Slide 1: Investor Day 2016 Nuclear Power Overview
Investor Day 2016 Nuclear Power Overview NYSE: CW
Slide 2: Today's Agenda
Today’s Agenda 8:30 – 8:50 AM Welcome & Logistics – Jim RyanSenior Director, Investor Relations Strategic Overview – Dave AdamsChairman and Chief Executive Officer 8:50 – 9:10 AM Nuclear Aftermarket – Jim LeachmanSVP and General Manager, Nuclear Division 9:10 – 9:25 AM AP1000 RCP Update – Greg Hempf
Slide 3: Safe Harbor Statement
Safe Harbor Statement Please note that the information provided in this presentation is accurate as of the date of the original presentation. The presentation will remain posted on this website from one to twelve months following the initial presentation, but content will not be updated to reflect n
Slide 4: Strategic Overview
Strategic Overview David C. Adams, Chairman and CEO
Slide 5: Delivering on the Vision
Delivering on the Vision Briefed at CW Investor DayDecember 11, 2013 One Curtiss-WrightSet aggressive targets Total team effort across the enterpriseMuch different todayLeanerMore profitableMore focusedPoised to capitalize on opportunityReached $4B market capAdded to S&P MidCap 400 IndexReturned $45
Slide 6: On Path to Top Quartile Performance
On Path to Top Quartile Performance Target Metric Original 5-Year Target* Current 2013 Reported *Issued December 11, 2013
Slide 7: How We Got Here
How We Got Here MARGIN EXPANSION CASH FLOW GENERATION CAPITAL ALLOCATION Lowering our Cost BasePortfolio Rationalization / ConsolidationsSupply Chain / Lean Leverage / Low Cost EconomiesShared Services – Finance, IT, HR Executing our Balanced Capital Allocation Strategy$450 Million of Shares Repurch
Slide 8: Aligning our Portfolio with Market Trends
We compete and win by adapting our core competencies and technologies to deliver solutions that leverage our deep technical expertise and address global market trends Aligning our Portfolio with Market Trends CW Technologies End-Market Trends Comm. Aero. Industrial Emissions RegulationsDevice / Plat
Slide 9: Aligning our Portfolio with Market Trends (cont.)
Aligning our Portfolio with Market Trends (cont.) Strategically Positioned for Sales Growth Ruggedized, High Performance ElectronicsGround Defense SubsystemsNuclear Navy Propulsion Components Increased Naval Defense Spending GloballyInternational Ground Defense SpendingAirspace Dominance: EW, UAVs C
Slide 10: Renewed Focus on Acquisitions
Renewed Focus on Acquisitions HIGH IP CONTENT HIGHLY ENGINEERED SEVERE SERVICE STRONG COMPETITIVE POSITION Strategic Fit $100 MILLION IN SALES PREFERRED 10% ROIC Y3; 12% ROIC Y5 ACCRETIVE TO EARNINGS IN LINE WITH CW MARGINS Financial Fit
Slide 11: Well Positioned for Growth
Well Positioned for Growth Consistently Increasing Shareholder Value SALES VOLUME O.I. EPS FCF Rebounds in Core Markets…. ….will Drive Strong Profitability and Free Cash Flow
Slide 12: Nuclear Aftermarket
Nuclear Aftermarket Jim Leachman, SVP and General Manager, Nuclear Division
Slide 13: Overview
Overview Nuclear Aftermarket BusinessWorldwide TrendsMarket DynamicsChallenges and Opportunities
Slide 14: Trends in Worldwide Commercial Nuclear Power Market
Trends in Worldwide Commercial Nuclear Power Market Aging global reactor baseReduced spend and early plant retirements (U.S.)Supply base consolidation (U.S.)Global new build and life extensionPost-Fukushima responseIndustry regulationEfficiency innovations Insert Picture(s) Operating reactors spend
Slide 15: Market Dynamics – U.S. Commercial Nuclear
Market Dynamics – U.S. Commercial Nuclear Gas Prices Electricity Prices 2008 2016 100 Operating Reactors4 New in 2020 http://www.nrc.gov/ http://www.eia.gov/ http://www.nei.org/ http://www.nei.org/
Slide 16: Track Record of Capitalizing During Market Down-cycle
Track Record of Capitalizing During Market Down-cycle We Are Executing the Same Strategies Today From 1988 thru 1998, the number of operating U.S. reactors declined from 115 to 104Suppliers fled; CW filled the gap with new teaming agreements and obsolescence solutionsPlants invested to prolong life;
Slide 17: CW's Diversified Portfolio
CW’s Diversified Portfolio Mechanical systems OEM teaming partnerships Spent fuel products Outage services Fasteners and precision machined parts Plant performance monitoring $2 - $3B Addressable Utility Spend
Slide 18: What Will Drive Our Growth?
What Will Drive Our Growth? Addressing Plant Efficiency and Reliability RequirementsCapitalizing on Supplier ConsolidationLeveraging Global Plant Aging TrendsIncreasing Content on New Build Reactors
Slide 19: Addressing Plant Efficiency and Reliability Requirements
Addressing Plant Efficiency and Reliability Requirements U.S. Operating Reactors are Investing in:Innovations to reduce staffNew process/technology development to reduce preventative maintenance spendPlant upgrades to enhance equipment reliability and safetyProcess improvements to streamline operati
Slide 20: Capitalizing on Supplier Consolidation
Capitalizing on Supplier Consolidation Provides Opportunity for:License agreements for OEM productsCapturing newly outsourced component manufacturing Teaming agreements to distribute products Market Disruptions Are Creating New Opportunities Companies with N-stamps https://www.asme.org/
Slide 21: Leveraging Global Plant Aging Trends
Leveraging Global Plant Aging Trends Growing Demand for Component Replacements, Upgrades Age of 447 Reactors in Operation in the World Worldwide Operating Reactors 0 10 20 30 40 Number of Reactors Mean Age: 28.8 years200 are 25 – 35 years old100 are > 35 years old Age of Reactor (years) http://world
Slide 22: Increasing Content on New Build Reactors
Increasing Content on New Build Reactors Potential of $10 - $30M (non-RCP content) Per Reactor Doors and airlocks Custom-designed valves Bolting Solutions Spent fuel pool gates Electrohydraulic valve actuators Cable tray assemblies Harsh-environment electrical connectors
Slide 23: Strategically Aligned with Changing Market Landscape
Strategically Aligned with Changing Market Landscape “Delivering the Nuclear Promise” relies on adopting new technology and innovationSupply chain consolidation creates opportunity for growthAddressing vibrant worldwide nuclear market Positioned to Capitalize on Growth Opportunities
Slide 24: AP1000 RCP Update
AP1000 RCP Update Greg Hempfling, SVP and General Manager, EMS Division
Slide 25: Overview
Overview Benefits of the AP1000 Reactor Coolant Pump (RCP)Status and key milestones on existing RCP contractsFuture outlook for the nuclear new build marketHow Curtiss-Wright is strategically positioned for growth
Slide 26: Key Benefits of AP1000 (Generation III+)
Key Benefits of AP1000 (Generation III+) AP1000 design reduces construction time and costStandard design and modular constructionSmaller footprint 45% less safety equipment requiredLonger refueling intervals creates higher efficiency Dramatic safety improvements in “passive” systemRelies on “laws of
Slide 27: AP1000 Reactor / Reactor Coolant Pump Relationship
AP1000 Reactor / Reactor Coolant Pump Relationship Heart of Reactor System Each plant site includes two reactors4 RCPs per reactor8 RCPs per plant siteRCPs pump primary coolant through the reactor coreThe RCP provides a “life of the plant” solutionCanned motor RCPs improve reliability AP1000 Reactor
Slide 28: AP1000 RCP Key Components
AP1000 RCP Key Components AP1000 RCP Design Features60-year design life basis with no maintenance 7000 horsepower motor; 1800 RPM machinePumps 78,750 gallons per minute Water lubricated bearings2235 PSIG pressure at 537o FTwo large flywheels weighing 5.9 tons total Fully Assembled RCP
Slide 29: China's Nuclear Energy Priority – Improved Air Quality
China’s Nuclear Energy Priority – Improved Air Quality China is committed to new nuclear plants to meet clean energy needs The need is real:China’s National Energy Administration says that “China will make nuclear energy the foundation of its power-generation system for the next 10 to 20 years.” Sou
Slide 30: AP1000 RCP Program History
AP1000 RCP Program History 2007: China Contract (16 RCPs) RCP Design 8 RCPs for Sanmen 1&2 Reactors8 RCPs for Haiyang 1&2 Reactors2008: Domestic Contract (16 RCPs) 8 RCPs for Vogtle 3&4 Reactors8 RCPs for VC Summer 2&3 Reactors 2015: China Direct Contract (16 RCPs)4 RCPs for Sanmen 3 Reactor4 RCPs f
Slide 31: RCP Shipments (Initial Contracts)
RCP Shipments (Initial Contracts) Contract (Site) # of Pumps Shipped Current Status China (Sanmen 1) 4 Q4-15 Installed in plant China (Haiyang 1) 4 Q1-16 Installed in plant Domestic (Vogtle 3) 4 Q2-16 Delivered to site China (Sanmen 2) 4 Q4-16 Delivered to site First Domestic RCP Arrives at Vogtle S
Slide 32: Remaining RCP Shipments (Initial Contracts)
Remaining RCP Shipments (Initial Contracts) Contract (Site) # of Pumps Estimated Ready for Shipment Dates China (Haiyang 2) 4 Q4-16 Domestic (VC Summer 2) 4 Q1-17 Domestic (Vogtle 4) 4 Q2-17 Domestic (VC Summer 3) 4 Q3-17 Shipment of the AP1000 RCPs Total REMAINING To Ship: 16
Slide 33: Key Milestones to Achieve China AP1000 Startup
Key Milestones to Achieve China AP1000 Startup (Initial Contracts)
Slide 34: Curtiss-Wright Awarded 2nd China AP1000 Contract (2015)
Curtiss-Wright Awarded 2nd China AP1000 Contract (2015) Received new China AP1000 order on December 31, 2015Providing 16 RCPs for four reactors (four RCPs per reactor)Production to accelerate 2017 - 2019Shipping in 2019 - 2020 Total production revenue: $448M
Slide 35: Potential AP1000 China Opportunity
Potential AP1000 China Opportunity CW’s share of this market expected to be significant Source: World Nuclear Association http://www.world-nuclear.org/information-library/country-profiles/countries-a-f/china-nuclear-power.aspx 8-10 Year Horizon Long-term Proposed AP1000 Construction 18 Reactors 72 R
Slide 36: Other Potential Worldwide AP1000 Opportunities
Other Potential Worldwide AP1000 Opportunities India NON-CHINA AP1000 RCPs PLANNED AND PROPOSED Location Planned Proposed India 24 24 United Kingdom 0 12 Turkey 0 8 Bulgaria 4 0 Other countries (estimated)* 40-80 100-140 Rest of THE WORLD 6 reactors (24 RCPs) designated to be AP1000Westinghouse and
Slide 37: Unique AP1000 Technology Positions CW for Success
Unique AP1000 Technology Positions CW for Success AP1000 is the first NRC licensed Generation III+ design being constructed throughout the worldCW has the only designed, tested, qualified, produced and installed AP1000 RCPCW AP1000 RCP successfully going through initial plant start-up Curtiss-Wright
Slide 38: CURTISS -
CURTISS - WRIGHT 38 | October 6, 2016 | Proprietary | ©2016 Curtiss-Wright
Slide 39: Break
BREAKTentatively Resume ~10:00am ET
Slide 40: Financial Update
Financial Update Glenn E. Tynan, VP Finance and CFO
Slide 41: Agenda
Agenda AP1000 financial projectionsInitial orders (2007 China / 2008 U.S.)China Direct order (2015)Progress on long-term financial objectivesReview of 2016 financial guidance Preview of 2017 financial outlook
Slide 42: AP1000 Revenue Projection – Initial Orders in 2007/2008
AP1000 Revenue Projection – Initial Orders in 2007/2008 $ in millions $0 Concluding initial China (2007) and U.S. (2008) order All learning curve costs (testing, design changes), were charged to the initial China order (2007)China RCP deliveries to conclude in 2016U.S. RCP deliveries to conclude in
Slide 43: AP1000 Revenue Projection – China Direct Order 2015
AP1000 Revenue Projection – China Direct Order 2015 $ in millions Total production revenue: $448M (16 reactor coolant pumps @ $28M apiece) Revenue recognition cadence expected to generally resemble bell curveRCP production to accelerate 2017 - 2019Revenue/margin recognition mainly driven by producti
Slide 44: AP1000 Margin Projection – China Direct Order 2015
AP1000 Margin Projection – China Direct Order 2015 Accounting Treatment Contract Margin(1) Revenue and margin recognition based on percentage of completion (POC) accounting methodInitially anticipate steady margin, unless cost estimates changeIf cost estimates change, a cumulative adjustment to marg
Slide 45: AP1000 Free Cash Flow Projection – China Direct Order 2015
$ in millions AP1000 Free Cash Flow Projection – China Direct Order 2015 Note: Free cash flow is defined as cash flow from operations less capital expenditures Expect to generate ~$70M in FCF
Slide 46: On Path to Top Quartile Performance
On Path to Top Quartile Performance Target Metric Original 5-Year Target* Current 2013 Reported *Issued December 11, 2013
Slide 47: Driving Significant Margin Improvement
Driving Significant Margin Improvement Note: Peer group per CW 2016 proxy and estimates per FactSet projections 500 BP Improvement Key Drivers to DateOne Curtiss-WrightCompensation plans aligned with key metricsPortfolio rationalization ConsolidationsOngoingLow cost economiesShared servicesFuture Fo
Slide 48: Solid Improvement in Return On Invested Capital (ROIC)
Solid Improvement in Return On Invested Capital (ROIC) 7.4% 11.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2013 Reported 2016E ROIC* Note: Peer group per CW 2016 proxy and estimates per FactSet projections *ROIC = NOPAT / two-year average net debt plus equity, and excludes equity from discontinued
Slide 49: Rigorous Working Capital Management
Rigorous Working Capital Management *Working Capital = Accounts receivable plus inventory minus accounts payable, deferred income and deferred development costs. Note: Peer group per CW 2016 proxy and estimates per FactSet projections Key Drivers Company-wide (BU level) drive to reduce working capit
Slide 50: Stringent Discipline of Capital Expenditures
Stringent Discipline of Capital Expenditures Note: Peer group per CW 2016 proxy and estimates per FactSet projections Top Quartile 2013 Top Quartile 2016 Key Drivers More disciplined approach to management of CapEx Focus on high return projects and/or businessesInvestments reflect combination of gro
Slide 51: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation $300 - 320 Notes: Free cash flow is defined as cash flow from operations less capital expenditures. 2015 adjusted to remove the $145 million contribution to the Company’s corporate defined benefit pension plan. FCF conversion is defined as free cash flow divided by n
Slide 52: Balanced Capital Allocation
Balanced Capital Allocation Return of Capital Operational Investments Acquisitions Committed to steady return of capital to shareholdersAt least $100M share repurchases expected in 2016Nearly $450M in share repurchases since early 2014Steady dividend payoutGrowth through strategic acquisitions
Slide 53: 2016E Financial Outlook
2016E Financial Outlook* (Guidance as of October 6, 2016) ($ in millions, except EPS) FY2015 Pro Forma FY2016E(Current) Change vs. 2015 Sales $2,186 $2,120 - 2,170 (1 - 3%) Operating IncomeCW Margin $291 13.3% $301 - 313 14.2 - 14.4% 4 - 8% +90 - 110 bps Diluted EPS $3.74 $4.00 - 4.15 7 - 11% Free C
Slide 54: 2016E EPS Guidance Update
2016E EPS Guidance Update Expect strong second half 2016 EPS performanceHigher sales driving increased overhead absorptionMajority of AP1000 China direct program revenue occurs in 4QNet savings from H1 restructuring activityBenefit of ongoing margin improvement initiatives3Q’16 EPS guidance range: $
Slide 55: Preliminary 2017 Outlook
Preliminary 2017 Outlook Sales in-line with 2016Headwinds continue in near-termIndustrial production slowly improvingDelayed nuclear aftermarket reboundTailwinds in our favorAP1000 Defense – strong positions on key platformsOperating margin expansion to remain top-quartileIncreased investment in R&D
Slide 56: Curtiss-Wright Remains a Solid Investment Delivering Long-Term Shareholder Value
Curtiss-Wright Remains a Solid Investment Delivering Long-Term Shareholder Value Financial transparencyDelivering top-quartile performance vs. peer groupRigorous working capital managementDriving free cash flow generationCommitted to balanced capital allocation strategy
Slide 57: Closing Remarks
Closing Remarks David C. Adams, Chairman and CEO
Slide 58: Key Positions on Exciting, Growing Programs
Key Positions on Exciting, Growing Programs Medical mobility platforms Sophisticated control systems connected to the Internet of ThingsMeets needs of aging population $200 Million over 5 years Hybrid AND ELECTRIC commercial vehicles Power electronics – inverters, distribution centersCritical to emi
Slide 59: Key Positions on Exciting, Growing Programs
Key Positions on Exciting, Growing Programs New aircraft carriers and submarines F-35 Joint strike fighter Valves, pumps, motors, generators, secondary propulsionStrong single-source positions $1.0+ Billion over 5 years Flap drive system, motors, sensors, solenoids, rugged processors> $380k per aver
Slide 60: Key Positions on Exciting, Growing Programs
Key Positions on Exciting, Growing Programs Commercial aircraft programs (737, A320, etc) Flap transmissions, sensors, solenoids, surface treatmentsStrong production forecast $600 Million over 5 years C4isr electronics Urgency from air superiority rqts., cyber security, unmanned systemsOver 200 new
Slide 61: Why Invest in CW?
Why Invest in CW? Solid Returns in an Uncertain Market We have critical mass in the right markets We generate strong cash flow and deploy it strategically We are structured for profitability We increase shareholder value Return of Capital Operational Investments Acquisitions CW 59% TSR since ‘13
Slide 62: CURTISS -
CURTISS - WRIGHT 62 | October 6, 2016 | Proprietary | © 2016 Curtiss-Wright
Slide 63: Appendix
CURTISS - WRIGHT Appendix 63 | October 6, 2016 | Proprietary | © 2016 Curtiss-Wright
Slide 64: Appendix - Use of Non-GAAP Financial Information
Appendix - Use of Non-GAAP Financial Information The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these non-GAAP measures provide investors with additi