01—Abstract
Summary
Summary of the 10-K filed March 31, 1995. Cited figures are marked; the original filing is the authoritative source.
Curtiss-Wright Corporation (NYSE: CW) reported its 1994 results in a 10-K filed March 31, 1995, showing a clear rebound from a difficult 1993.
Consolidated net earnings were $19.3 milliona, or $3.81 per share, versus a net loss of $5.6 million ($1.11 per share) in 1993. Excluding 1993 unusual charges (litigation settlement, environmental, restructuring, and accounting changes), normalized 1993 earnings were $14.1 million, so the underlying improvement was about $5.2 million. Sales fell 2% to $155.0 million, but segment pre-tax operating profit rose 32% to $26.5 million, driven by cost containment and a recovery in the Industrial segment.
The top line remains under pressure. New orders fell 22% to $122.4 million and year-end backlog declined to $116.6 millionb from $149.2 million. Aerospace, the largest segment at $83.5 million of sales, is heavily dependent on a few programs (F-16 actuators, Boeing commercial transports) and faces declining F-16 volumes and commercial airframe production cuts.
Management is pursuing new products and markets, including the Power Hawk rescue tool, a Korean nuclear valve program, and a Danish joint venture, but these efforts are early-stage and not yet material to revenue. The balance sheet is conservative. Working capital was $108.3 millionc with a current ratio of 4.0 to 1, total debt was only about $14.4 million, and stockholders' equity was $158.8 million.
Cash flow from operations was negative $7.6 milliond in 1994, largely because of a $8.9 million payment on the 1993 litigation settlement and a short-term trading securities program. Investors should also note the Wood-Ridge, NJ environmental remediation, which moves into a higher-spending phase, and the stock's 1994 trading range of roughly $33 to $37, with a steady $1.00 annual dividend.
02—Key points
Key Highlights
- Net earnings rebounded to $19.3 million ($3.81/share) in 1994 from a $5.6 million loss ($1.11/share) in 1993, which included about $14.1M of non-recurring charges.
- Sales declined 2% to $155.0 million, but segment pre-tax operating profit rose 32% to $26.5 million on cost containment.
- New orders fell 22% to $122.4 million and backlog fell to $116.6 million from $149.2 million, signaling weaker future revenue visibility.
- Aerospace is concentrated in a few programs (F-16, Boeing commercial), with 1994 segment sales down 14% to $83.5 million; the F-22, F/A-18E/F, and V-22 are development-stage with production not expected until 1996 or later.
- Balance sheet is strong: current ratio of 4.0 to 1, working capital of $108.3 million, $72.2 million in short-term investments, and debt of only about $14.4 million.
- Operating cash flow was negative $7.6 million in 1994, mainly due to an $8.9 million litigation settlement payment and trading securities activity.
- Dividend held at $1.00 per share; the company has about 5.06 million shares outstanding and a Wood-Ridge, NJ environmental remediation program moving into higher-cost phases.
03—Questions
Frequently Asked Questions
Why did reported earnings swing from a loss in 1993 to strong profit in 1994?
The 1993 loss was driven by unusual items: a $17.5 million litigation settlement with the U.S. Government (Target Rock), $3.8 million in environmental charges, $3.6 million in restructuring charges, and a $9.8 million SFAS No. 106 accounting change. Excluding these, 1993 normalized earnings were $14.1 million, and 1994's $19.3 million represents a genuine improvement of about $5.2 million, largely from better segment performance and lower costs.
Is the company's revenue outlook improving?
Not yet. Sales fell to $155.0 million, and new orders dropped 22% to $122.4 million, with backlog down to $116.6 million. Management attributes this to fewer new aerospace production programs and reduced F-16 volumes. Much of the business (shot-peening, overhaul, and spare parts, over 50% of sales) has short lead times, so backlog understates near-term activity, but the company has limited visibility into the 1996 production ramp.
How concentrated is the company's customer and program base?
Highly concentrated. The Aerospace segment depends on a few customers, including Lockheed, Boeing, and McDonnell Douglas, and the F-16 has been its largest program, with future volumes dependent on foreign sales. The Flow Control and Marine segment depends heavily on Westinghouse for U.S. Government end-use sales, and U.S. Government sales represented 31% of total 1994 sales.
What are the main financial and environmental risks to note?
The Wood-Ridge, NJ remediation is moving from study to active soil and groundwater cleanup in 1995, with higher expenditures expected over the next several years, although management says costs remain within the 1990 reserve of $21 million. Environmental obligations totaled $15.6 million at year-end 1994. Other exposures include a pending class action over retiree medical benefit terminations, a Superfund matter at Sharkey Landfill, and reliance on a single 38-year-old extrusion press at the Buffalo facility, which is being offered for sale.
Is the dividend and capital structure sustainable?
The dividend has been held at $1.00 per share for several years, about $5.1 million annually, and the company has a modest debt load of roughly $14.4 million, down from $14.4 million... (see note): total debt was about $14.4 million at year-end 1994 against $158.8 million of equity, with about $26.1 million of unused credit lines. Cash on hand was only $4.2 million, but short-term investments of $72.2 million provide substantial liquidity, so the dividend appears well covered for now, though operating cash flow was negative in 1994.
04—Continue