Curtiss-wright Corporation · NYSE:CW
Curtiss-wright — Investor Day (December 2013)
47 slides from Curtiss-wright's investor day presentation, Dec 11, 2013
Slide 1: Reshaping for the Future
Investor Day - December 11, 2013 Reshaping for the Future COMMERCIAL / INDUSTRIAL DEFENSE ENERGY
Slide 2: Safe Harbor Statement
Safe Harbor Statement original presentation. The presentation will remain posted on this web site from one to twelve months following the initial presentation, but content will not be updated to reflect new information that may become available after the original presentation posting. The presentati
Slide 3: Strategic Overview and Future Vision
Investor Day - December 11, 2013 ess and Future Vision Dave Adams President and CEO Se _, Strategic Overview COMMERCIAL / INDUSTRIAL DEFENSE ENERGY
Slide 4: Creating Shareholder Value
CREATING SHAREHOLDER VALUE Financial Update and 2014 Guidance Operating Margin Improvement BUSINESS OVERVIEW Commercial Aerospace Industrial Surface Technologies Defense Oil & Gas Power Generation Glenn Tynan Tom Quinly Graham Macdonald Kevin Rayment Larry Peach Lynn Bamford Ron Stockwell Greg Hempf
Slide 5: An Inflection Point...
An Inflection Point...
Slide 6: Moving Forward — Creating Value
Moving Forward — Creating Value FOCUS: Improving Shareholder Value 2 Market Strategies Organic Growth (VP / GMs) 5 Operational Margin Improvement Initiatives (COO) . Financial Capital Deployment Discipline (CFO) 5 : Efficient Working Capital / CF Execution New Alignment Will Accelerate Value Creatio
Slide 7: Our Vision is One Curtiss-Wright
Our Vision is One Curss-r on INTEGRATED MARKET-FACING GLOBAL & DIVERSIFIED "5 or fewer major segments with critical mass "Top quartile performer A Unified Global Diversified Industrial Company
Slide 8: Recent Organization
Recent Organization Three Segments Organized by Technology, Serving Diverse Markets | i Flow Control HQ Power Generation Oil & Gas Naval Defense T Controls HQ Commercial Aerospace Aerospace Defense Ground Defense General Industrial 1 Surface Technologies HQ Commercial Aerospace Aerospace Defense Gen
Slide 9: Today's Organization
Today’s Organization Three Segments Aligned by Market Commercial / Commercial Aerospace Power Generation Aerospace Defense General Industrial Ground Defense Oil & Gas Surface Naval Defense Technologies i
Slide 10: Experienced Executive Team
Experienced Executive Team = 20+ Years industry exp. « 24+ Years industry exp. « 20+ Years industry exp. = 9 Years at CW = 14 Years at CW = 14 Years at CW = Former President: = Former President: CW Controls CW Controls, Flow Control, Surface Technologies | e r n Indu a } | Kevin Rayment india Fs 25
Slide 11: Three Powerful Segments
Three Powerful Segments COMMERCIAL / INDUSTRIAL ] a | Component / Subsystems offering provides strong margins without high overhead requirements Providing unique value through vehicle control systems; leveraging trends in emissions and efficiency DEFENSE High value IP content in Electronics and Nucl
Slide 12: Our Alignment
Our Alignment PRIORITIZES THE CUSTOMER EMPHASIZES MARKET LEADERSHIP LEVERAGES OPERATIONAL EXPERTISE / SYNERGIES STREAMLINES P&Ls and REDUCES DUPLICATION
Slide 13: Choosing Where We Compete
hoosing Where We Compete custom design systems integration very low volume high volatility little IP content high volume low tier parts supplier
Slide 14: Achieving Profitable Growth
Achieving Profitable Growth custom design systems integration very low volume high volatility UNIQUE IP PLATFORM INDEPENDENT SCALE little IP content high volume low tier parts supplier
Slide 15: Clear Financial Objectives
Clear Financial Objectives ‘Organic Sales EPS Operating ROIC Free Cash Flow Growth Growth Margins Conversion
Slide 16: Financial Highlights
Investor Day - December 11, 2013 Financial Highlights Glenn E. Tynan VP & CFO COMMERCIAL / INDUSTRIAL DEFENSE ENERGY
Slide 17: Finance Transformation
Finance Transformation UNIVERSAL AND TRANSPARENT METRICS RIGOROUS WORKING CAPITAL MANAGEMENT COMPREHENSIVE CAPITAL ALLOCATION STRATEGY ONE CURTISS-WRIGHT THREE MARKET-FACING SEGMENTS
Slide 18: Return on Invested Capital
Return on Invested Capital ROIC = NOPAT / (Avg. Debt + Equity) = Adopting ROIC as standard metric for: > Capital Investments > Acquisitions > Compensation " Capital to be allocated to the highest return investments and/or businesses
Slide 19: Return on Invested Capital
Return on Invested Capital __ RoIc" Curtiss-Wright Peer 50th Peer 75th Percentile Percentile = Currently below median versus peer group?) " Target: 12% ROIC = Goal: Top Quartile (1) ROIC = NOPAT / (Avg. Debt + Equity) p (2) Peer group per CW proxy - CW 2013F: Peers latest SEC filing Ungar
Slide 20: Capital Allocation Strategy
Capital Allocation Strategy = The same metric (ROIC) and criteria are applied to all investment opportunities = Leverage Metrics: > Debt / Cap 35% — 50% > Debt/ EBITDA 2x - 4x
Slide 21: Cash Flow
Cash Flow Working Capital") as a % of Sales Curtiss-Wright Peer 50th Peer 75th Percentile Percentile = Currently below median = Cash flow key element of versus peer group?) S/T compensation plan = Goal: Top Quartile = Focus: Reduce Working Capital % at the BU level L (1) Working Capital = Inventory
Slide 22: Capital Expenditures
Capital Expenditures CapEx as a % of Sales 3.5% 3.0% 2.5% 2.0% - 1.5% - 1.0% 0.5% 0.0% OBJECTIVE | Curtiss-Wright : Peer 50th : Peer 75th Percentile Percentile " Currently below median = Invest in high return versus peer group") projects and/or businesses = Goal: Top Quartile = Accountability (1) Pe
Slide 23: A New Approach to M&A
A New Approach to M&A a Corporate-led process drives consistency =" New ROIC-based valuation analysis = Capital Allocation decisions temper current spend = Ample quality opportunities More Selective Approach
Slide 24: Dividends and Share Repurchase
Dividends and Share Repurchase = Dividends > Steady, periodic increases = Share Buybacks > Shift of balance enables share buybacks to become a more strategic element of our capital allocation strategy Consistently Working to Maximize Value
Slide 25: Financial Guidance
sa-. , 5 . “ ties) Financial Guidance COMMERCIAL / INDUSTRIAL DEFENSE ENERGY
Slide 26: 2014 Guidance — Current Segment Structure
2014 Guidance — Current Segment Structure FY2013E FY2014E 5 (as of Oct.30) (as of Dec. 11)” Growth Total Sales $2,480 - 2,520M $2,650 - 2,700M 6 -8% Flow Control $1,300 - 1,320M $1,370 - 1,390M 5-6% Controls $865 - 875M $950 - 970M 9-11% Surface Technologies $315 - 325M $330 - 340M 3-6% Total Operat
Slide 27: Operating Margin Expansion 2014
Operating Margin Expansion 2014 10.5% 10.1 - 10.3% (80 bps) (10 bps) 10.0% 9.5% 93-95% 9.0% 8.5% 8.0% 2013E pe 8 ti 2014E npr in base business 4012-1013 2H413 I
Slide 28: 2014 Guidance — Transition to New Segment Structure
2014 Guidance — Transition to New Segment Structure aucwst Controls: All Comm Aero + Gen. Ind Controls Surface Power Tech — A comm Energy Flow: Oil & Gas + Power Gen (Aftermarket) IRTISS WRIGHT
Slide 29: 2014 Guidance — New Segment Structure
2014 Guidance — New Segment Structure FY2014E (as of Dec. 11) Total Sales $2,650 - 2,700M 6 -8% Commercial / Industrial $1,040 - 1,060M Defense $890 - 910M Energy $720 - 730M Total Operating Income $267 - 278M cw aa a 10.1% - 10.3% Wed! Commercial / Industrial $138 - 142M Margin 13.3% - 13.4% Defens
Slide 30: 2014 Guidance — Sales Growth by End Market
2014 Guidance — Sales Growth by End Market FY2014E % of Total (as of Dec. 11) Sales Aero Defense 8-12% 1% Ground Defense (7 - 11%) 3% Naval Defense (2) - 2% 14% rad Oe oe 1-8% 29% Commercial Aero 6- 10% 16% Oil & Gas 11-15% 19% Power Generation 2-6% 18% General Industrial 8-12% 18% Total Commercial
Slide 31: 2014 Guidance — All Other
2014 Guidance — All Other FY2013E FY2014E (as of Oct. 30) (as of Dec. 11) Post-Retirement Expense $33 - 34M $36 - 37M Interest Expense $39 - 40M $39 - 40M Diluted EPS $2.75 - 2.85 $3.20 - 3.35 Diluted Shares Outstanding 47.6M 48.4M() Effective Tax Rate 32.0% 32.0% Free Cash Flow $110 - 120M. $140 -
Slide 32: Sound Financial Strategies
Sound Financial Strategies Improving Shareholder Returns
Slide 33: Operating Margin Improvement
Investor Day - December 11, 2013 Operating Margin Improvement Tom Quinly Chief Operating Officer COMMERCIAL / INDUSTRIAL DEFENSE ENERGY
Slide 34: Current State - Operating Margin Benchmarking
Current State - Operating Margin Benchmarking 14% 140% g OBJECTIVE | 12.5% 12.0% 10.0% | 9.3% -9.5% 9.2% 8.0% 6.0% 4.0% 2.0% 0.0% CW 2013 50th 75th Target Peer Group Percentile (1) Based upon peer group per CW proxy - 3 year avg. 2010-2012
Slide 35: Margin Improvement: Big 10 Imperatives
Margin Improvement “BIG 10” IMPERATIVES
Slide 36: Clarity of Purpose
Clarity of Purpose Growth Initiatives I cul 'S WRIGHT
Slide 37: Accountability
Accountability - Total Alignment = Total Commitment = No Excuses = Compensation Alignment
Slide 38: Operational Excellence
Operational Excellence 3 " Continue Lean Journey = Drive Engineering Excellence = Continuous Improvement Culture All disciplines " Targeted Savings by Site/Team Total 2013 Opportunity Continuing the Journey
Slide 39: Supply Chain Initiatives
Supply Chain Initiatives 4 = Leverage Spend Council cae = LCE Supplier Development $330M INDIRECT Indirect Spend Target Focused Commodity Teams = Clear Accountability Total Opportunity $880m DIRECT
Slide 40: Portfolio Rationalization Market Attractiveness
Portfolio Rationalization 5 Market Attractiveness HIGH | wooerare | Low = STRONG § Fe 8 i @ Zz & apequate 3 6 is} WEAK “Addition by Subtraction”
Slide 41: Consolidation Programs
Consolidation Programs 6 = Market facing — delayering = Numerous Opportunities Eee = Improving transparency = Leverage Centers of Excellence = Continuous Process: > Strategy Evolution > Acquisition Integration KE Oppecininy — <$40m >$40M *Excludes Surface Technologies sales and sites
Slide 42: Shared Services
Shared Services uFinance alT aHR Benchmarking complete Finance — well down the path: > Contributing 30% % of Sales IT - well down the path: > Fy14 contributions HR - early days >» Phase Il launch next year >» Additional plans being developed 00% Driving top quartile performance 3.1% ‘current Top Sta
Slide 43: Low Cost Economy COE Development
Low Cost Economy COE Development 4 LCE Labor Hours = Suzhou, China + Nogales, MX ie > Significant Contributions . - Pune, India + Querétaro, MX 9°) & > Still Maturing \ Wh Supply Chain Localization > Key Driver = Teams/Processes in place = Aggressive Fy14 plan
Slide 44: Segment Focus Opportunities
Segment Focus Opportunities g $30-40M Segment Focus Area Defense — Consolidation Programs t Defense — Underperforming Product Areas — Program Investments — Portfolio Expansion Investments 2 Cc Commercial — Greenfield Operations € omiind Industrial — LCE Capability Development 2 — Portfolio Expansion
Slide 45: Strategic Growth Initiatives
Strategic Growth Initiatives 10 Dimension Focus Area ie nan cusey Technology —Protect the Core — Technology Leadership — Attack Discontinuities — Portfolio Expansion Technology Market — Leverage core capabilities — Attack niche new segments — Select Bolt-On Acquisitions Geographic Geographic | — Man
Slide 46: Strategic Margin Drivers
Strategic Margin Drivers > Strategic Initiatives Segment Focus s on Portfolio Review 9.3-9.5% shared a Services Competitiveness Programs Today 2018 Ac ng 14% Over the Plann eriod
Slide 47: Key Takeaways
Key Takeaways Significant opportunities = Plan in place = Management alignment and commitment =" Talented team to execute = No excuses WRIGHT