01—Abstract
Summary
Summary of the 10-K filed March 20, 2000. Cited figures are marked; the original filing is the authoritative source.
Curtiss-Wright Corporation (NYSE: CW) reported a strong fiscal 1999, its most profitable year since 1981.
Sales rose 18% to $293.3 milliona, net earnings increased 34% to $39.0 million, and diluted EPS reached $3.82 ($3.33 excluding a $7.4 million environmental insurance settlement and $2.3 million of Motion Control consolidation costs). New orders grew 27% to $295.7 million and year-end backlog reached $212.8 million. Growth was driven largely by acquisitions (Drive Technology, Metallurgical Processing, Farris Engineering, Sprague Products, Enertech, Alpha Heat Treaters), which contributed about $59.9 million of 1999 sales.
Return on equity was 16.0% and stockholders' equity reached $258.4 millionb. The company operates three segments: Motion Control (aerospace actuation, MRO and military vehicle drives, 42% of sales), Metal Treatment (shot-peening and heat treating, 36% of sales, with a slowdown in 1999 and lower segment net earnings), and Flow Control (nuclear and process valves, which grew 71% with the Farris and Sprague acquisitions). Investors should note customer concentration: Boeing sales were $42.9 million, the U.S. Government accounted for about 17% of total sales, and the Flow Control backlog is about 25% tied to a U.S. Navy prime contractor.
The filing also flags that Boeing's 2000 deliveries are expected to fall more than 22%c, though management estimates the reduction in Boeing original-equipment sales will be less than 2% of total 2000 sales. Leadership is changing. Chairman David Lasky announced his retirement following the April 2000 annual meeting, with President and COO Martin R.
Benante expected to succeed him. Controller Kenneth P. Slezak resigned effective February 22, 2000.
Liquidity remains solid, with working capital of $124.4 milliond, a current ratio of 3.2 to 1, and $35.1 million in cash and short-term investments. Total debt was $38.2 million, mostly industrial revenue bonds and a Swiss franc-denominated revolver, and the company has $100 million in committed credit facilities.
02—Key points
Key Highlights
- Record-level profitability: net earnings up 34% to $39.0M; diluted EPS $3.82 vs. $2.82 in 1998 (normalized $3.33, up 17-18%)
- Sales grew 18% to $293.3M, with new orders up 27% to $295.7M and backlog at a year-end high of $212.8M
- One-time items: $7.4M ($0.72/share) environmental insurance settlement boosted 1999 earnings; $2.3M ($0.23/share) Motion Control consolidation costs reduced them
- Acquisition-driven growth: six businesses acquired since April 1998 contributed $59.9M of 1999 sales; Flow Control sales rose 71% to $65.0M
- Customer and government concentration: Boeing ($42.9M) and U.S. Government (~17% of sales) represent material risks; Flow Control backlog ~25% tied to one U.S. Navy prime contractor
- Boeing 2000 deliveries forecast to drop over 22%, but management expects original-equipment sales impact to be under 2% of total sales
- Management transition: Chairman David Lasky retiring after April 2000 annual meeting; Martin Benante (President & COO) to lead; Controller Slezak resigned Feb 2000
- Balance sheet strength: current ratio 3.2:1, $35.1M cash and short-term investments, total debt $38.2M, equity $258.4M
03—Questions
Frequently Asked Questions
How did Curtiss-Wright perform financially in 1999?
Sales increased 18% to $293.3 million and net earnings rose 34% to $39.0 million, or $3.82 per diluted share. Excluding a $7.4 million environmental insurance settlement and $2.3 million in Motion Control consolidation costs, normalized diluted EPS was $3.33, up about 23% from $2.70 in 1998. Return on equity was 16.0%.
Is the 1999 earnings growth sustainable?
Part of the improvement was non-recurring. The insurance settlement added $0.72 per diluted share, and 1998 included charges of $0.38 per share. Much of the underlying growth came from acquisitions, which add to sales but also bring integration risk. Investors should focus on normalized results and on whether the Metal Treatment segment, whose 1999 net earnings fell to $14.4M from $18.2M, recovers.
What are the main risks for investors?
Key risks include dependence on Boeing (a 2000 delivery decline of more than 22%), U.S. Government and Navy business (about 17% of sales, with termination-for-convenience clauses), environmental remediation (the company is pursuing insurers for recovery but the lawsuit is ongoing), foreign operations (a significant share of pre-tax earnings), and the 2000 leadership transition.
How strong is the balance sheet and liquidity position?
The balance sheet is solid. Working capital was $124.4M, the current ratio was 3.2 to 1, and cash plus short-term investments totaled $35.1M. Total debt was $38.2M, mainly industrial revenue bonds and a Swiss franc revolver. The company had $100M in bank credit facilities, with $58.2M of unused credit available at year-end, and expected 2000 cash generation to cover capex, debt repayment and dividends.
What is the outlook for each business segment?
Motion Control faces a Boeing-driven slowdown in 2000 but benefits from MRO growth, the V-22 and Raptor programs, and a new Boeing 757 retrofit contract. Metal Treatment expects weak markets to persist in some areas but sees a good aerospace outlook, supported by new shot-peening facilities and heat-treating acquisitions. Flow Control is expected to grow from acquisitions and Navy nuclear submarine programs, though it has long order lead times and high reliance on the U.S. Navy.
04—Continue