CW Curtiss Wright Corporation

Management Discussion

• Sales for the year increased $76 million, or 3%, to $2,488 million, compared with the prior year period. On a segment basis, sales from the Commercial/Industrial, Defense, and Power segments increased $31 million, $25 million, and $20 million, respectively. Changes in sales by segment are discussed in further detail in the "Results by Business Segment" section below.
• Operating income for the year increased $30 million, or 8%, to $404 million, and operating margin increased 70 basis points compared with 2018. The increases in operating income and operating margin were primarily due to favorable overhead absorption on higher naval defense sales and the absence of first year purchase accounting costs from our DRG acquisition in the Power segment. Operating income and operating margin also benefited from gains recognized on the sales of a product line and building in the Commercial/Industrial segment. The benefits of our ongoing margin improvement initiatives were recognized across all segments. These increases were partially offset by an unfavorable shift in mix within our defense electronic products, higher research and development expenses, and favorable contract adjustments in the prior year period which did not recur in the Defense segment as well as the impact of tariffs in the Commercial/Industrial segment. The timing of sales on the AP1000 China Direct program negatively impacted operating income in the Power segment.
• Non-segment operating expense of $35 million was essentially flat compared to the prior year period.