01—Abstract
Summary
Summary of the 10-K filed March 31, 1994. Cited figures are marked; the original filing is the authoritative source.
Curtiss-Wright's 1993 results were weak.
The company reported a net loss of $5.6 milliona, or $1.11 per share, versus net earnings of $21.7 million ($4.29 per share) in 1992. Sales fell 12% to $158.9 million. The loss was driven by a $17.5 million settlement (about $8.6 million after tax) of the U.S. Government's False Claims suit against subsidiary Target Rock, a $6.4 million after-tax charge for the SFAS No. 106 postretirement accounting change, environmental charges, and restructuring costs.
Excluding these unusual items, management says net earnings would have been about $14.1 millionb, or $2.78 per share, still well below 1992. Segment pre-tax operating profit fell 36% to $21.9 million. The operating picture is mixed.
Aerospace sales declined 13% to $96.9 millionc on production stretchouts at Boeing and McDonnell Douglas and reduced U.S. Air Force Fighting Falcon procurement. Management expects development work on the Advanced Tactical Fighter and F/A-18 E/F programs to carry the business until production, with flat sales expected in 1994. Industrial and Flow Control and Marine segments also declined.
Target Rock continues to hold share in the Navy nuclear valve market despite a strike that began in May 1993. Management said it had tried to sell the Flight Systems and Metal Improvement units in 1993 but rejected the offers as too low. The balance sheet remains conservative.
Working capital was $92.7 milliond, the current ratio was 3.1 to 1, and total debt was only about 10% of equity. Stockholders' equity fell to $144.2 million, or $28.50 per share, and the $1.00 annual dividend was maintained. Investors should weigh the strong liquidity and pension overfunding against the earnings decline, ongoing environmental liabilities (Wood-Ridge remediation reserve of about $19.6 million), and the concentration of revenue in defense and commercial aerospace programs.
02—Key points
Key Highlights
- Net loss of $5.6 million ($1.11 per share) in 1993 versus net earnings of $21.7 million ($4.29 per share) in 1992; excluding unusual items, earnings would have been $14.1 million ($2.78 per share).
- Sales fell 12% to $158.9 million, and new orders fell 19% to $156.0 million; year-end backlog was $149.2 million.
- $17.5 million Target Rock settlement with the U.S. Government reduced 1993 net earnings by $8.6 million, and a $6.4 million after-tax SFAS No. 106 charge further weighed on results.
- Aerospace segment sales dropped 13% to $96.9 million; management expects no better than flat sales in 1994 as commercial and defense programs slow.
- Balance sheet remains strong, with $92.7 million in working capital, a 3.1-to-1 current ratio, and total debt equal to about 10% of stockholders' equity.
- The $1.00 annual dividend was maintained, but the company's attempts to sell Flight Systems and Metal Improvement at acceptable prices failed, and it continues to operate both businesses.
- Ongoing environmental exposure includes a Wood-Ridge, New Jersey remediation reserve of about $19.6 million and additional environmental provisions recorded in 1993.
03—Questions
Frequently Asked Questions
Why did Curtiss-Wright report a net loss in 1993?
The loss came from several one-time items: a $17.5 million Target Rock settlement with the U.S. Government ($8.6 million after tax), a $6.4 million after-tax charge for adopting SFAS No. 106 on postretirement benefits, $2.5 million after-tax in environmental charges, $2.4 million after-tax in restructuring charges, and a $3.6 million tax valuation allowance. Excluding these items, net earnings would have been $14.1 million.
What is the outlook for 1994?
Management expects no better than flat sales in 1994, citing a continued slowdown in commercial aerospace and possible further defense budget cuts. Growth is expected later in the decade as new programs such as the Advanced Tactical Fighter and F/A-18 E/F move into production. Capital expenditures are planned to rise to about $11.6 million.
How strong is the company's financial position?
The balance sheet is conservative. Working capital was $92.7 million, the current ratio was 3.1 to 1, total debt was about 10% of equity, and the company had $28.1 million of unused credit under its $45 million revolving facility. Domestic pension plans were overfunded, and total assets were $236.9 million.
What are the main risks to the business?
Key risks include dependence on a few major customers (Lockheed, Boeing, and Westinghouse), uncertain future U.S. military orders, production stretchouts at Boeing and McDonnell Douglas, a 1993 strike at Target Rock that remained unresolved, and continuing environmental cleanup obligations, mainly at Wood-Ridge, New Jersey. The Buffalo extrusion facility's sale also fell through in 1993.
Did the company change its dividend or its strategic plans?
The $1.00 per share annual dividend was maintained. Management explored selling Flight Systems and Metal Improvement in 1993 but ended both processes after offers fell below its valuation. The company now plans to keep and grow these businesses, while it is still trying to sell the Buffalo Extrusion Facility.
04—Continue