01—Abstract
Summary
Summary of the 10-K filed April 7, 1994. Cited figures are marked; the original filing is the authoritative source.
Curtiss-Wright Corporation's 1993 Form 10-K describes a difficult year: the company posted 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 millionb, and pre-tax segment operating profit dropped 36% to $21.9 million. The loss was driven by several one-time items, including a $17.5 million settlement (about $8.6 million after tax) of the U.S. Government's suit against subsidiary Target Rock, environmental reserve increases, restructuring charges, and a $6.4 million after-tax cumulative-effect charge for adopting SFAS No. 106 (postretirement medical costs). Excluding these items, management reports net earnings of about $14.1 million, or $2.78 per share.
Management also said 1994 sales would be no better than flat. The company's balance sheet remains conservative. Total assets were $236.9 millionc, stockholders' equity $144.2 million, and working capital $92.7 million with a current ratio of 3.1 to 1.
Total debt was only about $14.6 milliond, and there were no cash borrowings under a $45 million revolving credit facility. Short-term investments of $54.8 million and cash of $20.3 million add to liquidity. The dividend was held at $1.00 per share, which is covered by the 1993 cash flow from operations of $21.5 million.
The key investor concerns are the concentration of the business in defense and commercial aerospace, with about 34% of sales tied to U.S. Government end use, and the company's failed attempts in 1993 to sell its Flight Systems and Metal Improvement units at prices management considered too low. The company also faces ongoing environmental remediation at Wood-Ridge, New Jersey, a labor strike at Target Rock that had not yet been settled, and a Buffalo extrusion facility sale that fell through. Investors will be watching whether the new Advanced Tactical Fighter and F/A-18 E/F programs can offset declining legacy production volumes.
02—Key points
Key Highlights
- Net loss of $5.6 million ($1.11/share) in 1993 vs. net earnings of $21.7 million ($4.29/share) in 1992; excluding one-time items, earnings were $14.1 million ($2.78/share)
- Sales declined 12% to $158.9 million; new orders fell 19% to $156.0 million; year-end backlog was $149.2 million
- One-time charges included a $17.5 million Target Rock litigation settlement (about $8.6 million after tax), $3.8 million in environmental provisions, $3.6 million in restructuring, and a $6.4 million after-tax SFAS 106 accounting charge
- Strong balance sheet: $92.7 million working capital, 3.1:1 current ratio, $144.2 million equity, and no cash borrowings under the $45 million revolving credit facility
- Dividend maintained at $1.00 per share, supported by $21.5 million of 1993 operating cash flow
- Management expects no better than flat sales in 1994 as commercial aerospace weakens and defense budgets face possible cuts
- About 34% of total sales were tied to U.S. Government direct or end-use sales, and the loss of key customers such as Lockheed or Boeing would be materially adverse
03—Questions
Frequently Asked Questions
Why did Curtiss-Wright report a net loss in 1993 after earning $21.7 million in 1992?
The loss came mainly from non-recurring charges. The largest was the $17.5 million settlement of the U.S. Government's False Claims Act suit against subsidiary Target Rock, which cut earnings by about $8.6 million after tax. Environmental reserve increases, restructuring charges, and a $6.4 million after-tax cumulative-effect charge from adopting SFAS 106 added further pressure. Operating results also declined as aerospace and industrial demand weakened.
How financially healthy is Curtiss-Wright's balance sheet?
The balance sheet is conservative. Total assets were $236.9 million and equity was $144.2 million. Debt totaled about $14.6 million, roughly 10% of equity, and no cash borrowings were outstanding under the $45 million revolver. Working capital was $92.7 million, and short-term investments plus cash totaled about $75 million.
What is the outlook for Curtiss-Wright's key aerospace programs?
Near-term revenue is expected to stay weak. Development contracts on the Advanced Tactical Fighter, the F/A-18 E/F, and the V-22 tilt rotor should generate engineering revenue over several years, but production is largely years away, with the ATF full-scale production scheduled around 1998. Legacy F-16 (Fighting Falcon) and Boeing 737/747 production volumes are declining, and management does not expect a substantial near-term recovery.
Did Curtiss-Wright try to sell any of its businesses, and why was that abandoned?
Yes. In 1993 the board explored selling Flight Systems and Metal Improvement Company, working through Merrill Lynch. Management judged the offers too low relative to the businesses' underlying value, so both processes were terminated in July and October 1993. A separate agreement to sell the Buffalo Extrusion facility expired without the buyers obtaining financing, and management continues to seek a buyer.
What are the main risks investors should consider?
Key risks include heavy dependence on U.S. Government and a few large prime contractors, with about 34% of sales government-related; ongoing environmental remediation, including the Wood-Ridge cleanup, which has a remaining accrued cost of about $19.6 million; a Target Rock labor strike that was still unresolved; a single-source extrusion press at Buffalo; and possible defense budget cuts and continued commercial aerospace weakness.
04—Continue