Margin
Cash Flow
While it is bittersweet to conclude my role as the CEO of this amazing Company, I look forward with confidence to my successor Lynn Bamford to continue to deliver strong financial results, and in turn, drive long-term value for Curtiss-Wright and its shareholders.
2020 Financial Performance
Throughout this past year, and in response to the COVID-19 pandemic, our top priority was protecting our employees’ health, and ensuring safe and productive working environments.
As a result of our employees’ perseverance and agility to manage through an especially challenging set of circumstances, Curtiss-Wright produced an exceptional year in 2020, which is a true testament to their dedication to ensuring the company’s long-term success.
We entered 2020 with our recession playbook in hand and quickly implemented and accelerated our plans in response to COVID-19 to ensure that Curtiss-Wright would be well positioned for 2021 and beyond.
Net sales of $2.4 billion decreased only 4%, led by tremendous growth in our defense markets, particularly 22% growth in naval defense, and the contribution from our acquisitions. Although weaker economic and market conditions impacted our commercial and industrial businesses last year, we were encouraged by the strong sequential improvement and steady rebound from the lows experienced in the second quarter.
Adjusted operating income of $391 million was down 7%, while adjusted operating margin of 16.3% was fairly stable, falling only 20 basis points compared to the prior year. This performance reflects our strong execution on higher sales in our defense businesses and the benefits of our restructuring and cost containment initiatives.
We achieved adjusted diluted earnings per share of $6.87, which exceeded our expectations driven by a solid fourth quarter performance, as well as the benefit of our ongoing share repurchase activity.
In addition, and despite the pandemic, we generated record $394 million in adjusted free cash flow, equating to 137% adjusted free cash flow conversion. This represented our eighth consecutive year achieving more than 100% free cash flow conversion.
Delivering top quartile Performance
Next, I’d like to reflect on our performance over the past seven years — which began by leveraging the critical mass of One Curtiss-Wright across the enterprise.
If you recall, in 2013, we established a five-year goal to achieve top quartile performance versus our peer group across a range of key financial metrics, including: Operating Margin, Earnings per Share, Return on Invested Capital (ROIC), Working Capital as a percentage of Sales, Capital Expenditures as a percentage of Sales and Free Cash Flow Conversion. We achieved or exceeded all of the original targets and reached top quartile for every metric within that five-year timeframe. I am very proud of our accomplishments and our employees’ steadfast focus on relentlessly driving operational improvement.
Our strong operational execution has also played a key role in driving Curtiss-Wright’s robust free cash flow generation. Further, our strong balance sheet has enabled a balanced capital allocation strategy inclusive of strategic acquisitions, consistent returns to our shareholders (nearly $1 billion in stock repurchased since 2013), and steady operational investments to drive our organic growth.
strong succession planning
Turning to our senior leadership team, the Board of Directors’ selection of Lynn Bamford as the Company’s next President and Chief Executive Officer, and as a member of the Board, underscores our deeply engrained succession planning process. Since joining Curtiss-Wright in 2004, she has established herself as a respected leader with a long-standing track record of success. She is experienced in executing our strategic growth initiatives, driving significant financial performance and integrating numerous defense acquisitions. Further, Lynn has been a catalyst in driving tremendous value for Curtiss-Wright and our shareholders, and I have the utmost confidence in her ability to lead Curtiss‑Wright.
Earlier in 2020, we announced K. Christopher Farkas as the Company’s next Chief Financial Officer, succeeding our former CFO Glenn Tynan, who retired following a distinguished 20-year career at the Company. We also recently announced that Kevin Rayment would succeed Tom Quinly, who is retiring as Chief Operating Officer in 2021 following a tremendous 17-year career at Curtiss-Wright. I personally would like to thank Glenn and Tom for their dedication and service to Curtiss-Wright and wish them well in their future endeavors.
Chris and Kevin have been strong leaders at Curtiss-Wright for more than a decade and their appointments are prime examples of our long-standing succession planning process.
In Recognition
As always, I would like to commend our 8,200 employees for their untiring efforts and hard work. Their ongoing dedication and commitment will ensure Curtiss-Wright’s continued success.
I would like to thank all of our stakeholders — including our shareholders, analysts, customers, suppliers, partners and other constituencies — for being a part of this journey and expressing your confidence in Curtiss-Wright.
I remain excited for the opportunities that lie ahead for this great organization and its ability to deliver solid earnings growth and free cash flow, and I look forward to serving as Executive Chairman.
David C. Adams
Executive Chairman