptions, and uncertainty regarding the stability of global credit and financial markets could affect our ability to fund our operations.
Although we currently generate significant operating cash flows, which combined with access to the credit markets provides us with significant discretionary funding capacity, global macroeconomic uncertainty, the ongoing trade disputes between the United States and China, the United Kingdom’s withdrawal from the European Union, armed conflicts around the world, such as those in Ukraine and Israel, and any conflict or threatened conflict between China and Taiwan (including the imposition of related sanctions by the United States and other countries as well as measures taken in response to such sanctions), inflationary pressures, rising interest rates, labor shortages, global supply chain disruptions, and uncertainty regarding the stability of global credit and financial markets could affect our ability to fund our operations.
We believe that our customers consider safety and reliability as key criteria in selecting our products and believe that our reputation for quality assurance is a significant competitive strength.
Furthermore, an accident caused by one of our products could damage our reputation for selling quality products. We believe that our customers consider safety and reliability as key criteria in selecting our products and believe that our reputation for quality assurance is a significant competitive strength.
Our future claims expense might exceed historical levels, which could reduce our earnings. We expect to periodically assess our self-insurance strategy. We are required to periodically evaluate and adjust our claims reserves to reflect our experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.
We are required to periodically evaluate and adjust our claims reserves to reflect our experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.
On August 2, 2019, the Bipartisan Budget Act of 2019 (BBA) was signed into law, which raised the BCA budget caps for both defense and non-defense discretionary spending in 2020 and 2021 and extended the mandatory BCA spending reductions through 2029.
On August 2, 2019, the Bipartisan Budget Act of 2019 (BBA) was signed into law, which raised the BCA budget caps for both defense and non-defense discretionary spending in 2020 and 2021 and extended the mandatory BCA spending reductions through 2029. Absent additional legislative or other remedial action, the sequestration could require reduced U.S. federal government spending through fiscal 2029.
Although we have estimated and reserved for future environmental remediation costs, the final resolution of these liabilities may significantly vary from our estimates and could potentially have an adverse effect on our 16 results of operations and financial position.
Although we have estimated and reserved for future environmental remediation costs, the final resolution of these liabilities may significantly vary from our estimates and could potentially have an adverse effect on our results of operations and financial position. We are also subject to federal, state, local, and foreign laws and regulations governing worker health and safety requirements.
Because we strive to limit the volume of raw materials and component parts on hand, our business could be adversely affected if we were unable to obtain these raw materials and components from our suppliers in the quantities we require or on favorable terms.
Because we strive to limit the volume of raw materials and component parts on hand, our business could be adversely affected if we were unable to obtain these raw materials and components from our suppliers in the quantities that we require. We also depend on subcontractors and suppliers to meet their contractual obligations in full compliance with customer requirements.
Further, indemnities, insurance or escrow/holdback arrangements may not fully cover such matters. Failure to successfully implement our acquisition strategy, including successfully integrating acquired businesses, could have a material adverse effect on our business, financial condition, and results of operations. Our future success will depend, in part, on our ability to develop new technologies.
Further, indemnities, insurance or escrow/holdback arrangements may not fully cover such matters and acquisitions of public companies typically do not include post-closing indemnities or escrows. Failure to successfully implement our acquisition strategy, including successfully integrating acquired businesses, could have a material adverse effect on our business, financial condition, and results of operations.
Regulators, stockholders, and other interested constituencies have focused increasingly on corporate responsibility, specifically related to the environmental, social, and governance (ESG), practices of companies, including climate change.
Regulators, stockholders, and other interested constituencies have focused increasingly on corporate responsibility, specifically related to the environmental, social, and governance (ESG) or sustainability practices of companies, including climate change, over the past few years, and expectations in this area are rapidly evolving .
Total backlog includes both funded (unfilled orders for which funding is authorized, appropriated, and contractually obligated by the customer) and unfunded backlog (firm orders for which funding has not been appropriated and/or contractually obligated by the customer).
Total backlog includes both funded (unfilled orders for which funding is authorized, appropriated, and contractually obligated by the customer) and unfunded backlog (firm orders for which funding has not been appropriated and/or contractually obligated by the customer). We are a subcontractor to prime contractors for the vast majority of our government business.
In addition, while our existing disaster recovery and business continuity plans (including those relating to our information technology systems) are well designed, they may not be fully responsive to, or minimize losses associated with, catastrophic events. As a result, any business disruption could negatively affect our business, operating results, or financial condition. Item 1B. Unresolved Staff Comments. None.
In addition, while our existing disaster recovery and business continuity plans, including those relating to our information technology systems are well designed, they may not be fully responsive to, or minimize losses associated with, catastrophic events.
Any decrease in demand resulting from a downturn in the aerospace market could adversely affect our business, financial condition, and results of operations. Our backlog is subject to reduction and cancellation, which could negatively impact our revenues and results of operations. Backlog represents products or services that our customers have contractually committed to purchase from us.
Our backlog is subject to reduction and cancellation, which could negatively impact our revenues and results of operations. Backlog represents products or services that our customers have contractually committed to purchase from us.
The occurrence of some of these risks may be increased due to the increase in remote working by our employees due to the COVID-19 pandemic. We continue to review and enhance our computer systems as well as provide training to our employees in an attempt to prevent unauthorized and unlawful intrusions.
The occurrence of some of these risks may be increased due to the work-from-home arrangements that we have implemented for many of our office-based employees. We continue to review and enhance our computer systems as well as provide training to our employees in an attempt to prevent unauthorized and unlawful intrusions.
Despite our implementation of firewalls, switchgear, and other network security measures, our servers, databases, and other systems may be vulnerable to computer hackers, physical or electronic break-ins, sabotage, computer viruses, worms, and similar disruptions from unauthorized tampering with our computer systems.
Despite our implementation of firewalls, switchgear, and other network security measures, our servers, databases, and other systems may be vulnerable to various cyber and other security threats, including those caused by computer hackers, physical or electronic break-ins, sabotage, computer viruses, malware, worms, and similar disruptions from unauthorized access and tampering with our computer systems, including through social engineering such as phishing attacks, coordinated denial-of-service attacks, and similar incidents .
Absent additional legislative or other remedial action, the sequestration could require reduced U.S. federal government spending from fiscal 2022 through fiscal 2029. As a result of this uncertainty, a decrease in U.S. Government defense spending or changes in spending allocation could result in one or more of our programs being reduced, delayed, or terminated.
As a result of this uncertainty, a decrease in U.S. Government defense spending or changes in spending allocation could result in one or more of our programs being reduced, delayed, or terminated.
Changes in estimates could affect our profitability and overall financial position. Long-term contract accounting requires judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total revenues and costs at completion is complicated and subject to many variables.
Accounting for contracts that apply over-time revenue recognition requires judgment relative to assessing risks, estimating contract net sales and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total net sales and costs at completion is complicated and subject to many variables.
Virtually all products produced and sold by us are highly engineered and require sophisticated manufacturing and system-integration techniques and capabilities. The commercial and government markets in which we operate are characterized by rapidly changing technologies. In addition, product and program needs of our government and commercial customers change and evolve regularly.
Our future success will depend, in part, on our ability to develop new technologies. Virtually all products produced and sold by us are highly engineered and require sophisticated manufacturing and system-integration techniques and capabilities. The commercial and government markets in which we operate are characterized by rapidly changing technologies.
While we are in compliance with government health and safety regulations related to COVID-19, the cost of complying, or failing to comply, with these regulations could have an adverse effect on our operating results. We may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance.
Failing to comply with these laws and regulations could have an adverse effect on our operating results. We may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance. From time to time, we are involved in lawsuits and regulatory actions brought or threatened against us in the ordinary course of business.
Government may unilaterally modify or cancel its contracts. In addition, under certain of our commercial contracts, our customers may unilaterally modify or terminate their orders at any time for their convenience. Accordingly, certain portions of our backlog can be cancelled or reduced at the option of the U.S. Government and commercial customers.
Backlog is subject to fluctuations and is not necessarily indicative of future sales. The timing of backlog may be impacted by project delays. The U.S. Government may unilaterally modify or cancel its contracts. In addition, under certain of our commercial contracts, our customers may unilaterally modify or terminate their orders at any time for their convenience.
There can be no assurance as to the outcome of any such examinations. If the ultimate determination of our taxes owed were for an amount in excess of amounts reserved, our operating results, cash flows, and financial condition could be materially and adversely affected. We use estimates when accounting for long-term contracts.
If the ultimate determination of our taxes owed were for an amount in excess of amounts reserved, our operating results, cash flows, and financial condition could be materially and adversely affected. We use estimates when accounting for contracts that apply over-time revenue recognition. Changes in estimates could affect our profitability and overall financial position.
Our success is dependent upon the efforts of our senior management personnel and our ability to attract and retain other highly qualified management and technical personnel. We face competition for management and qualified technical personnel from other companies and organizations.
Our success in driving business performance and executing our growth strategy is dependent upon the efforts of our senior management personnel and our ability to attract and retain other highly qualified management and technical personnel.
Generally, raw materials and purchased components are available from a number of different suppliers, though several suppliers are our sole source of certain components. If a sole-source supplier should cease or otherwise be unable to deliver such components, our operating results could be adversely impacted.
Generally, raw materials and purchased components are available from a number of different suppliers, though several suppliers are our sole source of certain components.
We believe that these risks are heightened due to the global economic impact of the COVID-19 pandemic. Our failure to replace cancelled or reduced backlog could negatively impact our results of operations. RISKS RELATED TO LEGAL AND REGULATORY MATTERS As a U.S. Government contractor, we are subject to numerous procurement rules and regulations.
Accordingly, certain portions of our backlog can be cancelled or reduced at the option of the U.S. Government and commercial customers. Our failure to replace cancelled or reduced backlog could negatively impact our results of operations. As a U.S. Government contractor, we are subject to numerous procurement rules and regulations.
We self-insure health benefits and may be adversely impacted by unfavorable claims experience. We are primarily self-insured for our health benefits. If the number or severity of claims increases, or we are required to accrue or pay additional amounts because the claims prove to be more severe than our original assessment, our operating results would be adversely affected.
If the number or severity of claims increases, or we are required to accrue or pay additional amounts because the claims prove to be more severe than our original assessment, our operating results would be adversely affected. Our future claims expense might exceed historical levels, which could reduce our earnings. We expect to periodically assess our self-insurance strategy.
Department of Treasury, technology transfer restrictions, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act, and the anti-boycott provisions of the U.S. Export Administration Act. Because the COVID-19 pandemic has so negatively impacted local economies, government intervention has increased, which in turn can create elevated risk and opportunity for corruption.
Department of Treasury, technology transfer restrictions, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act, and the anti-boycott provisions of the U.S. Export Administration Act.
From time to time, we are involved in lawsuits and regulatory actions brought or threatened against us in the ordinary course of business. These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, or breach of contract.
These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, or breach of contract. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of any such actions or proceedings.
The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations. RISKS RELATED TO FINANCIAL MATTERS Political and economic changes in foreign countries and markets, including foreign currency fluctuations, may have a material effect on our operating results.
RISKS RELATED TO FINANCIAL MATTERS Political and economic changes in foreign countries and markets, including foreign currency fluctuations, may have a material effect on our operating results. During 2023, approximat ely 28% of ou r total net sales were to customers outside of the United States. Additionally, we also have operating facilities located in foreign countries.
RISKS RELATED TO OUR OPERATIONS Intrusion on our systems could damage our business. We store sensitive data, including intellectual property, proprietary business information, and confidential employee information on our servers and databases. The COVID-19 pandemic has caused us to modify our business practices, including empowering many of our office-based associates to work productively from home on a hybrid basis.
RISKS RELATED TO OUR OPERATIONS Intrusion on our systems could damage our business. We store sensitive data, including intellectual property, proprietary business information, and confidential employee information on our servers and databases. As a result, we are increasingly dependent upon our information systems to operate our business.
We are a subcontractor to prime contractors for the vast majority of our government business; as such, substantially all amounts in backlog are funded. Backlog excludes unexercised contract options and potential orders under ordering type contracts (e.g. Indefinite Delivery / Indefinite Quantity).
As such, substantially all amounts in backlog are funded. Backlog excludes unexercised contract options and potential orders under ordering type contracts (e.g. Indefinite Delivery / Indefinite Quantity). Backlog is adjusted for changes in foreign exchange rates and is reduced for contract cancellations and terminations in the period in which they occur. Backlog as of December 31, 2023 was $2.9 billion.
Furthermore, the amount of income taxes paid by us is subject to examination by U.S. federal, state, and local tax authorities and by non-U.S. tax authorities. We regularly assess the likelihood of an adverse outcome resulting from such examinations to determine the adequacy of our provision for taxes.
We regularly assess the likelihood of an adverse outcome resulting from such examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of any such examinations.
As of December 31, 2022, we had $1.3 billion of debt outstanding. Our level of debt could have significant consequences for our business.
As of December 31, 2023, we had approximately $1.0 billion of debt outstanding. Our level of debt and debt servicing costs associated with that indebtedness, in part because of increases in interest rates on variable rate indebtedness under our revolving credit facility, could have significant consequences for our business.
While U.S. domestic air travel continues to recover, international travel utilizing wide-body aircraft will take longer to fully recover. Furthermore, as companies and employees become accustomed to working remotely, business travel and the associated flight hours may not reach pre-pandemic levels. As such, we believe the commercial market may shift away from wide-body aircraft.
Furthermore, as companies and employees become accustomed to working remotely, there is a risk that business travel and the associated flight hours may not fully reach pre-pandemic levels. Any decrease in demand resulting from a downturn in the aerospace market could adversely affect our business, financial condition, and results of operations.
The pandemic has adversely affected, and is expected to continue to adversely affect, certain elements of our business, including our supply chain, transportation networks, and production levels. As of December 31, 2022, all of our manufacturing operations are operational.
As a result, any business disruption could negatively affect our business, operating results, or financial condition. 21 The COVID-19 pandemic adversely impacted, and may in the future adversely impact, our business, operations, and financial results. The COVID-19 pandemic disrupted the global economy and adversely impacted certain elements of our business, including our supply chain, transportation networks, and production levels.
Removed
In addition to the risks and uncertainties set forth in section below entitled “ Risks Related to the Coronavirus (COVID-19) Pandemic," many of the risks and uncertainties set forth in the other risk factors are exacerbated by the COVID-19 pandemic, corresponding government and business responses, and any further resulting decline in the global business and economic environment, and may be impacted by the extent and speed of the global economic recovery.
Added
In addition, the failure of a product that we have sold c ould also result in a recall of, or safety alert relating to, such product which could ultimately result, in certain cases, in the removal of such product from the marketplace and claims regarding costs associated therewith.
Removed
RISKS RELATED TO THE CORONAVIRUS (COVID-19) PANDEMIC The COVID-19 pandemic has adversely impacted, and is expected to continue to pose risks to our business, the nature and extent of which are highly uncertain and unpredictable. 10 In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic.
Added
If a sole-source supplier is delayed or should cease or otherwise be unable to deliver such components, we may not be able to produce the related product in a timely manner or in sufficient quantities, if at all, which could adversely affect our operating results.
Removed
The COVID-19 pandemic and the associated pandemic-related responses continue to cause significant and volatile disruptions in global economies, in capital markets, and across industries.
Added
A sole-source supplier of a key component could also potentially exert significant bargaining power over price, quality, warranty claims, or other terms relating to these materials, which could have a material adverse effect on our financial condition, results of operations, and cash flows.
Removed
While we continue to actively monitor the pandemic and take steps to mitigate the risks posed by its spread, there is no guarantee that our efforts will mitigate the adverse impacts of COVID-19 or will be effective.
Added
In addition, product and program needs of our government and commercial customers change and evolve regularly.
Removed
However, due to the numerous uncertainties that have arisen from the pandemic, including the likelihood of resurgences and the emergence and spread of variants, we are unable to predict if there will be additional government-imposed restrictions on our ability to operate in future periods.
Added
U.S. lawmakers on several occasions have passed legislation to raise the federal debt ceiling, including the most recent suspension to the federal debt ceiling in June 2023, which is expected to allow the U.S. government to cover its debt obligations until at least January 1, 2025.
Removed
Additionally, our ability to continue to manufacture products is highly dependent on our ability to maintain the safety and health of our factory employees. The ability of our employees to work may be significantly impacted by the individuals contracting or being exposed to COVID-19 and its variants.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our corporate headquarters is located at a leased facility in Davidson, North Carolina. As of December 31, 2022, we had 146 facilities worldwide, including four corporate and shared-services facilities. Approximately 83% of our facilities operate as manufacturing and engineering, metal treatment, or aerospace overhaul plants, while the remaining 17% operate as selling and administrative office facilities.
Biggest changeItem 2. Properties. Our corporate headquarters is located at a leased facility in Davidson, North Carolina. As of December 31, 2023, we had 147 facilities worldwide, consisting of 143 facilities associated with our reportable segments as well as four corporate and shared-services facilities.
The number and type of facilities utilized by each of our reportable segments are summarized below: Owned Facilities Location Aerospace & Industrial Defense Electronics Naval & Power Total North America 7 1 5 13 Europe 9 — — 9 Total 16 1 5 22 Leased Facilities Location Aerospace & Industrial Defense Electronics Naval & Power Total North America 42 18 25 85 Europe 14 5 5 24 Asia 9 1 1 11 Total 65 24 31 120 21 The buildings on the properties referred to in this Item are well maintained, in good condition, and are suitable and adequate for current needs.
The number and type of facilities utilized by each of our reportable segments are summarized below: Owned Facilities Location Aerospace & Industrial Defense Electronics Naval & Power Total North America 7 1 4 12 Europe 9 — — 9 Total 16 1 4 21 Leased Facilities Location Aerospace & Industrial Defense Electronics Naval & Power Total North America 42 16 27 85 Europe 15 5 6 26 Asia 9 1 1 11 Total 66 22 34 122 The buildings on the properties referred to in this Item are well maintained, in good condition, and are suitable and adequate for current needs.
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Approximately 83% of our facilities operate as manufacturing and engineering, metal treatment, or aerospace overhaul plants, while the remaining 17% operate as selling and administrative office facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including assessment of the merits of the particular claim, as well as current accruals and insurance coverage, we do not believe that the disposition of any of these matters, individually or in the aggregate, will have a material adverse effect on our consolidated financial condition, results of operations, and cash flows.
Biggest changeAlthough the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including assessment of the merits of the particular claim, as well as current accruals and insurance coverage, we do not believe that the disposition of any of these matters, individually or in the aggregate, will have a material adverse effect on our consolidated financial condition, results of operations, and cash flows. 23 We have been named in pending lawsuits that allege injury from exposure to asbestos.
We maintain insurance coverage for these potential liabilities and we believe adequate coverage exists to cover any unanticipated asbestos liability. Item 4. Mine Safety Disclosures. Not applicable. 22 PART II
We maintain insurance coverage for these potential liabilities and we believe adequate coverage exists to cover any unanticipated asbestos liability. Item 4. Mine Safety Disclosures. Not applicable. 24 PART II
We have been named in pending lawsuits that allege injury from exposure to asbestos. To date, we have not been found liable or paid any material sum of money in settlement in any asbestos-related case.
To date, we have not been found liable or paid any material sum of money in settlement in any asbestos-related case.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Number of shares purchased Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Maximum Dollar amount of shares that may yet be Purchased Under the Program (in thousands) October 1 – October 31 26,864 $156.18 341,353 $208,377 November 1 – November 30 24,121 $173.92 365,474 204,182 December 1 – December 31 23,831 $169.64 389,305 200,140 For the quarter ended December 31 74,816 $166.19 389,305 $200,140 In December 2022, the Corporation adopted two written trading plans in connection with its previously authorized share repurchase program, of which approximately $200 million remains available for repurchase.
Biggest changeTotal Number of shares purchased Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Maximum Dollar amount of shares that may yet be Purchased Under the Program (in thousands) October 1 – October 31 21,978 $200.13 231,447 $158,375 November 1 – November 30 20,024 $209.66 251,471 154,177 December 1 – December 31 18,440 $218.93 269,911 150,140 For the quarter ended December 31 60,442 $209.02 269,911 $150,140 In November 2023, the Corporation adopted two written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. MARKET INFORMATION Our common stock is listed and traded on the New York Stock Exchange (NYSE) under the symbol CW. As of January 1, 2023, we had approximately 2,653 registered shareholders of our common stock, $1.00 par value.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. MARKET INFORMATION Our common stock is listed and traded on the New York Stock Exchange (NYSE) under the symbol CW. As of January 1, 2024, we had approximately 2,493 registered shareholders of our common stock, $1.00 par value.
Issuer Purchases of Equity Securities 23 The following table provides information about our repurchases of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2022.
Issuer Purchases of Equity Securities 25 The following table provides information about our repurchases of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the quarter ended December 31, 2023.
Securities and Exchange Commission on December 14, 2022. The following performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any of our other filings under the Securities Act or the Securities Exchange Act of 1934, except to the extent we specifically incorporate this information by reference therein.
The following performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any of our other filings under the Securities Act or the Securities Exchange Act of 1934, except to the extent we specifically incorporate this information by reference therein.
DIVIDENDS During 2022 and 2021, the Company paid quarterly dividends as follows: 2022 2021 Common Stock First Quarter $ 0.18 $ 0.17 Second Quarter 0.19 0.18 Third Quarter 0.19 0.18 Fourth Quarter 0.19 0.18 SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information regarding our equity compensation plans as of December 31, 2022, the end of our most recently completed fiscal year: Plan category Number of securities to be issued under equity compensation plans Weighted-average fair value of outstanding equity-based awards Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) Equity compensation plans approved by security holders 407,581 (a) $112.85 1,776,493 (b) Equity compensation plans not approved by security holders None Not applicable Not applicable (a) Consists of 362,729 shares issuable upon vesting of performance share units, restricted shares, restricted stock units, and shares to non-employee directors under the 2005 and 2014 Omnibus Incentive Plan, and 44,852 shares issuable under the Employee Stock Purchase Plan.
DIVIDENDS During 2023 and 2022, the Company paid quarterly dividends as follows: 2023 2022 Common Stock First Quarter $ 0.19 $ 0.18 Second Quarter 0.20 0.19 Third Quarter 0.20 0.19 Fourth Quarter 0.20 0.19 SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information regarding our equity compensation plans as of December 31, 2023, the end of our most recently completed fiscal year: Plan category Number of securities to be issued under equity compensation plans Weighted-average fair value of outstanding equity-based awards Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) Equity compensation plans approved by security holders 356,766 (a) $139.36 1,613,185 (b) Equity compensation plans not approved by security holders None Not applicable Not applicable (a) Consists of 319,828 shares issuable upon vesting of performance share units, restricted shares, restricted stock units, and shares to non-employee directors under the 2005 and 2014 Omnibus Incentive Plan, and 36,938 shares issuable under the Employee Stock Purchase Plan.
(b) Consists of 1,192,211 shares available for share-based awards under the 2014 Omnibus Incentive Plan, and 584,282 shares remaining available for issuance under the Employee Stock Purchase Plan.
(b) Consists of 1,100,366 shares available for share-based awards under the 2014 Omnibus Incentive Plan, and 512,819 shares remaining available for issuance under the Employee Stock Purchase Plan.
The first trading plan includes share repurchases of $50 million, to be executed equally throughout the 2023 calendar year. The second trading plan includes opportunistic share repurchases up to $100 million to be executed through a 10b5-1 program. The terms of these trading plans can be found in the Corporation’s Form 8-K filed with U.S.
The second trading plan includes opportunistic share repurchases up to $100 million during 2024 to be executed through a 10b5-1 program. The terms of these trading plans can be found in the Corporation’s Form 8-K filed with U.S. Securities and Exchange Commission on November 28, 2023.
The graph assumes an investment of $100 on December 31, 2017 and the reinvestment of all dividends paid during the following five fiscal years. 24 Company / Index 2017 2018 2019 2020 2021 2022 Curtiss-Wright Corp 100 84.21 116.81 97.15 116.44 140.93 S&P MidCap 400 Index 100 88.92 112.21 127.54 159.12 138.34 S&P Aerospace & Defense Select 100 95.79 133.91 142.55 146.43 139.48 Item 6. [Reserved]
The graph assumes an investment of $100 on December 31, 2018 and the reinvestment of all dividends paid during the following five fiscal years. 26 Company / Index 2018 2019 2020 2021 2022 2023 Curtiss-Wright Corp 100 138.70 115.36 138.27 167.35 224.21 S&P MidCap 400 Index 100 126.20 143.44 178.95 155.58 181.15 S&P A&D Select Industry Index 100 139.79 148.81 152.86 145.61 180.68 Item 6. [Reserved]
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The Corporation implemented these written trading plans in connection with its previously authorized share repurchase program, of which approximately $150 million of the previously authorized up to $550 million remains available for repurchase. The first trading plan includes share repurchases of $50 million, to be executed equally throughout the 2024 calendar year.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe definition of “organic” also excludes the impairment of assets held for sale and corresponding loss from sale of our industrial valves business in Germany, as well as the effects of foreign currency translation. 29 Year Ended December 31, Percent change (In thousands, except percentages) 2022 2021 2022 vs. 2021 Sales: Aerospace & Industrial $ 836,035 $ 786,334 6 % Defense Electronics 690,262 724,326 (5) % Naval & Power 1,030,728 995,271 4 % Total sales $ 2,557,025 $ 2,505,931 2 % Operating income: Aerospace & Industrial $ 136,996 $ 121,817 12 % Defense Electronics 154,568 159,089 (3) % Naval & Power 177,582 141,660 25 % Corporate and eliminations (45,703) (39,883) (15) % Total operating income $ 423,443 $ 382,683 11 % Interest expense 46,980 40,240 (17) % Other income, net 12,732 12,067 6 % Earnings before income taxes 389,195 354,510 10 % Provision for income taxes (94,847) (87,351) (9) % Net earnings $ 294,348 $ 267,159 10 % Loss on divestiture/impairment of assets held for sale $ 4,651 $ 19,088 NM New orders $ 2,942,550 $ 2,590,534 14 % Backlog $ 2,622,731 $ 2,228,924 18 % NM - Not meaningful Components of sales and operating income growth (decrease): 2022 vs. 2021 Sales Operating Income Organic 3 % 6 % Acquisitions/divestiture — % — % Loss on divestiture/impairment of assets held for sale — % 4 % Foreign currency (1) % 1 % Total 2 % 11 % Sales for the year increased $51 million, or 2%, to $2,557 million, compared with the prior year period.
Biggest changeYear Ended December 31, Percent change (In thousands, except percentages) 2023 2022 2023 vs. 2022 Sales: Aerospace & Industrial $ 887,228 $ 836,035 6 % Defense Electronics 815,912 690,262 18 % Naval & Power 1,142,233 1,030,728 11 % Total sales $ 2,845,373 $ 2,557,025 11 % Operating income: Aerospace & Industrial $ 145,278 $ 136,996 6 % Defense Electronics 191,775 154,568 24 % Naval & Power 189,227 177,582 7 % Corporate and eliminations (41,678) (45,703) 9 % Total operating income $ 484,602 $ 423,443 14 % Interest expense 51,393 46,980 (9) % Other income, net 29,861 12,732 135 % Earnings before income taxes 463,070 389,195 19 % Provision for income taxes (108,561) (94,847) (14) % Net earnings $ 354,509 $ 294,348 20 % New orders $ 3,090,029 $ 2,942,550 5 % Backlog $ 2,873,243 $ 2,622,731 10 % Components of sales and operating income growth (decrease): 2023 vs. 2022 Sales Operating Income Organic 10 % 12 % Acquisitions 2 % — % Divestiture-related costs — % 1 % Foreign currency (1) % 1 % Total 11 % 14 % Sales for the year increased $288 million, or 11%, to $2,845 million, compared with the prior year period.
While we closely monitor these industry metrics, our success and future growth in the commercial aerospace market is primarily tied to the growth in aircraft production rates (e.g., Boeing 737 and 787, Airbus A320 and A350), the timing of our order placement, and continued partnering with aerospace OEMs on both the current fleet and the next-generation of single aisle programs and engines, as well as emerging opportunities to support more fuel efficient and all-electric aircraft.
While we closely monitor these industry metrics, our success and future growth in the commercial aerospace market is primarily tied to the growth in aircraft production rates (e.g., Boeing 737 and 787, Airbus A320 and A350), the timing of our 29 order placement, and continued partnering with aerospace OEMs on both the current fleet and the next-generation of single aisle programs and engines, as well as emerging opportunities to support more fuel efficient and all-electric aircraft.
One of the industry’s most significant challenges is maintaining electricity market competitiveness. Throughout the past decade, U.S. reactor operators have faced increased security measures and post-Fukushima regulatory requirements, and were also tasked with reassessing operating practices, improving efficiency, and reducing plant costs to compete with sustained low natural gas prices.
One of the industry’s most significant challenges is maintaining electricity market competitiveness. Throughout the past decade, U.S. reactor operators faced increased security measures and post-Fukushima regulatory requirements, and were also tasked with reassessing operating practices, improving efficiency, and reducing plant costs to compete with sustained low natural gas prices.
We are also a designer and manufacturer of high-technology data acquisition and comprehensive flight test instrumentation systems, as well as critical aircraft arresting systems equipment. In the ground defense market, we are a supplier of advanced tactical communications solutions for battlefield network management, including 26 COTS-based rugged, small form factor communications systems, and integrated network communications management software.
We are also a designer and manufacturer of high-technology data acquisition and comprehensive flight test instrumentation systems, as well as critical aircraft arresting systems equipment. In the ground defense market, we are a supplier of advanced tactical communications solutions for battlefield network management, including COTS-based rugged, small form factor communications systems, and integrated network communications management software.
Our growth in these markets is typically aligned with the 28 performance of the U.S. and global economies, with changes in global GDP rates and industrial production driving our sales, particularly for our surface treatment services. We have developed long-standing relationships with our customers, and provide technologies that promote efficiency, safety, reduced emissions, and longevity.
Our growth in these markets is typically aligned with the performance of the U.S. and global economies, with changes in global GDP rates and industrial production driving our sales, particularly for our surface treatment services. We have developed long-standing relationships with our customers, and provide technologies that promote efficiency, safety, reduced emissions, and longevity.
As a supplier of COTS and COTS+ solutions, we continue to demonstrate that defense electronics technology will enhance our ability to design and develop future generations of advanced systems and products for high performance applications, while also meeting the military’s Size, Weight, and Power considerations.
As a supplier of COTS and COTS+ solutions, we continue to demonstrate that defense electronics technology will enhance our ability to design and develop future 28 generations of advanced systems and products for high performance applications, while also meeting the military’s Size, Weight, and Power considerations.
We play an important role in the new build market for the Generation III+ Westinghouse AP1000 reactor design, for which we are a supplier of reactor coolant pumps, as well as a variety of ancillary plant products and services. On a global basis, nuclear plant construction remains active.
We also play an important role in the new build market for the Generation III+ Westinghouse AP1000 reactor design, for which we are a supplier of reactor coolant pumps, as well as a variety of ancillary plant products and services. On a global basis, nuclear plant construction remains active.
The industry experienced a strong rebound in global passenger growth in 2022, benefiting from the propensity for the general public to travel by air, decisions by most governments to lift COVID-19 travel restrictions, and the continued availability and implementation of vaccines.
Beginning in 2022, the industry experienced a strong rebound in global passenger growth, benefiting from the propensity for the general public to travel by air, decisions by most governments to lift COVID-19 travel restrictions, and the continued availability and implementation of vaccines.
RESULTS BY BUSINESS SEGMENT Aerospace & Industrial Sales in the Aerospace & Industrial segment are primarily generated from the commercial aerospace and general industrial markets and, to a lesser extent, the defense markets. The following tables summarize sales, operating income and margin, and new orders within the Aerospace & Industrial segment.
RESULTS BY BUSINESS SEGMENT Aerospace & Industrial Sales in the Aerospace & Industrial segment are primarily generated from the commercial aerospace and general industrial markets and, to a lesser extent, the defense markets. The following tables summarize sales, operating income and margin, new orders, and backlog within the Aerospace & Industrial segment.
Other Intangible Assets Other intangible assets are generally the result of acquisitions and consist primarily of purchased technology, customer related intangibles, and trademarks. Intangible assets are recorded at their fair values as determined through purchase accounting, based 39 on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows arising from follow-on sales.
Other Intangible Assets Other intangible assets are generally the result of acquisitions and consist primarily of purchased technology, customer related intangibles, and trademarks. Intangible assets are recorded at their fair values as determined through purchase accounting, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows arising from 41 follow-on sales.
We also adopted the MP-2021 projected mortality scale published in October 2021, with no pandemic adjustments. The overall expected return on assets assumption is based primarily on the expectations of future performance. Expected future performance is determined by weighting the expected returns for each asset class by the plan’s asset allocation.
We also retained the MP-2021 projected mortality scale published in October 2021, with no pandemic adjustments. The overall expected return on assets assumption is based primarily on the expectations of future performance. Expected future performance is determined by weighting the expected returns for each asset class by the plan’s asset allocation.
We also updated our mortality assumptions from prior year for the CW Pension plan by adopting a 50/50 blend of the Pri-2012 Aggregate and White Collar tables published by the Society of Actuaries in October 2019, while retaining the White Collar table for the nonqualified plan.
We also retained our mortality assumptions from prior year for the CW Pension plan by adopting a 50/50 blend of the Pri-2012 Aggregate and White Collar tables published by the Society of Actuaries in October 2019, while retaining the White Collar table for the nonqualified plan.
As such, the U.S. Defense budget serves as a leading indicator of our growth in the defense market. We derive revenue from the naval defense, aerospace defense, and ground defense markets, which collectively represent more than 50% of our annual net sales.
As such, the U.S. Defense budget serves as a leading indicator of our growth in the defense market. We derive revenue from the naval defense, aerospace defense, and ground defense markets, which collectively represent more than 55% of our annual net sales.
Based upon the completion of our annual test as of October 31, 2022, we determined that there was no impairment of goodwill and that all reporting units’ estimated fair values were substantially in excess of their carrying amounts.
Based upon the completion of our annual test as of October 31, 2023, we determined that there was no impairment of goodwill and that all reporting units’ estimated fair values were substantially in excess of their carrying amounts.
Similarly, the global environment, which is typically influenced by international trade, economic conditions, and geopolitical uncertainty, had also been greatly impacted by the pandemic in 2020 before it dramatically rebounded in 2021.
Similarly, the global environment, which is typically influenced by international trade, economic conditions, and geopolitical uncertainty, had also been greatly impacted by the pandemic in 2020 before it rebounded in 2021 and 2022.
However, in 2022, the U.S. market experienced strong bipartisan support for nuclear power, with significant investments through the Civil Nuclear Credit Program (part of the Infrastructure Bill) and nuclear power production tax credits (provided by the Inflation Reduction Act) focused on helping to preserve the existing U.S. reactor fleet.
In 2023, the U.S. market experienced strong bipartisan support for nuclear power, with significant investments through the Civil Nuclear Credit Program (part of the Infrastructure Bill) and nuclear power production tax credits (provided by the Inflation Reduction Act) focused on helping to preserve the existing U.S. reactor fleet.
RESULTS OF OPERATIONS The following MD&A is intended to help the reader understand the results of operations and financial condition of the Corporation for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
RESULTS OF OPERATIONS The following MD&A is intended to help the reader understand the results of operations and financial condition of the Corporation for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
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. Revenue recognized on an over-time basis for the year ended December 31, 2022 accounted for approximately 51% of total net sales.
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. Revenue recognized on an over-time basis for the year ended December 31, 2023 accounted for approximately 47% of total net sales.
Defense We have a well-diversified portfolio of products and services that supply all branches of the U.S. military, with content on critical high-performance programs and platforms, as well as a growing international defense business. A significant portion of our defense business operations are characterized by long-term programs and contracts driven primarily by U.S. DoD budgets and funding levels.
Defense We have a well-diversified portfolio of products and services that supply all branches of the U.S. military, with content on critical high-performance programs and platforms, as well as a growing international defense business. A significant portion of our defense business operations is comprised of long-term programs and contracts driven primarily by U.S. DoD budgets and funding levels.
The expected returns are based on long-term capital market assumptions provided by our investment consultants. Based on a review of market trends, actual returns on plan assets, and other factors, the Company’s expected long-term rate of return on plan assets was increased to 6.50% as of December 31, 2022, which will be utilized for determining 2023 pension cost.
The expected returns are based on long-term capital market assumptions provided by our investment consultants. Based on a review of market trends, actual returns on plan assets, and other factors, the Company’s expected long-term rate of return on plan assets was increased to 6.75% as of December 31, 2023, which will be utilized for determining 2024 pension cost.
The rate of compensation increase for base pay in the pension plans decreased to a weighted average of 3.4% for the current period, based upon a graded scale of 4.1% to 2.9% that decrements as pay increases, which reflects the experience over past years and the Company’s expectation of future salary increases.
The rate of compensation increase for base pay in the pension plans remained unchanged at a weighted average of 3.4% for the current period, based upon a graded scale of 4.1% to 2.9% that decrements as pay increases, which reflects the experience over past years and the Company’s expectation of future salary increases.
An expected long-term rate of return of 5.75% was used for determining 2022 expense, with 6.50% used for 2021 pension expense and 7.50% used for 2020 pension expense. 38 The timing and amount of future pension income or expense to be recognized each year is dependent on the demographics and expected compensation of the plan participants, the expected interest rates in effect in future years, inflation, and the actual and expected investment returns of the assets in the pension trust.
An expected long-term rate of return of 6.50%% was used for determining 2023 expense, with 5.75% used for 2022 pension expense and 6.50% used for 2021 pension expense. 40 The timing and amount of future pension income or expense to be recognized each year is dependent on the demographics and expected compensation of the plan participants, the expected interest rates in effect in future years, inflation, and the actual and expected investment returns of the assets in the pension trust.
Goodwill We have $1.5 billion in goodwill as of December 31, 2022. Generally, the largest separately identifiable asset from the businesses that we acquire is the value of their assembled workforces, which includes the additional benefit received from management, administrative, marketing, business development, engineering, and technical employees of the acquired businesses.
Goodwill We have $1.6 billion in goodwill as of December 31, 2023. Generally, the largest separately identifiable asset from the businesses that we acquire is the value of their assembled workforces, which includes the additional benefit received from management, administrative, marketing, business development, engineering, and technical employees of the acquired businesses.
Discussion and analysis of our financial condition and results of operations for the year ended December 31, 2021, as compared to the year ended December 31, 2020, is contained in our 2021 Annual Report on Form 10-K, filed with the SEC on February 24, 2022.
Discussion and analysis of our financial condition and results of operations for the year ended December 31, 2022, as compared to the year ended December 31, 2021, is contained in our 2022 Annual Report on Form 10-K, filed with the SEC on February 22, 2023.
Notable products include electronic throttle controls, shift controls, joysticks, power management systems, and traction inverter systems, driving our ability to provide a full suite of in-cab operator control systems to our customers.
Notable products include electronic throttle controls, shift controls, joysticks, power management systems and power electronics, charge switching units and traction inverter systems, driving our ability to provide a full suite of in-cab operator control systems to our customers.
Debt Compliance As of December 31, 2022, we were in compliance with all debt agreements and credit facility covenants, including our most restrictive covenant, which is our debt to capitalization ratio limit of 60%. As of December 31, 2022, we had the ability to incur total additional indebtedness of $1.7 billion without violating our debt to capitalization covenant.
Debt Compliance As of December 31, 2023, we were in compliance with all debt agreements and credit facility covenants, including our most restrictive covenant, which is our debt to capitalization ratio limit of 60%. As of December 31, 2023, we had the ability to incur total additional indebtedness of $2.3 billion without violating our debt to capitalization covenant.
The following table reflects the impact of changes in selected assumptions used to determine the funded status of the Company’s U.S. qualified and nonqualified pension plans as of December 31, 2022 (in thousands, except for percentage point change): Assumption Percentage Point Change Increase in Benefit Obligation Increase in Expense Discount rate (0.25) % $16,976 ($231) Expected return on assets (0.25) % — $2,223 See Note 17 to the Consolidated Financial Statements for further information on our pension and postretirement plans.
The following table reflects the impact of changes in selected assumptions used to determine the funded status of the Company’s U.S. qualified and nonqualified pension plans as of December 31, 2023 (in thousands, except for percentage point change): Assumption Percentage Point Change Increase in Benefit Obligation Increase/(Decrease) in Expense Discount rate (0.25) % $17,163 ($256) Expected return on assets (0.25) % — $2,255 See Note 17 to the Consolidated Financial Statements for further information on our pension and postretirement plans.
Future Commitments Cash generated from operations should be adequate to meet our planned capital expenditures of approximately $50 million to $60 million and expected dividend payments of approximately $29 million in 2023. There can be no assurance, however, that we will continue to generate cash from operations at the current level, or that these projections will remain constant throughout 2023.
Future Commitments Cash generated from operations should be adequate to meet our planned capital expenditures of approximately $55 million to $65 million and expected dividend payments of approximately $30 million in 2024. There can be no assurance, however, that we will continue to generate cash from operations at the current level, or that these projections will remain constant throughout 2024.
Outside of the U.S., we have seen sentiment shift dramatically towards nuclear power, as many countries have begun or are starting to recommit to advanced technologies, while realizing the strategic importance of energy independence.
In recent years, we have seen sentiment shift dramatically towards nuclear power, as many countries have begun or are starting to recommit to advanced technologies, while realizing the strategic importance of energy independence.
Interest cost is determined by applying the spot rate from the full yield curve to each anticipated benefit payment. The discount rate changes contributed to a decrease in the benefit obliga tion of $181 million in the CW plans.
Interest cost is determined by applying the spot rate from the full yield curve to each anticipated benefit payment. The discount rate changes contributed to an increase in the benefit obliga tion of $12 million in the CW plans.
Contract assets and contract liabilities are reported in the "Receivables, net" and "Deferred revenue" lines, respectively, within the Consolidated Balance Sheet. Inventory Inventory costs include materials, direct labor, purchasing, and manufacturing overhead costs, which are stated at the lower of cost or net realizable value.
Contract liabilities primarily consist of customer advances received prior to revenue being earned. Contract assets and contract liabilities are reported in the "Receivables, net" and "Deferred revenue" lines, respectively, within the Consolidated Balance Sheet. Inventory Inventory costs include materials, direct labor, purchasing, and manufacturing overhead costs, which are stated at the lower of cost or net realizable value.
Looking ahead to the next few years, we remain cautiously optimistic that our economically sensitive commercial and industrial markets will continue to improve based upon a return to normalized global growth conditions.
Looking ahead to the next few years, we remain cautiously optimistic that our economically sensitive commercial and industrial markets will continue to improve based upon a return to normalized global growth conditions, continued easing of supply chain conditions, and lower interest rates.
The discount rate used to determine the plan benefit obligations as of December 31, 2022, and the annual periodic costs for 2023, was increased from 2.87% to 5.04% for the Curtiss-Wright Pension Plan, and from 2.70% to 4.99% for the nonqualified benefit plan, to reflect current economic conditions.
The discount rate used to determine the plan benefit obligations as of December 31, 2023, and the annual periodic costs for 2024, was decreased from 5.04% to 4.86% for the Curtiss-Wright Pension Plan, and from 4.99% to 4.79% for the nonqualified benefit plan, to reflect current economic conditions.
On a segment basis, sales from the Aerospace & Industrial and Naval & Power segments increased $50 million and $35 million, respectively, with sales from the Defense Electronics segment decreasing $34 million. Changes in sales by segment are discussed in further detail in the "Results by Business Segment" section below.
On a segment basis, sales from the Aerospace & Industrial, Defense Electronics, and Naval & Power segments increased $51 million, $126 million, and $111 million, respectively. Changes in sales by segment are discussed in further detail in the results by business segment section below.
We expect these inflationary pressures to continue to persist in 2023. Market Analysis and Economic Factors Economic Factors Impacting Our Markets Many of Curtiss-Wright’s commercial businesses are driven in large part by global economic growth, primarily led by operations in the U.S., Canada, Europe, and China.
Market Analysis and Economic Factors Economic Factors Impacting Our Markets Many of Curtiss-Wright’s commercial businesses are driven in large part by global economic growth, primarily led by operations in the U.S., Canada, Europe, and China.
Other income, net for the year increased $1 million, or 6% , to $13 million, primarily due to lower overall pension costs against the comparable prior year period.
Other income, net for the year increased $17 million, or 135% , to $30 million, primarily due to lower overall pension costs against the comparable prior year period.
In 2020, U.S. real gross domestic product (GDP) declined 3.4%, principally due to the impact of the COVID-19 pandemic, before it rebounded sharply in 2021, increasing 5.7% and at the fastest pace since 1984, led by an acceleration in industrial activity. In 2022, U.S.
GDP declined 3.4%, principally due to the impact of the COVID-19 pandemic, before it rebounded sharply in 2021, increasing 5.8% and at the fastest pace since 1984, led by an acceleration in industrial activity. U.S. GDP grew 1.9% in 2022. In 2023, U.S.
New orders increased $83 million as compared to the prior year, primarily due to an increase in new orders for ground defense and aerospace defense equipment. Naval & Power Sales in the Naval & Power segment are primarily to the naval defense and power & process markets, and, to a lesser extent, the aerospace defense market.
New orders increased $100 million as compared to the prior year, primarily due to an increase in orders for tactical communications as well as embedded computing products. Naval & Power Sales in the Naval & Power segment are primarily to the naval defense and power & process markets, and, to a lesser extent, the aerospace defense market.
Financing Activities Debt Issuances and Repayments On October 27, 2022, we issued $300 million Senior Notes, consisting of $200 million 4.49% notes that mature on October 27, 2032 and $100 million 4.64% notes that mature on October 27, 2034. In the fourth quarter of 2021, we repaid $100 million of the 2011 Notes that matured on December 1, 2021.
Financing Activities Debt Issuances and Repayments In February 2023, we repaid $203 million of the 2013 Notes that matured on February 26, 2023. On October 27, 2022, we issued $300 million Senior Notes, consisting of $200 million 4.49% notes that mature on October 27, 2032 and $100 million 4.64% notes that mature on October 27, 2034.
The following tables summarize sales, operating income and margin, and new orders within the Defense Electronics segment.
The following tables summarize sales, operating income and margin, new orders, and backlog within the Naval & Power segment.
We have generally been able to offset these increases, as a portion of our contracts contain terms and conditions that enable us to pass inflationary price increases to our customers. In those cases whereby inflationary increases are not contractually stipulated, we actively negotiate price increases. We have consistently made annual investments in capital that deliver efficiencies and cost savings.
We have consistently focused on mitigating inflation through pricing and operational excellence initiatives, and generally have been able to offset these cost increases, as a portion of our contracts contain terms and conditions that enable us to pass inflationary price increases to our customers. In those cases whereby inflationary increases are not contractually stipulated, we actively negotiate price increases.
According to the World Nuclear Organization, there are currently 58 new reactors under construction across 18 countries, with 104 planned and 341 proposed over the next several decades.
According to the World Nuclear Organization, there are currently 60 new reactors under construction across 17 countries, with 111 planned and more than 300 proposed over the next several decades.
According to the Nuclear Regulatory Commission (NRC), nuclear power comprises approximately 20% of all electric power produced in the United States today, with 92 reactors operating across 54 nuclear power plants in 28 states.
According to the Nuclear Regulatory Commission (NRC), nuclear power comprises approximately 20% of all electric power produced in the U.S. today, with 93 reactors (includes the recently started Vogtle 3 reactor) operating across 54 nuclear power plants in 28 states.
Year Ended December 31, Percent Change (In thousands, except percentages) 2022 2021 2022 vs. 2021 Sales $ 836,035 $ 786,334 6 % Operating income 136,996 121,817 12 % Operating margin 16.4 % 15.5 % 90 bps New orders $ 883,838 $ 853,077 4 % Backlog $ 371,305 $ 338,581 10 % 31 Components of sales and operating income growth (decrease): 2022 vs. 2021 Sales Operating Income Organic 10 % 14 % Acquisitions (1) % (1) % Foreign currency (3) % (1) % Total 6 % 12 % Sales increased $50 million, or 6%, to $836 million, from the comparable prior year period primarily due to higher sales in the general industrial and commercial aerospace markets.
Year Ended December 31, Percent Change (In thousands, except percentages) 2023 2022 2023 vs. 2022 Sales $ 887,228 $ 836,035 6 % Operating income 145,278 136,996 6 % Operating margin 16.4 % 16.4 % — bps New orders $ 895,332 $ 883,838 1 % Backlog $ 387,248 $ 371,305 4 % 33 Components of sales and operating income growth (decrease): 2023 vs. 2022 Sales Operating Income Organic 6 % 6 % Acquisitions — % — % Foreign currency — % — % Total 6 % 6 % Sales increased $51 million, or 6%, to $887 million, from the comparable prior year period primarily due to higher sales in the commercial aerospace and general industrial markets.
Most of our long-term contracts allow for several billing points (progress or milestone) that provide us with cash receipts as costs are incurred throughout the project rather than upon contract completion, thereby reducing working capital requirements. 34 Consolidated Statement of Cash Flows Year ended December 31, (In thousands) 2022 2021 Net cash provided by (used in): Operating activities $ 294,776 $ 387,668 Investing activities (325,867) (42,403) Financing activities 129,428 (369,129) Effect of exchange rates (12,367) (3,380) Net increase (decrease) in cash and cash equivalents $ 85,970 $ (27,244) Operating Activities Cash provided by operating activities decreased $93 million to $295 million from the comparable prior year period , primarily due to higher inventory purchases, lower advanced cash receipts, and a legal settlement payment made to WEC during the current period.
Most of our long-term contracts allow for several billing points (progress or milestone) that provide us with cash receipts as costs are incurred throughout the project rather than upon contract completion, thereby reducing working capital requirements. 36 Consolidated Statement of Cash Flows Year ended December 31, (In thousands) 2023 2022 Net cash provided by (used in): Operating activities $ 448,089 $ 294,776 Investing activities (35,519) (325,867) Financing activities (273,403) 129,428 Effect of exchange rates 10,726 (12,367) Net increase in cash and cash equivalents $ 149,893 $ 85,970 Operating Activities Cash provided by operating activities increased $153 million to $448 million from the comparable prior year period , primarily due to higher net earnings and improved working capital.
GDP is expected to grow approximately 2.0%, according to the most recent estimates, as strong U.S. consumer spending continued to support GDP growth despite the dual headwinds of rising interest rates and high inflation.
GDP is expected to grow approximately 2.5%, according to the most recent estimates, as strong U.S. consumer spending and easing of prior supply chain disruptions continued to support GDP growth despite the dual headwinds of rising interest rates and high inflation. In 2024, economists expect a combination of a steady easing in headline and core inflation to prompt the U.S.
Through continued innovation as well as incremental research and development investments, Curtiss-Wright remains aligned with high growth DoD priorities, modernization efforts and emerging technological trends, including security, cyber, hypersonics, net-centric connected battlefield, soldier survivability, and MOSA capabilities.
Through continued innovation as well as incremental research and development investments, Curtiss-Wright remains aligned with high growth DoD priorities, modernization efforts and emerging technological trends, including security, cyber, hypersonics, net-centric connected battlefield, soldier survivability, and MOSA capabilities. In December 2022, the DoD approved and enacted a FY’23 defense budget of $817 billion, reflecting an approximate $75 billion increase from FY’22.
As of December 31, 2021, we had $94 million of borrowings outstanding under our prior Credit Agreement. 35 Repurchase of Common Stock During 2022, the Company repurchased approximately 0.4 million shares of its common stock for $57 million. In 2021, the Company repurchased approximately 2.7 million shares of its common stock for $343 million.
As of December 31, 2022, we had no borrowings outstanding under the Credit Agreement. Repurchase of Common Stock During 2023, the Company repurchased approximately 0.3 million shares of its common stock for $50 million.
As such, future acquisitions, if any, may be funded through the use of our cash and cash equivalents, through additional financing available under the credit agreement, or through new financing alternatives.
Future acquisitions will depend, in part, on the availability of financial resources at a cost of capital that meet our stringent criteria. As such, future acquisitions, if any, may be funded through the use of our cash and cash equivalents, through additional financing available under the credit agreement, or through new financing alternatives.
The increase in cash held by U.S. subsidiaries during 2022 as compared to 2021 was primarily due to lower share repurchase activity and higher foreign cash repatriation during the current period.
The increase in cash held by U.S. subsidiaries during 2023 as compared to 2022 was primarily due to higher cash from operations in the current period as well as no acquisition activity during the current period.
We provide a combination of flight control, actuation, high-temperature and high accuracy sensors, and other sophisticated electronics, as well as shot and laser peening services utilized on highly stressed components of turbine engine fan blades and aircraft structures.
Currently, more than 50% of our sales in this market are linked to the narrow-body market. We provide a combination of critical equipment, including flight controls, actuation, high-temperature and high accuracy sensors, and other sophisticated electronics, as well as shot and laser peening services utilized on highly stressed components of turbine engine fan blades and aircraft structures.
According to the International Monetary Fund’s World Economic Outlook, global GDP in world economies grew 6.0% in 2021 and is expected to grow 3.2% in 2022 and 2.7% in 2023, according to the most recent estimates.
According to the International Monetary Fund’s World Economic Outlook, global GDP in world economies is expected to grow 3.1% in 2023 followed by growth of approximately 3.0% in 2024, according to the most recent estimates.
Interest expense for the year increased $7 million, or 17% , to $47 million, primarily due to higher current period borrowings under our Credit Agreement as well as the issuance of $300 million Senior Notes in October 2022.
Interest expense for the year increased $4 million, or 9% , to $51 million, primarily due to the issuance of $300 million Senior Notes in October 2022, as well as higher interest rates under our Credit Agreement in the current period. This increase was partially offset by the repayment of our 2013 Notes in February 2023.
During the years ended December 31, 2022, 2021, and 2020, there were no significant changes in estimated contract costs. 37 If a performance obligation does not qualify for over-time revenue recognition, revenue is then recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery.
If a performance obligation does not qualify for over-time revenue recognition, revenue is then recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery. 39 Revenue recognized at a point-in-time for the year ended December 31, 2023 accounted for approximately 53% of total net sales.
Year Ended December 31, Percent Change (In thousands, except percentages) 2022 2021 2022 vs. 2021 Sales $ 690,262 $ 724,326 (5 %) Operating income 154,568 159,089 (3 %) Operating margin 22.4 % 22.0 % 40 bps New orders $ 836,660 $ 753,852 11 % Backlog $ 786,026 $ 667,510 18 % Components of sales and operating income growth (decrease): 2022 vs. 2021 Sales Operating Income Organic (4) % (6) % Acquisitions — % — % Foreign currency (1) % 3 % Total (5) % (3) % Sales decreased $34 million, or 5%, to $690 million, from the comparable prior year period.
Year Ended December 31, Percent Change (In thousands, except percentages) 2023 2022 2023 vs. 2022 Sales $ 815,912 $ 690,262 18 % Operating income 191,775 154,568 24 % Operating margin 23.5 % 22.4 % 110 bps New orders $ 936,329 $ 836,660 12 % Backlog $ 886,317 $ 786,026 13 % Components of sales and operating income growth (decrease): 2023 vs. 2022 Sales Operating Income Organic 18 % 21 % Acquisitions — % — % Foreign currency — % 3 % Total 18 % 24 % Sales increased $126 million, or 18%, to $816 million, from the comparable prior year period.
The unused credit available under the Credit Agreement as of December 31, 2022 was $733 million, which could be borrowed in full without violating any of our debt covenants.
Revolving Credit Agreement As of December 31, 2023, we had no borrowings outstanding under the Credit Agreement and $20 million in letters of credit supported by the credit facility. The unused credit available under the Credit Agreement as of December 31, 2023 was $730 million, which could be borrowed in full without violating any of our debt covenants.
As of December 31, 2022, we had contingent liabilities on outstanding letters of credit due as follows: (In thousands) Total 2023 2024 2025 2026 2027 Thereafter Letters of Credit (1) $ 17,325 $ 7,194 $ 4,247 $ 5,297 $ 53 $ 209 $ 325 (1) Amounts exclude bank guarantees of approximately $2.5 million.
As of December 31, 2023, we had contingent liabilities on outstanding letters of credit due as follows: (In thousands) Total 2024 2025 2026 2027 2028 Thereafter Letters of Credit (1) $ 19,866 $ 15,013 $ 4,504 $ 197 $ 152 $ — $ — (1) Amounts exclude bank guarantees of approximately $16.0 million.
Sales in the general industrial market increased $31 million primarily due to higher demand for industrial vehicle products. In the commercial aerospace market, sales increased $20 million primarily due to higher demand for sensors products and surface treatment services.
Sales in the general industrial market increased primarily due to higher demand for industrial automation products as well as higher sales of surface treatment services.
There are no legal or economic restrictions on the ability of any of our subsidiaries to transfer funds, absent certain regulatory approvals in China, where approximately $8 million of our foreign cash resides.
The increase in cash held by foreign subsidiaries during 2023 as compared to 2022 was primarily due to lower foreign cash repatriation during the current period. There are no legal or economic restrictions on the ability of any of our subsidiaries to transfer funds, absent certain regulatory approvals in China, w here approximately $19 million of our foreign cash resides.
Capital Resources Cash in U.S. and Foreign Jurisdictions As of December 31, (In thousands) 2022 2021 United States of America $ 147,851 $ 37,361 United Kingdom 48,203 69,732 Canada 33,268 24,019 European Union 8,721 12,154 China 7,889 13,403 Other foreign countries 11,042 14,335 Total cash and cash equivalents $ 256,974 $ 171,004 Cash and cash equivalents as of December 31, 2022 and December 31, 2021 were $257 million and $171 million, respectively.
Capital Resources Cash in U.S. and Foreign Jurisdictions As of December 31, (In thousands) 2023 2022 United States of America $ 230,298 $ 147,851 United Kingdom 72,342 48,203 Canada 35,736 33,268 European Union 22,950 8,721 China 18,967 7,889 Other foreign countries 26,574 11,042 Total cash and cash equivalents $ 406,867 $ 256,974 C ash and cash equivalents as of December 31, 2023 and December 31, 2022 were $407 million and $257 million, respectively.
The funded status of the Curtiss-Wright Pension Plan decreased by $24 million in 2022, primarily driven by unfavorable asset experience due to weak market performance in 2022, partially offset by a lower benefit obligation due to higher interest rates.
The funded status of the Curtiss-Wright Pension Plan increased by $34 million in 2023, primarily driven by favorable asset returns in 2023, partially offset by a higher benefit obligation due to a lower discount rate.
Contract assets primarily relate to our right to consideration for work completed but not billed as of the reporting date. Contract assets are transferred to billed receivables when the rights to consideration become unconditional. Contract liabilities primarily consist of customer advances received prior to revenue being earned.
Timing of revenue recognition and cash collection may result in billed receivables, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the Consolidated Balance Sheet. Contract assets primarily relate to our right to consideration for work completed but not billed as of the reporting date. Contract assets are transferred to billed receivables when the rights to consideration become unconditional.
Net Sales by End Market and Customer Type Year Ended December 31, Percent change (In thousands, except percentages) 2022 2021 2022 vs. 2021 Aerospace & Defense markets: Aerospace Defense $ 479,743 $ 452,661 6 % Ground Defense 219,739 220,290 — % Naval Defense 694,015 710,688 (2) % Commercial Aerospace $ 276,519 $ 267,722 3 % Total Aerospace & Defense $ 1,670,016 $ 1,651,361 1 % Commercial markets: Power & Process 472,300 473,489 — % General Industrial 414,709 381,081 9 % Total Commercial $ 887,009 $ 854,570 4 % Total Curtiss-Wright $ 2,557,025 $ 2,505,931 2 % Aerospace & Defense Markets Sales increased $19 million, or 1%, to $1,670 million, as compared to the prior year period, primarily due to higher sales in the aerospace defense and commercial aerospace markets.
Net Sales by End Market and Customer Type Year Ended December 31, Percent change (In thousands, except percentages) 2023 2022 2023 vs. 2022 Aerospace & Defense markets: Aerospace Defense $ 551,622 $ 479,743 15 % Ground Defense 308,008 219,739 40 % Naval Defense 720,013 694,015 4 % Commercial Aerospace $ 324,949 $ 276,519 18 % Total Aerospace & Defense $ 1,904,592 $ 1,670,016 14 % Commercial markets: Power & Process 509,998 472,300 8 % General Industrial 430,783 414,709 4 % Total Commercial $ 940,781 $ 887,009 6 % Total Curtiss-Wright $ 2,845,373 $ 2,557,025 11 % Aerospace & Defense Markets Sales increased $235 million, or 14%, to $1,905 million, as compared to the prior year period, primarily due to higher sales across all markets.
Sales decreases in the naval defense market were primarily due to the timing of sales on the CVN-80 aircraft carrier and Virginia-class submarine programs, as well as the timing of orders on various submarine and surface combat ship programs. These decreases were partially offset by production ramps on the Columbia-class submarine and CVN-81 aircraft carrier programs.
Sales increases in the naval defense market were primarily due to higher sales on the Columbia-class and Virginia-class submarine programs, partially offset by lower sales on various aircraft carrier programs.
We hold competitive positions in a majority of our key defense and commercial end markets through engineering and technological leadership, precision manufacturing, and strong relationships with our customers. We are also well positioned to build upon crossover applications for our defense and commercial market technologies that leverage the strength of our combined portfolio.
We hold competitive positions in a majority of our key A&D and commercial end markets through engineering and technological leadership, precision manufacturing, and strong relationships with our customers.
Passenger travel and freight logistics, along with the demand for and delivery of new aircraft, are the key drivers in the commercial aerospace market. Over the prior decade, there was an extended production up-cycle for the commercial aerospace market, which was driven by increases in production by Boeing and Airbus on both legacy and new aircraft, particularly narrow-body aircraft.
Over the prior decade, there was an extended production up-cycle for the commercial aerospace market, which was driven by increases in production by Boeing and Airbus on both legacy and new aircraft, particularly narrow-body aircraft. Additionally, sustained low oil prices contributed to declining fuel prices, which in turn led to cheaper airfares for consumers and increased passenger growth.
We are actively engaged and continue to pursue a foothold on numerous designs, both in the U.S. as well as internationally. In the process market, we service the oil and gas, chemical, and petrochemical industries through numerous industrial valve products, in which the majority of our industrial valve sales are to the downstream markets.
In the process market, we service the oil and gas, chemical, and petrochemical industries through severe-service pump and valve products, and surface treatment services, in which the majority of our sales are to the downstream markets.
Similar to the U.S., as international plants age, we foresee opportunities to support plant safety and technology upgrades, plant life extensions, and upgrades of computer systems.
Similar to the U.S., as international plants age, we foresee opportunities to help solve operators’ needs to prevent obsolescence through plant safety and technology upgrades, plant life extensions, and upgrades of computer systems, and we continue to build upon our relationships throughout Canada, Europe, and South Korea, among others.
We continue to expect to play a role in new build nuclear plant construction, where we are aligned with Westinghouse to support the growing need for carbon-free emissions and energy independence in eastern Europe, including Poland, Ukraine, Romania, Bulgaria, and the Czech Republic, while also seeking opportunities in China and India.
We continue to expect to play a role in new build nuclear plant construction, where we are aligned with Westinghouse to support future construction in central and eastern Europe, including Poland, Ukraine, Bulgaria, and the Czech Republic, among others, with the potential to see approximately 25 plants begin construction in the next 5 to 10 years.
We are also developing advanced pump technology to support the oil exploration industry’s need and desire for more reliable subsea pumping systems. Sales in these industries are driven by global supply and demand, crude oil prices, industry regulations, and the natural gas market.
We are also advancing several subsea pumping development initiatives to meet the growing demand for more reliable pumping systems in deep sea drilling and off-shore production facilities. Sales in these industries are driven by global supply and demand, crude oil prices, industry regulations, and the natural gas market, with growth rates in this market closely linked to global GDP.
Foreign currency translation adjustments during the year ended December 31, 2022 resulted in a comprehensive loss of $61 million, compared to a comprehensive loss of $11 million in the comparable prior period. Comprehensive losses during both the current period and prior year period were primarily attributed to decreases in the British Pound and Canadian Dollar.
The loss in the prior period was primarily attributed to lower asset returns, partially offset by increases in the discount rate. Foreign currency translation adjustments during the year ended December 31, 2023 resulted in a comprehensive gain of $38 million, compared to a comprehensive loss of $61 million in the comparable prior period.
Sales in the aerospace defense market increased primarily due to the incremental impact from our arresting systems acquisition, partially offset by lower sales of embedded computing equipment due to ongoing supply chain headwinds as well as lower sales of sensors products on various programs.
In the aerospace defense market, sales benefited from the incremental impact from our arresting systems acquisition as well as higher demand for embedded computing and flight test instrumentation equipment on various domestic and international programs. Sales in the ground defense market increased primarily due to higher demand for tactical battlefield communications equipment.
New orders increased $31 million as compared to the prior year, as an increase in new orders for commercial aerospace equipment was partially offset by the timing of new orders for industrial vehicles. Defense Electronics Sales in the Defense Electronics segment are primarily to the defense markets and, to a lesser extent, the commercial aerospace market.
New orders increased $11 million as compared to the prior year, primarily due to an increase in orders for actuation and sensors products within our A&D markets as well as surface treatment services within our commercial markets. These increases were partially offset by the timing of new orders for industrial vehicles.
Impacts of inflation, pricing, and volume 25 Historically, we have not been significantly impacted by inflation, with increases in raw material costs or payroll costs generally offset through lean manufacturing activities or price increases. During the current period, we have experienced significant increases in our costs of material, labor, and services consistent with the overall rates of inflation.
Based on this approach, we operate through three reportable segments: Aerospace & Industrial, Defense Electronics, and Naval & Power. Impacts of inflation, pricing, and volume 27 Historically, we have not been significantly impacted by inflation, with increases in raw material costs or payroll costs generally offset through lean manufacturing activities or pricing initiatives.
Though the impact of COVID-19 variants continues to cause supply-chain disruptions to global economies, including our business, as well as our customers and suppliers, U.S. economic activity has rebounded since 2021, due in part to the availability of vaccines, increased government support to rebuild the country’s infrastructure, and increased U.S. consumer spending.
Though to a lesser degree today, the impact of COVID-19 variants continues to cause supply-chain disruptions to global economies, including our business, as well as our customers and suppliers.
The Aerospace & Industrial segment benefited from an increase in new orders for commercial aerospace equipment. Comprehensive income (loss) Pension and postretirement adjustments within comprehensive income during the year ended December 31, 2022 were a $7 million loss, compared to a $131 million gain for the prior year period.
Comprehensive income (loss) Pension and postretirement adjustments within comprehensive income during the year ended December 31, 2023 were a $8 million gain, compared to a $7 million loss for the prior year period. The gain in the current period was primarily attributed to higher asset returns, partially offset by decreases in the discount rate.
Year Ended December 31, Percent Change (In thousands, except percentages) 2022 2021 2022 vs. 2021 Sales $ 1,030,728 $ 995,271 4 % Operating income 177,582 141,660 25 % Operating margin 17.2 % 14.2 % 300 bps Loss on divestiture/impairment of assets held for sale 4,651 19,088 NM New orders $ 1,222,052 $ 983,605 24 % Backlog $ 1,465,400 $ 1,222,833 20 % Components of sales and operating income growth (decrease): 2022 vs. 2021 Sales Operating Income Organic 3 % 15 % Acquisitions/divestiture 1 % — % Loss on divestiture/impairment of assets held for sale — % 10 % Foreign currency — % — % Total 4 % 25 % Sales increased $35 million, or 4%, to $1,031 million, from the comparable prior year period, primarily due to the impact of our arresting systems acquisition, which contributed incremental sales of $44 million.
Year Ended December 31, Percent Change (In thousands, except percentages) 2023 2022 2023 vs. 2022 Sales $ 1,142,233 $ 1,030,728 11 % Operating income 189,227 177,582 7 % Operating margin 16.6 % 17.2 % (60 bps) New orders $ 1,258,368 $ 1,222,052 3 % Backlog $ 1,599,678 $ 1,465,400 9 % Components of sales and operating income growth (decrease): 2023 vs. 2022 Sales Operating Income Organic 7 % 5 % Acquisitions 4 % — % Divestiture-related costs — % 2 % Foreign currency — % — % Total 11 % 7 % Sales increased $111 million, or 11%, to $1,142 million, from the comparable prior year period, primarily due to higher sales across our aerospace defense, naval defense, and power & process markets.
Dividends The Company made dividend payments of approximately $29 million in both 2022 and 2021.
In 2022, the Company repurchased approximately 0.4 million shares of its common stock for $57 million. 37 Dividends The Company made dividend payments of $30 million and $29 million in 2023 and 2022, respectively.
The effective tax rate of 24.4% for the year ended December 31, 2022, decreased as compared to an effective tax rate of 24.6% in the prior year period, primarily due to lower non-deductible losses related to our former industrial valve business in Germany.
The effective tax rate of 23.4% for the year ended December 31, 2023, decreased as compared to an effective tax rate of 24.4% in the prior year period, primarily due to a favorable change in the valuation allowance on foreign branch tax credit versus an unfavorable change in the prior year.
We are also well positioned to take advantage of market opportunities to support the ongoing design and development as well as future construction of Generation IV advanced and small modular reactors, driven by strong support from the U.S. Department of Energy which has allocated $3.2 billion for advanced nuclear through its Advanced Reactor Demonstration Program.
We also continue to seek additional opportunities in China and India. Backed by strong funding and legislative support, the U.S. Department of Energy has allocated $3.2 billion for advanced nuclear through its Advanced Reactor Demonstration Program (ARDP) to accelerate the development and demonstration of SMRs and advanced reactors through cost-shared partnerships with U.S. industry.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur fixed rate interest exposure was 100% and 91% as of December 31, 2022 and December 31, 2021, respectively. As of December 31, 2022, a change in interest rates of 1% would not have a material impact on consolidated interest expense. Information regarding our Senior Notes and Revolving Credit Agreement is contained in Note 14 to the Consolidated Financial Statements.
Biggest changeOur fixed rate interest exposure was 100% as of December 31, 2023 and December 31, 2022. As of December 31, 2023, a change in interest rates of 1% would not have a material impact on consolidated interest expense. Information regarding our Senior Notes and Revolving Credit Agreement is contained in Note 14 to the Consolidated Financial Statements.
We used forward foreign currency contracts to manage our currency rate exposures during the year ended December 31, 2022, and, in order to manage our interest rate risk, we may, from time to time, enter into interest rate swaps to balance the ratio of fixed to floating rate debt.
We used forward foreign currency contracts to manage our currency rate exposures during the year ended December 31, 2023, and, in order to manage our interest rate risk, we may, from time to time, enter into interest rate swaps to balance the ratio of fixed to floating rate debt.
We attempt to minimize possible changes in interest and currency exchange rates to amounts that are not material to our results of operations and cash flows. 40
We attempt to minimize possible changes in interest and currency exchange rates to amounts that are not material to our results of operations and cash flows. 42
If foreign exchange rates were to collectively weaken or strengthen against the U.S. dollar by 10%, net earnings would have decreased or increased, respectively, by approximately $7 million as it relates exclusively to foreign currency exchange rate exposures. Financial instruments expose us to counter-party credit risk for non-performance and to market risk for changes in interest and foreign currency rates.
If foreign exchange rates were to collectively weaken or strengthen against the U.S. dollar by 10%, net earnings would have decreased or increased, respectively, by approximately $13 million as it relates exclusively to foreign currency exchange rate exposures. Financial instruments expose us to counterparty credit risk for non-performance and to market risk for changes in interest and foreign currency rates.
We manage exposure to counter-party credit risk through specific minimum credit standards, diversification of counter-parties, and procedures to monitor concentrations of credit risk. We monitor the impact of market risk on the fair value and cash flows of our investments by investing primarily in investment grade interest-bearing securities, which have short-term maturities.
We manage exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. We monitor the impact of market risk on the fair value and cash flows of our investments by investing primarily in investment grade interest-bearing securities, which have short-term maturities.

Other CW 10-K year-over-year comparisons