How did Curtiss-Wright perform in 1998 compared with 1997?

Sales increased 13.7% to $249.4 million, and net earnings rose 4.2% to $29.1 million ($2.82 per diluted share). Reported results included a $3.9 million charge from ACPS segment problems, partly offset by insurance recoveries and a 1997 land-sale gain that did not recur. Excluding these items, earnings grew about 7%.

What drove the growth and what were the main problems?

Growth came mainly from the Alpha Heat Treaters and Enertech acquisitions, the SDT acquisition at year-end, and expansion of PMPS facilities. The main problem was the Actuation & Control segment, which faced cost overruns on military development contracts, inventory write-offs, and the costs of consolidating its Fairfield, NJ manufacturing into Shelby, NC. The segment's net result was a loss of about $1.0 million.

Is the company dependent on any single customer or market?

Yes, to a degree. Boeing represented 16% of consolidated revenue in 1998 (15% in 1997), and U.S. Government sales were 17% of total sales. The Flow Control segment also relies heavily on U.S. Navy orders through a prime contractor. Management says more than 83% of revenue now comes from commercial sources, and it is pursuing diversification into nuclear power services, military vehicles, and railway systems.

What is the company's financial condition and debt position?

Total assets were $352.7 million, and stockholders' equity was $229.6 million. Total debt was about $40.7 million, of which $20.5 million is a short-term credit borrowing due in October 1999. Management says it intends to extend or refinance that borrowing. Working capital was $130.8 million, the current ratio was 2.9 to 1, and cash plus short-term investments totaled $72.3 million.

What should investors watch for in 1999?

Watch the completion of the Fairfield-to-Shelby consolidation in Q3 1999 and whether the ACPS segment returns to acceptable margins, with about $1.6 million in after-tax relocation costs expected. Also watch the refinancing of the $20.5 million short-term borrowing due October 1999, the performance of the newly acquired SDT business, and the growth of PMPS as new facilities ramp up. Year 2000 remediation (estimated at $0.5 million) and the effects of Asian and South American economic conditions on orders are additional factors.

CW 10-K FY1998 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 31, 1999. Cited figures are marked; the original filing is the authoritative source.

Curtiss-Wright Corporation (NYSE: CW) reported solid 1998 results, with sales rising 13.7% to $249.4 million^a (from $219.4 million) and net earnings up 4.2% to $29.1 million, or $2.82 per diluted share.

Growth was driven by acquisitions (Alpha Heat Treaters, Enertech, and the SIG Drive Technology business acquired at year-end) and expansion in its Precision Manufacturing Products & Services segment. Excluding insurance recoveries and restructuring items, earnings rose about 7% to $2.69^b per share. Operating income increased 21% to $36.3 million, and return on average equity was 13.4%.

Profitability was uneven across segments. The Actuation and Control Products & Services segment (42% of sales) underperformed, absorbing a $3.9 million^c, or $0.38 per share, charge tied to military development program overruns, inventory write-offs, and the consolidation of manufacturing from Fairfield, NJ to Shelby, NC. Management expects roughly $1.6 million after tax in additional relocation costs in 1999.

The company also reported that more than 83% of 1998 revenue came from commercial sources, and that the Boeing account represented 16% of consolidated revenue, a notable concentration. The balance sheet changed significantly. Total assets grew to $352.7 million^d, and debt rose to about $40.7 million, mostly from a $20.5 million short-term credit borrowing used to fund the SDT acquisition, which matures in October 1999.

Working capital was stable at $130.8 million, the current ratio fell to 2.9 to 1, and cash and short-term investments totaled $72.3 million. Management also initiated a stock repurchase program covering up to 300,000 shares, signaling its view that the shares were undervalued.

02—Key points

Key Highlights

Sales rose 13.7% to $249.4 million in 1998, with acquisitions and PMPS expansion contributing $42.3 million of the increase.
Diluted EPS of $2.82 (up 4% from $2.71); excluding one-time items, EPS rose about 7% to $2.69.
Operating income increased 21% to $36.3 million; return on average stockholders' equity was 13.4%.
Actuation & Control segment took a $3.9 million ($0.38/share) charge for military program overruns, inventory adjustments, and plant consolidation, with another ~$1.6 million after-tax relocation cost expected in 1999.
Total debt rose to about $40.7 million, including a $20.5 million short-term credit borrowing due October 1999 that funded the SDT acquisition.
Boeing accounted for 16% of consolidated revenue, and the company has a significant concentration in a single customer's production cycle.
A stock repurchase program of up to 300,000 shares (about 3%) was authorized in October 1998, reflecting management's view that the stock was undervalued.

03—Questions

Frequently Asked Questions

How did Curtiss-Wright perform in 1998 compared with 1997?
Sales increased 13.7% to $249.4 million, and net earnings rose 4.2% to $29.1 million ($2.82 per diluted share). Reported results included a $3.9 million charge from ACPS segment problems, partly offset by insurance recoveries and a 1997 land-sale gain that did not recur. Excluding these items, earnings grew about 7%.
What drove the growth and what were the main problems?
Growth came mainly from the Alpha Heat Treaters and Enertech acquisitions, the SDT acquisition at year-end, and expansion of PMPS facilities. The main problem was the Actuation & Control segment, which faced cost overruns on military development contracts, inventory write-offs, and the costs of consolidating its Fairfield, NJ manufacturing into Shelby, NC. The segment's net result was a loss of about $1.0 million.
Is the company dependent on any single customer or market?
Yes, to a degree. Boeing represented 16% of consolidated revenue in 1998 (15% in 1997), and U.S. Government sales were 17% of total sales. The Flow Control segment also relies heavily on U.S. Navy orders through a prime contractor. Management says more than 83% of revenue now comes from commercial sources, and it is pursuing diversification into nuclear power services, military vehicles, and railway systems.
What is the company's financial condition and debt position?
Total assets were $352.7 million, and stockholders' equity was $229.6 million. Total debt was about $40.7 million, of which $20.5 million is a short-term credit borrowing due in October 1999. Management says it intends to extend or refinance that borrowing. Working capital was $130.8 million, the current ratio was 2.9 to 1, and cash plus short-term investments totaled $72.3 million.
What should investors watch for in 1999?
Watch the completion of the Fairfield-to-Shelby consolidation in Q3 1999 and whether the ACPS segment returns to acceptable margins, with about $1.6 million in after-tax relocation costs expected. Also watch the refinancing of the $20.5 million short-term borrowing due October 1999, the performance of the newly acquired SDT business, and the growth of PMPS as new facilities ramp up. Year 2000 remediation (estimated at $0.5 million) and the effects of Asian and South American economic conditions on orders are additional factors.

04—Continue

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