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CURTISS-WRIGHT CORPORATION
ANNUAL REPORT 1994
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PEOPLE WORKING TOGETHER TOWARD SHARED GOALS
COVER
213
Curtiss-Wright Corporation, headquartered in Lyndhurst, New Jersey, is a
diversified multi-national manufacturing concern which produces and markets
precision components and systems and provides highly engineered services to
Aerospace, Industrial, and Flow Control and Marine markets.
The Company employs approximately 1,500 people with its principal
operations including four domestic manufacturing facilities and thirty-one
Metal Improvement service facilities located in North America and Europe.
COVER: PICTURED IS ONE OF CURTISS-WRIGHT'S PROJECT TEAMS WHO ARE PERFORMING
ENGINEERING AND DEVELOPMENT WORK ON THE LOCKHEED/BOEING F-22 ADVANCED TACTICAL
FIGHTER. CURTISS-WRIGHT FLIGHT SYSTEMS GROUP WAS SINGLED OUT AS THE MOST
VALUABLE PLAYER FOR THE CRITICAL SUBCONTRACTOR CATEGORY ON THAT PROGRAM.
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214
Financial Highlights
($ in thousands except per share data) 1994 1993 1992
-------------------------------------------------------------------------------------------
PERFORMANCE
Sales and other revenues $166,189 $170,264 $193,088
Net earnings (loss) before accounting changes $19,547 $(2,952) $21,687
Net earnings (loss) $19,303 $(5,623) $21,687
Net earnings (loss) per share before accounting changes $3.86 $(.58) $4.29
Net earnings (loss) per common share $3.81 $(1.11) $4.29
Return on sales 12.5% (3.5)% 12.1%
Return on assets 8.1% (2.4)% 9.2%
Return on equity 12.7% (2.0)% 14.7%
New orders $122,367 $155,990 $191,641
Backlog at year-end $116,554 $149,188 $152,062
YEAR-END FINANCIAL POSITION
Current assets in excess of current liabilities $108,329 $92,712 $86,342
Ratio of current assets to current liabilities 4.0 TO 1 3.1 to 1 3.3 to 1
Total assets $238,694 $236,947 $238,898
Stockholders' equity $158,769 $144,231 $155,204
Stockholders' equity per common share $31.37 $28.50 $30.67
OTHER YEAR-END DATA
Depreciation $10,883 $11,483 $11,919
Capital expenditures $4,609 $4,914 $6,752
Shares of common stock outstanding 5,060,743 5,060,743 5,060,743
Number of stockholders 6,409 6,881 7,378
Number of employees 1,496 1,557 1,684
DIVIDENDS PER COMMON SHARE $1.00 $1.00 $1.00
CONTENTS
1. Financial Highlights
2. Letter To Our Shareholders
9. Management's Discussion and Analysis of Financial Condition and Results of Operations
14. Report of the Corporation and Report of Independent Accountants
15. Consolidated Financial Statements
19. Notes to Consolidated Financial Statements
27. Quarterly Results of Operations
28. Consolidated Financial Data and Corporate Directory and Information
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Fellow Shareholders
Over the last few years, Curtiss-Wright and the other participants in the
defense and aerospace industries have been forced to adapt to the post-cold
war environment and simultaneously to cope with the global airline business
recession. Specifically, Curtiss-Wright has been adversely affected by the
maturation of the F-16 and end of the F-14 military aircraft production
programs, the stretch-out of the Air Force F-22 development program, an over
50% decline in the rate of Boeing's commercial aircraft production since 1991,
an over 70% reduction of McDonnell Douglas commercial aircraft production for
the same period, two program curtailments in our Nuclear Navy valve business
area, and the overall pressure to reduce prices as competition intensifies.
Despite these adverse developments, we have maintained our business base and
(with the exception of unusual or non-recurring charges) very respectable
levels of profitability. 1994 was no exception.
Although current year sales of $155.0 million declined 2.4% from 1993 sales of
$158.9, Curtiss-Wright's earnings in 1994 rebounded to $19.3 million, or $3.81
per share, as compared with "normalized" earnings in 1993 of $14.1 million, or
$2.78 per share, which excludes 1993 charges for litigation settlement costs,
environmental costs, restructuring charges and the recognition of new
accounting principles. 1994 performance yielded a 12.7% return on equity and an
8.1% return on assets. To a significant extent, this performance is the result
of our ability to sharply reduce and contain costs.
[Photo of President center of Page 2-3/4 x 3-3/4]
Recent Developments
-------------------
The F-16 Fighting Falcon, which has for the last few years been the
predominant military application of our Curtiss-Wright Flight Systems Group
("Flight Systems"), is being procured by the United States Air Force in
substantially lower quantities. While the potential exists for sales to foreign
governments, future activity will be reduced from the high levels of recent
years. To some extent, the declining volume of production at Flight Systems of
F-16 leading edge actuation equipment is being offset by significant
engineering and development work on the Lockheed/Boeing F-22 Advanced Tactical
Fighter, the McDonnell Douglas F/A-18 E/F and the Bell Boeing V-22 Osprey.
During 1994, $6.3 million of our sales revenue was derived from the development
of actuation systems and components for these programs. By participating in the
design and development stages of these programs, Flight Systems should be in a
strong position to win follow-on production contracts.
With the reduced manufacturing levels for components of the F-16, and with
production relating to these development programs not being anticipated until
1996 at the earliest, Flight Systems' management has been addressing cost
containment issues at that facility. This situation will continue until these
new developmental programs enter the production phase. Based upon current
Pentagon projections, should Flight Systems be successful in winning production
contracts for these systems, these programs could exceed the total sales level
experienced by Flight Systems on the F-16.
Sales of actuation and control equipment to the commercial airframe industry
continue at reduced levels because of the production slowdowns being
experienced in that industry. Offsetting declines in sales of this equipment in
1994 were gains made by our Metal Improvement subsidiary ("MIC") in penetrating
shot-peening and heat-treating service markets, advances in the precision
stamping segment of MIC's business and increased sales by Flight Systems of
spare parts and overhaul services for actuation and control equipment.
Production is also proceeding at our Target Rock operation on valves for the
U.S. Navy's next aircraft carrier, as is development work for the next
generation of attack submarines.
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216
In 1994, the focus of environmental cleanup activities at the Company's
Wood-Ridge, N.J. Business Complex shifted to preparation for the remediation of
the property. Soil and ground water remediation will begin in 1995. Total
anticipated costs associated with the remediation stage of the project remain
within the amounts reserved in 1990. With the cleanup program turning to
remediation, the level of expenditures will be higher over the next few years
than it was during the earlier stages of the cleanup task.
Customer Focus
--------------
Curtiss-Wright realizes the importance of its customers to the success of the
Company and continuously strives to gain their recognition as a production and
technological leader and innovator. We feel that the Company must not only be
looked upon as a premier supplier, but as a partner who supplies the solutions
to its customers needs.
Flight Systems furthered this reputation in 1994 through its involvement in
the development program on the F-22, for which it received recognition from its
customers as the "Most Valuable Player for the Critical Subcontractor Cate-
gory." Flight Systems also earned the "New Jersey Quality Partner Award", which
is based upon the national Malcolm Baldridge Quality Award criteria.
In 1994, MIC illustrated its ability to service its customer base from
multiple locations, which is an advantage unmatched by any of its competition.
When last year's California earthquake shut down one of MIC's shot-peening
facilities, it was able to quickly react and continue servicing its customers
by utilizing other facilities. The result was that MIC maintained deliveries,
without a material disruption in service, despite the catastrophic event which
adversely impacted many businesses in the region. The ability to react to this
situation also reflects the quality and dedication of the people at MIC.
MIC took further steps in 1994 to more effectively service its shot-peening
customers through its mission to continuously expand its present shot-peening
base. MIC intends to maintain its reputation for high quality, low cost service
to its customers and, through its dedication and involvement in providing
solutions to customers' needs, to develop a true partnership with them.
MIC intends to use its strengths to expand globally, with the ultimate goal of
establishing a worldwide network of businesses providing state of the art
technology and service.
Our Target Rock subsidiary continues to play a key role in support of customer
needs whether for field support, critical spare parts to maintain our nation's
commercial nuclear power generation industry, or activities for the U.S. Navy's
nuclear power program. Target Rock's response in support of these demanding
programs is key to its continuing success in increasing market share in those
business segments.
Product and Service Expansion
-----------------------------
Flight Systems has taken steps to increase its market share by capturing
additional aircraft applications and extending its activities into other areas.
It recently was awarded a major production contract to produce trailing-edge
flap actuators for the Boeing 767. We will be gearing up for production in 1995
with actual shipments scheduled to begin in the first quarter of 1996. Flight
Systems also has successfully expanded its activities in the commercial
actuation and control equipment overhaul business by capitalizing on the
airlines' decision to outsource maintenance functions and by offering an
expedited turnaround on many components, a service which previously was unheard
of in that segment of the overhaul business. Steps are being taken to duplicate
this domestic success overseas through the establishment of a joint venture
with Danish Aerotech A/S, a well-established aerospace concern. The joint
venture, Curtiss-Wright Flight Systems Europe A/S, to be located in Karup,
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217
Denmark, will service the commercial European, Middle East and African markets.
MIC is looking forward to growing its flapper valve and heat treating
businesses. The flapper valve unit is working to expand its position as a
supplier of valves to encompass a multiple of markets that it does not service.
Heat treating is looked upon as a business area which can be expanded on a
selective basis through acquisitions. Acquisitions are being evaluated on a
continuous basis.
While the size of the Nuclear Navy market has been shrinking with the
reduction in submarine and aircraft carrier procurements, Target Rock, which
regards itself as the dominant supplier for nuclear containment valves, has
been increasing its share of the remaining opportunities. In addition to
capturing business on new ship-builds, it has been successful in winning
redesign and development contracts for the Navy's next generation of attack
submarines. This is considered to be key to being the supplier of those
components when those submarines enter the production phase. Target Rock also
intends to extend its presence in the marine segment industry by competing for
valve applications beyond those related only to its specialty of nuclear
containment. These valves have many characteristics which are similar to those
already being produced at Target Rock. In addition, Target Rock has developed a
new bolted bonnet configuration for its valves, which is enhancing its
competitive position in overseas commercial nuclear programs.
In 1995, Target Rock will commence shipment of multiple valve programs for the
Korean commercial nuclear power generation program including safety relief
valves, solenoid valves, and motor operated valves. These valves are for
installation in the first Korean Standard plant design based on Combustion
Engineering technology. Capture of these programs has positioned Target Rock
well for future additional business, as the Korean nuclear program continues to
grow with four more additional plants of identical design already approved and
funded.
New Product Development
-----------------------
During 1994, Curtiss-Wright spent in excess of $10.3 million for both
customer-sponsored development work and company-sponsored research and
development activities. In 1995, we expect to be making additional strategic
investments to continue the development of new products. We have challenged our
employees to identify new markets to provide a further broadening and
diversification of our business activities. In 1994, the Company began to see
some results from initial past efforts in this area.
Flight Systems' power hinge aerospace technology has been applied to the
commercial rescue tool market with the introduction of the Power Hawk (TM). The
primary use for this tool is the extrication of automobile accident victims. A
distribution network for the United States market has been completed and
commercial sales are scheduled to commence in 1995. During 1995, we also plan
to address the development of additional products utilizing comparable
technology.
Target Rock continued to track opportunities in the chemical and petrochemical
processing industries, which are being driven by the requirements of the Clean
Air Act of 1990. We are working with chemical companies to establish Target
Rock valves as the solution for the emerging need for the prevention of
so-called "fugitive emissions". While this market has developed much more
slowly than originally anticipated, it is looked upon as expansion of our
existing valve technology and as a potential source of future growth.
We continue to dedicate resources to establishing Target Rock highly regarded
supplier to this market.
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Officers and Directors
----------------------
Our Chairman, Mr. Shirley D. Brinsfield, has decided to retire. Accordingly,
he will not stand for reelection as a director at the Annual Meeting of
Stockholders on May 5, 1995. Shirley has served Curtiss-Wright in various
capacities, as a director, officer and employee, for almost 35 years. We are
indebted to him for his many significant contributions.
On April 19, 1994, John B. Morris, who served on the Board of Directors since
1961 and for a period of that time also was a member of Curtiss-Wright's
management team, died at the age of 83. His experience and judgment will be
missed.
Future Focus
------------
Our initial efforts at product and service expansion and new product
development, described above, reflect our judgment that in the long term,
Curtiss-Wright cannot expect to continue to be successful in the face of static
or declining business levels. Significant progress must be made towards our
goal of sustained, profitable growth, as measured by the development of new
products and services, alone or in conjunction with others, and increased
market share. To achieve this goal, we must expand our capabilities
significantly, from both a technology and a production standpoint. We must be
aggressive in seeking out and capitalizing upon new opportunities within or on
the periphery of our existing core competencies and markets. Of course, at the
same time, the Company cannot lose sight of the needs of its current customers,
and must maintain at high levels the performance of its day-to-day
responsibilities.
We believe that important opportunities will continue to exist in the defense
and aerospace industries and the Company is committed to continued involvement
in those areas. A key to successfully capturing additional market share will be
the ability to capitalize upon the reputation that the Company has developed in
the areas of technology, quality and customer service and to expand our
reputation to the global arena. Curtiss-Wright also will seek to leverage
positions it has in particular markets and to build upon its existing
technologies so as to extend its current product lines and to expand into
complementary businesses. We are prepared to invest the financial and employee
resources required to be successful in these endeavors.
The Employees of Curtiss-Wright
-------------------------------
The success of the efforts outlined above will be dependent upon our
employees. It is they who are responsible for the leadership positions that
have been attained by our business units. We will now be looking to them to
identify and develop new opportunities beyond the markets which Curtiss-Wright
traditionally has served. Progress in this direction will only be achieved as a
result of the continued dedication and involvement of the "people" of Curtiss-
Wright, working together toward shared goals.
We are confident that our employees will be successful in their efforts to
expand the scope of the Company for the benefit of our customer, employee and
investor constituencies. It is only fitting that we dedicate this Annual Report
to them.
David Lasky
David Lasky
President
February 7, 1995
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MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS:
======================
Curtiss-Wright Corporation posted consolidated net earnings for 1994 totaling
$19.3 million, or $3.81 per share, compared with a consolidated net loss of
$5.6 million, or $1.11 per share, for 1993. Net earnings for 1994 were slightly
below net earnings of 1992, which were $21.7 million, or $4.29 per share. The
net loss for 1993 reflected four unusual or infrequently occurring items which
distorted any comparison with the net earnings for 1994. Excluding the impact
of those unusual items, as detailed below, the Corporation would have achieved
net earnings in 1993 of $14.1 million, or $2.78 per share. A comparison of net
earnings of 1994 with "normalized" 1993 net earnings shows an improvement of
$5.2 million, or $1.03 per share. Generally speaking, the improvement is
attributable to the improved performance of our business segments in 1994, when
compared with 1993.
Total sales for the Corporation were $155.0 million in 1994, a 2% decline from
1993 sales of $158.9 million, and a 14% decline from sales of $179.7 million in
1992. Despite the small decline in sales, pre-tax operating profits from our
three business segments improved 32%, totaling $26.5 million in 1994, compared
with segment operating profits of $20.0 million in 1993. Pre-tax operating
profit for 1994 remained below 1992 levels, which had totaled $31.7 million.
New orders received by the Corporation totaled $122.4 million in 1994, 22%
below orders received in 1993 and 36% below orders received in 1992. The
decline in orders is largely attributable to a high level of engineering and
manufacturing development orders received by our Aerospace segment in 1993, as
well as a general decline in the availability of new aerospace production
programs. The total backlog of unshipped orders at December 31, 1994 amounted
to $116.6 million, well below the total backlog at December 31, 1993 and
December 31, 1992, which totaled $149.2 million and $152.1 million,
respectively. It should be noted that shot-peening, heat-treating, peen-forming
and overhaul services and spare parts sales, which represent more than 50% of
the Corporation's total sales for 1994, are sold with very modest lead times.
Accordingly, backlog for these product lines is less of an indication of future
activity.
The major items impacting 1993 earnings were:
1) The Corporation's Target Rock Corporation subsidiary recorded a charge of
$17.5 million for the settlement of litigation brought by the U. S. Government
in 1990. The settlement, net of the effect of a $3.0 million insurance recovery
under a blanket crime policy and applicable tax benefits, reduced net earnings
of 1993 by $8.6 million, or $1.70 per share. Further details on this settlement
can be found in Note 10.
2) The Corporation recorded charges of $3.8 million for the estimated future
environmental cleanup on a number of sites on which it has been named a
potentially responsible party (PRP) by the Environmental Protection Agency,
which reduced 1993 net earnings by $2.5 million, or $.49 per share. Further
details on environmental matters can be found in Note 13.
3) The Corporation recorded restructuring charges associated with the
anticipated sale and closing of operating properties totaling $3.6 million,
which reduced net earnings for the year by $2.4 million, or $.47 per share.
Further information on restructuring charges can be found in Note 14.
4) The Corporation recognized a one-time transition obligation of $9.8
million for postretirement medical costs under SFAS No. 106, reducing net
earnings by $6.4 million, or $1.27 per share. This was offset to the extent of
$.2 million, or $.04 per share, on account of a change in accounting for income
taxes under SFAS No. 109. Further information on SFAS No. 106 and SFAS No. 109
can be found in Notes 17 and 7, respectively.
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SEGMENT PERFORMANCE
===================
Aerospace:
----------
The Corporation's Aerospace segment posted sales of $83.5 million for 1994, a
decline of 14% when compared with sales of $96.9 million for 1993. The
decreased sales, in comparison with the prior year, primarily reflect lower
volume and reduced pricing on actuation products for the F-16 military program,
as well as lower production of actuation products for Boeing commercial
transport aircraft. Sales of aerospace spare parts and overhaul services
increased significantly for 1994, as compared with 1993, but did not offset the
declines in sales on major domestic aerospace production programs. Despite a
significant decline in sales, pre-tax operating income for the Aerospace
segment in 1994 increased slightly from operating income reported for 1993,
totaling $15.8 million in 1994, compared with $15.4 million in 1993. Operating
profits of 1993 had been reduced by provisions of $2.4 million, established for
restructuring costs relating to the shot-peening and composite facilities,
discussed in Note 14, which operated principally in the Aerospace market.
Operating income for 1994 was limited by the reduced sales associated with
declines in certain major actuation production programs, but showed benefits
from increased sales of actuation spare parts and overhaul services,
improvements in foreign aerospace programs, and cost containment efforts. New
orders recorded in 1994, however, show a substantial decline in order levels
from those received in 1993. Orders for this segment totaled $58.0 million in
1994, 42% below orders received in the prior year. The decline in orders
primarily reflects a non-recurrence of the high level of engineering and
manufacturing development orders for the F-22 program received in 1993 and a
lack of new aerospace production programs to replace orders received in the
prior year for the matured F-16 program.
The Aerospace segment reported sales and operating income declines of 13% and
33%, respectively, when comparing 1993 results with the sales and operating
profits reported in 1992. Overall, these declines reflected a stretchout of
current orders and cutbacks in new aircraft production from both military and
commercial aircraft builders. Sales and operating profits in 1993 for actuation
components, systems and spare parts declined in comparison with those products'
results in 1992. Declines in sales and profits of commercial actuation products
were primarily caused by production schedule reductions on current programs for
Boeing Airplane Company's 737 and 747 aircraft. Declines in sales and profits
of military actuation products reflect reduced pricing arrangements in 1993, as
compared with 1992, as well as the scale back of Air Force requirements on the
F-16 program. Military sales in 1993 were also affected by lower Department of
Defense procurement activity for F-18 production and spares, and for F-14
spares. The Corporation delivered final production orders on F-14 programs in
1991 but had maintained a high level of spares sales in 1992. Aerospace results
in 1993 also reflect a substantial decline in sales and in operating profits of
shot-peening and peen-forming services for aerospace customers in comparison
with the 1992 performance. Declines in sales and operating profits for these
services are generally attributed to a stretch out of orders on Airbus and
McDonnell Douglas programs, combined with reduced pricing in some areas.
Operating profits of 1993 were further reduced by provisions established for
the closing of a composites facility in Texas and the consolidation of
shot-peening operations which operate principally in the Aerospace market.
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AEROSPACE
Product / Services
Control & Actuation Components & Systems
Shot-Peening & Peen-Forming Services
Custom Extruded Shapes
Windshield Wiper Systems
MAJOR MARKETS
U.S. Government Agencies
Foreign Governments; Commercial / Military / General Aviation
Aerospace Manufacturers
Helicopter Manufactures
Commercial Airlines; Missile Manufactures
222
Industrial:
-----------
The Industrial segment posted sales and operating income of $45.8 million and
$7.2 million, respectively in 1994, both substantial improvements when compared
with sales and operating income reported in 1993, which had totaled $37.2
million and $2.6 million, respectively. The improvement in both sales and
operating income, when comparing 1994 with 1993, is largely due to higher sales
of shot-peening and heat-treating services to automotive industry customers and
improved sales of industrial valves for other commercial customers. Changes in
these product lines during 1994 was largely due to a recovery in general
worldwide economic conditions which had hindered sales of our shot-peening and
heat-treating services during 1993. New orders received in 1994 were $47.7
million compared with orders of $36.2 million received in 1993. The Industrial
segment reported sales of $37.2 million in 1993, only slightly below sales of
$37.5 million reported in 1992. Operating profits for 1993, however, declined
50% to $2.6 million, compared with $5.1 million in 1992. Sales for 1993
reflected an increase, from 1992 levels, in sales of extruded commercial
tubular products, which was offset by a decline in sales of Swench products.
The Corporation had received a $4.5 million order in 1992 for its Swench manual
impact wrench on which final shipments were made in early 1993. Sales of
shot-peening services for industrial markets remained at 1992 levels but
generated significantly lower operating profits for 1993. The decline in
profits was due to a reduction in industrial market field work in 1993 and the
continued effects of recession on automotive and non-aerospace industries,
especially in Europe.
INDUSTRIAL
PRODUCTS / SERVICES
Shot-Peening and Heat-Treating Services
Extruded Shapes and Seamless Alloy Pipe
Compressor Value Reeds
Rescue Tool
MAJOR MARKETS
Metal Working Industries
Oil / Petrochemical / Chemical Construction
Oil and Gas Drilling / Exploration
Power Generation
Agricultrual Equipment
Automotive & Truck Manufactures
Rescue Tool Industry
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Flow Control and Marine:
------------------------
Sales for the Flow Control and Marine segment totaled $25.7 million, slightly
above sales of $24.7 million reported in 1993. The improvement is primarily due
to a higher level of commercial valve sales. Excluding sales recorded in 1993
under a Seawolf termination settlement, the details of which are discussed
below, sales of military valve products also increased for 1994, generally due
to progress achieved under long-term contracts. Segment operating income of
$3.5 million for 1994 also improved when compared with operating income of $2.0
million in 1993. Operating income for 1994 benefited from an improved sales mix
and lower administrative expenses when compared with 1993. New orders received
by the Flow Control and Marine segment were $16.6 million for 1994, a decline
from new orders of $19.7 million received in 1993. New orders for the Flow
Control and Marine segment received in 1994 include a contract to develop a
series of new valves for the U.S. Navy's next generation of attack submarines,
while new order levels for 1993 included a high level of valve production
orders for use in the U.S. Navy's next aircraft carrier.
The Flow Control and Marine segment reported sales of $24.7 million for 1993,
down 19% from sales of $30.3 reported for 1992. Operating profits for 1993
totaled $2.0 million, compared with $3.6 million of operating profit for 1992.
Sales for 1993 include $3.2 million related to the termination of valve orders
on the U. S. Navy's Seawolf program. The additional sales reflect the
settlement of Seawolf termination claims and equitable price adjustments
related to the cancellation of contracts. Excluding these adjustments, sales of
valve products for government end use declined $1.9 million for 1993, when
compared with 1992. Commercial valve sales also declined in 1993, primarily due
to increased shipments in 1992. Operating earnings generated by the valve
product lines declined overall for 1993, when compared with 1992, primarily due
to overruns on a fixed price commercial valve contract. Also contributing to
the decline in sales and operating profits, when comparing 1993 with 1992, was
a substantial absence, in 1993, of sales of extruded products for aircraft
carriers and submarines.
FLOW CONTROL AND MARINE
PRODUCTS / SERVICE
Globe, Gate, Control, Soleniod, Safety Relief, and Severe
Service Values
Custom Extruded Shapes and Seamless Alloy Pipe
MAJOR MARKETS
U.S. Navy Propulsion Systems
Nuclear and Fossil Fuel Power Plants
U.S. Navy Shipbuilding
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Other Revenues and Costs:
-------------------------
Other revenue for 1994 totaled $11.2 million, compared with $11.4 million for
1993 and $13.4 million for 1992. Rental income improved slightly in 1994 from
increased occupancy levels at the Corporation's Wood-Ridge New Jersey Business
Complex, but was more than offset by net losses recorded on the sale and
disposal of excess machinery and equipment primarily used in shot-peening
operations. Revenue generated by our portfolio of short-term investments also
showed a slight increase for 1994, when compared to 1993, generally due to
improved market performance. Other revenue for 1992 was increased $2.0 million
by interest income associated with refunds of federal and state income taxes
previously paid on long-term contracts.
Product, engineering and selling costs incurred by our operating segments
declined 6% and 9%, respectively, for 1994 and 1993, from costs incurred in the
previous year. The decline in costs generally reflects the lower sales volumes
in each succeeding year. Product and engineering costs reflect charges of $.6
million, $1.6 million and $2.2 million in 1994, 1993 and 1992, respectively,
for non-recoverable costs on long-term contracts and associated new program
development costs. General and administrative expenses for 1994 were $2.9
million, or 11%, below 1993, and $2.4 million, or 9%, below 1992. Included in
general and administrative expenses for 1994 and 1993 are net periodic costs
related to new accounting rules for postretirement medical benefits. These
additional costs amounted to $.9 million and $1.0 million for 1994 and 1993,
respectively, compared with actual claims paid in 1992 of $.5 million. General
and administrative expenses for the Corporation are reduced by the Corpora-
tion's non-cash pension income which results from the amortization into income
of the excess of the retirement plan's assets over the estimated obligations
under the plan. The amount recorded reflects the extent to which this non-cash
income exceeds the net cost of providing benefits in the same year, as detailed
in Note 18. Pension income before taxes amounted to $4.0 million in 1994, as
compared with $3.0 million, and $3.7 million recognized in 1993 and 1992,
respectively. The increase in pension income in 1994, as compared with 1993, is
primarily attributable to an increase in the expected long-term rate of return
on plan assets from 7% to 8%, partially offset by the impact of increased
retirement benefits.
The Corporation's provision for income taxes in 1994 generally reflects
federal income taxes at a statutory 35% rate, lowered primarily by tax benefits
available from the application of the Corporation's capital loss carryforward
and the dividends received deduction. The provision for income taxes for 1993
was increased by the recognition of a valuation allowance, established in
accordance with SFAS No. 109, as discussed in Note 7. In addition, the tax
provision for 1993 also included an adjustment to the Corporation's deferred
tax items for an enacted change in federal tax rates to 35%, resulting in an
additional charge to earnings of $.5 million for 1993. Taxes applicable to 1992
were generally based on the prior U. S. Federal statutory rate of 34%.
CHANGES IN FINANCIAL CONDITION:
===============================
Liquidity and Capital Resources:
--------------------------------
The financial position of the Corporation continues to be very strong. Working
capital at December 31, 1994, amounted to $108.3 million, a 17% increase over
working capital of $92.7 million at December 31, 1993. The ratio of current
assets to current liabilities at December 31, 1994 also improved to 4.0 to 1
from 3.1 to 1 at December 31, 1993.
The Corporation's total current liabilities at December 31, 1994 decreased by
$6.5 million when compared with December 31, 1993. The decrease in current
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225
liabilities primarily reflects a payment of $8.9 million made to the U.S.
Government in early 1994 in connection with the aforementioned litigation
settlement. The Corporation also recorded charges in 1994 of $2.9 million and
$2.0 million, respectively, against liabilities established in 1993 for
restructuring costs and environmental matters. The increase in the current
portion of long-term debt represents payments required to be made in 1995 for
two outstanding industrial revenue bonds. A bond payment of $1.3 million is
scheduled for the second quarter of 1995 and the remaining $4.0 million of
current debt is expected to be paid in the fourth quarter of 1995.
Also impacting working capital at year-end 1994 were higher net receivables
and net inventory balances at December 31, 1994, as compared with December 31,
1993. The increase in receivables is primarily due to a high level of fourth
quarter 1994 commercial spare sales. The increase in inventory balances, at
year-end 1994, is associated with higher inventoried costs related to new
aerospace development programs which are entering a manufacturing transition
phase.
As discussed above, the Corporation expects to pay down $5.4 million of
outstanding debt during 1995. Debt payments during 1994 totaled $.1 million,
while in 1993 the Corporation retired outstanding debt of $3.5 million through
the prepayment of industrial revenue bonds and a mortgage note. The
Corporation's total outstanding debt at year-end 1994 represented 9% of total
stockholders' equity with the long-term portion representing only 6%, compared
with 10% at December 31, 1993.
The Corporation has available credit lines totaling $45.0 million, under
agreements with a group of four banks. During 1993, the Corporation maintained
a $45.0 million revolving credit agreement. During 1994, the Corporation
reduced the revolving credit agreement to $22.5 million and entered into a
short-term credit agreement for an additional $22.5 million credit line. The
maximum available credit unused at December 31, 1994 was $26.1 million,
consisting of $3.6 million available under the revolving credit agreement and
$22.5 million available under the short-term credit agreement. The maximum
available credit unused at December 31, 1993 was $28.1 million.
Capital expenditures were $4.6 million in 1994, down 6% from 1993 levels and
32% from capital expenditures in 1992. Actual expenditures related primarily to
replacement equipment and building improvements. Aerospace-related expenditures
accounted for $2.4 million, more than 50% of the total spent in 1994. The
Corporation also reduced its fixed asset base through the sale and disposal of
excess equipment, the reclassification of former manufacturing property to
other assets available for sale and the writedown of impaired assets. The
Corporation anticipates increasing its capital expenditures in 1995, from those
made in 1994, by approximately 66%, to $7.7 million. Projected expenditures for
1995 are expected to consist primarily of replacement machinery within the
Aerospace segment. At December 31, 1994, the Corporation had committed
approximately $1.4 million for future expenditures, primarily for machinery and
equipment to be used in its operating segments.
Cash generated from operations is considered to be adequate to meet the
Corporation's overall cash requirements for the coming year, including normal
dividends, planned capital expenditures, expenditures for environmental
programs, debt repayments and other working capital requirements.
- 12 -
226
REPORT OF THE CORPORATION
=========================
The consolidated financial statements appearing on pages 14 through 35 of
this Annual Report have been prepared by the Corporation in conformity with
generally accepted accounting principles. The financial statements
necessarily include some amounts that are based on the best estimates and
judgments of the Corporation. Other financial information in the Annual
Report is consistent with that in the financial statements.
The Corporation maintains accounting systems, procedures and internal
accounting controls designed to provide reasonable assurance that assets are
safeguarded and that transactions are executed in accordance with the
appropriate corporate authorization and are properly recorded. The accounting
systems and internal accounting controls are augmented by: written policies and
procedures; organizational structure providing for a division of responsibil-
ities; selection and training of qualified personnel and an internal audit
program. The design, monitoring, and revision of internal accounting control
systems involve, among other things, management's judgment with respect to
the relative cost and expected benefits of specific control measures.
Price Waterhouse, independent accountants, have examined the Corporation's
consolidated financial statements as stated in their report. Their
examination included a study and evaluation of the Corporation's accounting
systems, procedures and internal controls, and tests and other auditing
procedures, all of a scope deemed necessary by them to support their opinion as
to the fairness of the financial statements.
The Audit Committee of the Board of Directors, composed entirely of Directors
from outside the Corporation, among other things, makes recommendations to the
Board as to the nomination of independent auditors for appointment by
stockholders and considers the scope of the independent auditors' examination,
the audit results and the adequacy of internal accounting controls of the
Corporation. The independent auditors have direct access to the Audit
Committee, and they meet with the Committee from time to time with and without
management present, to discuss accounting, auditing, internal control and
financial reporting matters.
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227
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of Curtiss-Wright Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, cash flows and stockholders'
equity present fairly, in all material respects, the financial position of
Curtiss-Wright Corporation and its subsidiaries at December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As described in Note 16 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits," effective January 1, 1994.
Also, as described in Notes 7 and 17 to the consolidated financial statements,
the Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" and Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," effective January 1, 1993.
Price Waterhouse LLP
Morristown, New Jersey
February 6, 1995
- 14 -
228
CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
(In thousands except per share data) 1994 1993 1992
REVENUES:
Sales.................................................................................... $155,001 $158,864 $179,737
Rentals and gains (losses) on sales and disposals of real estate and equipment...... 7,877 8,101 7,744
Interest, dividends and gains (losses) on short-term investments, net............... 3,040 2,783 4,291
Other income, net................................................................... 271 516 1,316
-------- -------- --------
Total revenues................................................................. 166,189 170,264 193,088
-------- -------- --------
COSTS AND EXPENSES:
Product and engineering............................................................. 106,324 112,552 122,981
Selling and service................................................................. 5,368 6,055 7,038
Administrative and general.......................................................... 24,840 27,784 27,275
Litigation settlement costs......................................................... 13,915
Environmental remediation costs..................................................... 499 4,472 1,813
Restructuring charges............................................................... 3,626
Interest............................................................................ 401 530 1,264
-------- -------- --------
Total costs and expenses....................................................... 137,432 168,934 160,371
-------- -------- --------
Earnings before income taxes and cumulative effect of changes in accounting principles... 28,757 1,330 32,717
Provision for income taxes............................................................... 9,210 4,282 11,030
-------- -------- --------
Earnings (loss) before cumulative effect of changes in accounting principles............. 19,547 (2,952) 21,687
Cumulative effect of changes in accounting principles (net of applicable taxes).......... (244) (2,671)
-------- -------- --------
Net earnings (loss)............................................................ $ 19,303 $ (5,623) $ 21,687
======== ======== ========
NET EARNINGS PER COMMON SHARE:
Earnings (loss) before cumulative effect of changes in accounting principles........ $3.86 $(.58) $4.29
Cumulative effect of changes in accounting principles............................... (.05) (.53)
-------- -------- --------
Net earnings (loss) per common share........................................... $3.81 $(1.11) $4.29
======== ======== ========
[FN]
See notes to consolidated financial statements.
- 15 -
229
CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------
(In thousands) 1994 1993
ASSETS:
Current assets:
Cash and cash equivalents........................................................................ $ 4,245 $ 20,349
Short-term investments.......................................................................... 72,200 54,811
Receivables, net................................................................................. 32,467 27,333
Income taxes refundable.......................................................................... 255
Deferred tax asset............................................................................... 8,204 8,882
Inventories...................................................................................... 24,889 22,455
Other current assets............................................................................. 2,338 2,142
-------- --------
Total current assets........................................................................ 144,343 136,227
-------- --------
Property, plant and equipment, at cost:
Land............................................................................................. 4,655 4,994
Buildings and improvements....................................................................... 78,680 79,374
Machinery, equipment and other................................................................... 119,653 124,423
-------- --------
202,988 208,791
Less, accumulated depreciation.............................................................. 142,550 137,361
-------- --------
Property, plant and equipment, net.................................................................... 60,438 71,430
Prepaid pension costs................................................................................. 28,092 24,062
Other assets.......................................................................................... 5,821 5,228
-------- --------
Total assets................................................................................ $238,694 $236,947
======== ========
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230
DECEMBER 31
--------------------
(In thousands) 1994 1993
LIABILITIES:
Current liabilities:
Current portion of long-term debt................................................................ $ 5,354 $ 124
Accounts payable................................................................................. 5,482 3,810
Accrued expenses................................................................................. 9,768 11,180
Income taxes payable............................................................................. 2,105
Other current liabilities........................................................................ 13,305 28,401
-------- --------
Total current liabilities................................................................... 36,014 43,515
-------- --------
Long-term debt........................................................................................ 9,047 14,426
Deferred income taxes................................................................................. 6,446 6,354
Accrued postretirement benefit costs.................................................................. 10,802 10,376
Other liabilities..................................................................................... 17,616 18,045
-------- --------
Total liabilities........................................................................... 79,925 92,716
-------- --------
Contingencies and Commitments (Notes 9, 10, 11 & 19)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 12,500,000 authorized, 10,000,000 shares issued (outstanding shares
5,060,743 for 1994 and 1993)........................................................................ 10,000 10,000
Capital surplus....................................................................................... 57,139 57,172
Retained earnings..................................................................................... 275,600 261,356
Unearned portion of restricted stock.................................................................. (87)
Equity adjustments from foreign currency translation.................................................. (1,622) (1,862)
-------- --------
341,117 326,579
Less, treasury stock at cost (4,939,257 shares for 1994 and 1993)........................... 182,348 182,348
-------- --------
Total stockholders' equity.................................................................. 158,769 144,231
-------- --------
Total liabilities and stockholders' equity.................................................. $238,694 $236,947
======== ========
[FN]
See notes to consolidated financial statements.
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231
CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
(In thousands) 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)...................................................................... $ 19,303 $ (5,623) $ 21,687
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Cumulative effect of changes in accounting principles............................... 244 2,671
Litigation settlement costs......................................................... 13,915
Depreciation........................................................................ 10,883 11,483 11,919
Net losses on sales and disposals of real estate and equipment...................... 855 249 265
Net gains on short-term investments................................................. (1,013) (772) (2,112)
Deferred taxes...................................................................... 901 (1,502) (3,793)
Changes in operating assets and liabilities:
Proceeds from sales of trading securities...................................... 216,992
Purchases of trading securities................................................ (231,145)
(Increase) decrease in receivables............................................. (10,135) 1,072 7,006
(Increase) decrease in non-current retainages.................................. 889 (117)
(Increase) decrease in inventories............................................. (2,400) 2,526 8,307
Increase (decrease) in progress payments....................................... 4,967 (2,640) (4,640)
Increase (decrease) in accounts payable and accrued expenses................... 260 (1,549) (5,135)
Increase (decrease) in income taxes payable.................................... 2,360 (5,125) 3,426
Increase in other assets............................................................ (2,922) (2,836) (4,505)
Increase (decrease) in other liabilities............................................ (5,562) 8,224 1,076
Litigation settlement............................................................... (8,880)
Other, net.......................................................................... (2,321) 510 (741)
-------- -------- --------
Total adjustments................................................................... (26,916) 27,115 10,956
-------- -------- --------
Net cash provided (used) by operating activities.................................... (7,613) 21,492 32,643
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and disposals of real estate and equipment........................... 1,326 583 2,115
Additions to property, plant and equipment............................................... (4,609) (4,914) (6,752)
Proceeds from sales of short-term investments............................................ 140,212 643,951
Purchases of short-term investments...................................................... (155,841) (633,712)
-------- -------- --------
Net cash provided (used) by investing activities.................................... (3,283) (19,960) 5,602
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings....................................................... 4,047
Principal payments on long-term debt..................................................... (149) (4,258) (12,540)
Dividends paid........................................................................... (5,059) (5,059) (5,059)
-------- -------- --------
Net cash used by financing activities............................................... (5,208) (9,317) (13,552)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents..................................... (16,104) (7,785) 24,693
Cash and cash equivalents at beginning of year........................................... 20,349 28,134 3,441
-------- -------- --------
Cash and cash equivalents at end of year................................................. $ 4,245 $ 20,349 $ 28,134
======== ======== ========
[FN]
See notes to consolidated financial statements.
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232
CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
EQUITY
COMMON STOCK UNEARNED ADJUSTMENTS
-------------------- PORTION OF FROM FOREIGN TREASURY STOCK
SHARES CAPITAL RETAINED RESTRICTED CURRENCY -----------------
(In thousands of dollars) ISSUED AMOUNT SURPLUS EARNINGS STOCK TRANSLATION SHARES AMOUNT
---------- ------- ------- -------- ----- ------------ --------- --------
December 31, 1991.................... 10,000,000 $10,000 $57,099 $255,410 $ (855) $ 776 4,938,807 $182,323
Net earnings......................... 21,687
Common dividends..................... (5,059)
Repurchase of common shares.......... 9 4 450 25
Amort. of earned portion of
restricted stock..................... (46) 534
Translation adjustments, net......... (2,007)
---------- ------- ------- -------- ----- ------------ --------- --------
December 31, 1992.................... 10,000,000 10,000 57,062 272,038 (317) (1,231) 4,939,257 182,348
Net loss............................. (5,623)
Common dividends..................... (5,059)
Amort. of earned portion of
restricted stock..................... 110 230
Translation adjustments, net......... (631)
---------- ------- ------- -------- ----- ------------ --------- -------
December 31, 1993.................... 10,000,000 10,000 57,172 261,356 (87) (1,862) 4,939,257 182,348
Net earnings......................... 19,303
Common dividends..................... (5,059)
Amort. of earned portion of
restricted stock..................... (33) 87
Translation adjustments, net......... 240
---------- ------- ------- -------- ----- ------------ --------- ----
December 31, 1994.................... 10,000,000 $10,000 $57,139 $275,600 $-- $ (1,622) 4,939,257 $182,348
========== ======= ======= ======== ===== ============ ========= ========
[FN]
See notes to consolidated financial statements.
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233
CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
==============================================
A. PRINCIPLES OF CONSOLIDATION.
The financial statements present the consolidated accounts of Curtiss-
Wright Corporation and all majority owned subsidiaries (the Corporation),
after elimination of all significant intercompany transactions and accounts.
B. CASH EQUIVALENTS.
Cash equivalents consist of money market funds, commercial paper and
treasury bills that are readily convertible into cash, all with original
maturity dates of three months or less.
C. PROGRESS PAYMENTS.
Progress payments received under U. S. Government prime contracts and
subcontracts have been deducted from receivables and inventories as disclosed
in the appropriate following notes. With respect to such contracts, the
government has a lien on all materials and work in process to the extent of
progress payments.
D. REVENUE RECOGNITION.
The Corporation records sales and related profits within its Aerospace and
Industrial segments, as units are shipped, services are rendered, or as
engineering benchmarks are achieved. Sales and estimated profits under long-
term military contracts within the Flow Control and Marine segment are
recognized under the percentage of completion method of accounting. Profits are
recorded pro rata, based upon current estimates of direct and indirect
manufacturing and engineering costs to complete such contracts.
Losses on contracts are provided for in the period in which the loss
becomes determinable. Revisions in profit estimates are reflected on a
cumulative basis in the period in which the basis for such revisions become
known.
In accordance with industry practice, inventoried costs contain amounts
relating to contracts and programs with long production cycles, a portion of
which will not be realized within one year.
E. PROPERTY, PLANT AND EQUIPMENT.
Property, plant and equipment are carried at cost. Major renewals and
betterments are added to the fixed asset accounts while maintenance and repairs
that do not improve or extend the life of the assets are expensed in the period
they occur.
Depreciation is computed using principally the straight-line method based
upon the estimated useful lives of the respective assets.
F. INCOME TAXES.
Current provisions for income taxes consist of federal, foreign, state and
local income taxes and include deferred tax provisions and the benefits of loss
carryforwards, where applicable.
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234
The Corporation currently accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109), which was adopted on January 1, 1993. Information
related to this adoption appears in Note 7. For years prior to 1993, income
taxes were accounted for in accordance with Statement of Financial Accounting
Standards No. 96, "Accounting for Income Taxes."
G. FINANCIAL INSTRUMENTS AND CREDIT RISK.
Financial Instruments: The financial instruments with which the Corporation
is involved are primarily of a traditional nature. The Corporation's cash
equivalents are invested in primarily high quality money market mutual funds.
Short-term investments consist primarily of money market preferred stocks,
investment grade debt instruments and common equity securities. The Corporation
has limited participation in derivative trading securities as defined under
Statement of Financial Accounting Standards No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments,"
consisting of the forward currency exchange contracts and commitments to
purchase stocks, discussed below.
The Corporation had one forward currency exchange contract outstanding at
December 31, 1994 and 1993 to hedge its exposure to foreign currency
fluctuations on short-term Canadian securities. The carrying value of the asset
and related forward contract were $3,100,000 and $3,452,000, respectively, at
December 31, 1994 and $3,249,000 and $3,424,000, respectively at December 31,
1993. While forward exchange contracts affect the Corporation's results of
operations, they do so only in connection with the underlying transaction. As
a result, the Corporation is not subject to material risk from exchange rate
movements, because gains and losses on these contracts generally offset losses
and gains on the transaction being hedged.
The Corporation has made commitments to purchase common stock of utility
companies. At December 31, 1994, the Corporation had outstanding commitments to
purchase 382,000 shares of common stocks having an aggregate cost of $9,192,000
and an aggregate market value of $9,220,000. Correspondingly, the Corporation
held investments in 387,000 shares of other common stocks of utility companies
having an aggregate cost of $9,580,000 and an aggregate market value of
$9,267,000.
Fair Value of Financial Instruments: The carrying value of the Corpora-
tion's cash and cash equivalents approximates fair value because of the short
maturity of those instruments. The fair market value of short-term invest-
ments are determined based on quoted market prices for those investments.
Additional information concerning the market and carrying value of short-term
investments appears in Note 2. The carrying value of the Corporation's long-
term debt is considered to approximate its fair market value.
Credit Risk: Credit risk is generally diversified due to the large number
of entities comprising the Corporation's customer base and their geographic
dispersion. The largest single customer represented 6% of the total outstanding
billed receivables at December 31, 1994 and 10% of the total outstanding
billed receivables at December 31, 1993. The Corporation performs ongoing
credit evaluations of its customers and establishes appropriate allowances for
doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends, and other information.
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235
H. EARNINGS PER SHARE.
Earnings per share were computed by dividing the applicable amount of
earnings by the weighted average number of common shares outstanding during
each year (5,061,000 shares in each year). The Corporation has outstanding
stock options at December 31, 1994 and December 31, 1993 as reported in
Note 12. The assumed exercise of these stock options had an immaterial dilutive
effect on earnings per share for 1994 and an anti-dilutive effect on earnings
per share for 1993.
2. SHORT-TERM INVESTMENTS.
==========================
Effective January 1, 1994, the Corporation began accounting for its
short-term investments in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS No. 115). This statement requires that the Corporation's
investments in equity securities be classified as "trading securities" or
"available for sale securities." The Corporation's short-term investments are
comprised of marketable equity and non-equity securities, all classified as
trading securities at December 31, 1994, under SFAS No. 115 and accordingly,
net unrealized holding gains and losses for trading securities were included in
net earnings for 1994. Net realized gains and losses are determined on the
specific identification cost basis.
In accordance with SFAS No. 115, short-term investments at December 31,
1994 are carried at fair value, which is based on quoted market prices for
these investments. The adoption of SFAS No. 115 did not have a material effect
on the Corporation's results of operations or financial condition. Short-term
investments at December 31, 1993 were carried at the aggregate of lower of cost
or market value.
1994 1993
---------------------- -------------------
(In thousands) COST FAIR VALUE COST MARKET
------- ---------- ------- -------
Marketable securities $72,750 $ 72,200 $54,811 $54,869
======= ========== ======= =======
Investment Income consists of:
1994 1993 1992
--------- -------- -------
Net realized gains on the sale of
marketable securities $ 1,563 $ 772 $2,112
Interest and dividend income, net 2,027 2,011 206
Net unrealized holding losses (550)
---------- ------- -------
Total investment income, net 3,040 2,783 2,318
Interest on tax refunds 1,973
---------- ------- -------
Interest, dividends & gains (losses)
on short-term investments, net $ 3,040 $ 2,783 $4,291
========== ======= =======
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236
3. RECEIVABLES.
===============
Receivables at December 31 include amounts billed to customers and unbilled
charges on long-term contracts consisting of amounts recognized as sales but
not billed. Substantially all amounts of unbilled receivables are expected to
be billed and collected in the subsequent year. The composition of receivables
is as follows:
(In thousands) 1994 1993
-------- --------
Billed Receivables:
U.S. Government receivables $ 2,403 $ 4,581
Less: progress payments applied 711 1,781
-------- --------
Net U. S. Government receivables 1,692 2,800
-------- --------
Commercial and other receivables 25,718 20,423
Less: progress payments applied 3,753 2,327
-------- --------
Net commercial and other receivables 21,965 18,096
-------- --------
Allowance for doubtful accounts (694) (893)
-------- --------
Net receivables billed 22,963 20,003
======== ========
Unbilled Receivables:
Recoverable costs & est. earnings not billed 27,084 20,265
Less: progress payments applied 17,580 12,935
-------- --------
Net unbilled charges on long-term contracts 9,504 7,330
-------- --------
Total receivables, net $32,467 $27,333
======== ========
4. INVENTORIES.
===============
Inventories are valued at the lower of cost (principally average cost) or
market. The composition of inventories is as follows:
(In thousands) 1994 1993
-------- --------
Raw material $ 4,195 $ 5,626
Work-in-process 9,819 8,012
Finished goods 3,477 3,775
Inventoried costs related to U. S. Government and
other long-term contracts 10,049 7,727
------- -------
Gross inventories 27,540 25,140
Less: progress payments applied, principally related
to long-term contracts 2,651 2,685
------- -------
Net inventories $24,889 $22,455
======= =======
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237
5. OTHER ASSETS.
================
The Corporation has various undeveloped tracts of land and former
manufacturing properties which are no longer used in operations. These
properties are considered available for sale and as such are carried at their
lower of cost or net realizable values. In 1994, the Corporation reclassified
from property, plant and equipment a shot peening facility located in Long
Island, New York, adjusted the carrying value of its property in Ontario,
Canada and sold small tracts of land located in Nevada and New Jersey. The
composition of other assets at December 31 is as follows:
(In thousands) 1994 1993
------- -------
Property held for sale $ 5,002 $ 4,432
All other 819 796
------- -------
Total other assets $ 5,821 $ 5,228
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.
Accrued expenses at December 31 consist of the following:
(In thousands) 1994 1993
Accrued compensation $ 3,607 $ 3,275
Accrued taxes other than income taxes 1,072 738
Accrued insurance 1,659 1,860
All other 3,430 5,307
------- -------
Total accrued expenses $ 9,768 $11,180
======= =======
Other current liabilities at December 31 consist of the following:
(In thousands) 1994 1993
Current portion of environmental reserves $ 4,982 $ 6,980
Anticipated losses on long-term contracts 1,920 2,878
Litigation settlement 8,880
Other litigation reserves 3,101 3,254
Restructuring reserves 744 3,626
All other 2,558 2,783
------- -------
Total other current liabilities $13,305 $28,401
======= =======
7. INCOME TAXES.
================
Effective January 1, 1993, the Corporation adopted SFAS No. 109, "Accounting
for Income Taxes." It requires an asset and liability approach for financial
accounting and reporting for deferred income taxes. Pursuant to SFAS No. 109,
the Corporation recognized a net tax benefit of $5,861,000 in 1993 (of which
$3,764,000 or $.74 per share was recognized as a cumulative effect of changes
in accounting principles), primarily from the utilization of its capital loss
carryforward, and correspondingly recorded a valuation allowance to offset this
deferred tax asset, based on management's assessment of the likely realization
of future capital gain income. During 1994, the Corporation realized
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238
$1,697,000 of capital gain income resulting in a reduction to the valuation
allowance of $594,000. An additional valuation of $193,000 was recorded for an
unrealized loss on securities. The net valuation allowance decreased by
$401,000. The Corporation had available, at December 31, 1994, net capital loss
carryforwards of $11,110,000 and $3,940,000 that will expire on December 31,
1995 and December 31, 1997, respectively.
Earnings (loss) before income taxes and cumulative effect of changes in
accounting principles for domestic and foreign operations are:
(In thousands) 1994 1993 1992
-------- -------- --------
Domestic $24,009 $(1,639) $28,246
Foreign 4,748 2,969 4,471
-------- -------- --------
Total $28,757 $ 1,330 $32,717
======== ======== ========
The provisions for taxes on earnings before cumulative effect of changes in
accounting principles consist of:
(In thousands) 1994 1993 1992
-------- -------- --------
Federal income taxes currently payable $ 4,755 $ 3,100 $11,367
Foreign income taxes currently payable 1,991 1,035 1,531
State & local income taxes currently payable 668 1,411 1,925
Deferred income taxes 1,603 (5,303) (3,130)
Adj. for deferred tax liability rate change 453 (663)
Federal income tax on net capital gains 594 367 998
Utilization of capital loss carryforward (594) (367) (998)
Valuation allowance 193 3,586
-------- -------- --------
$ 9,210 $ 4,282 $11,030
======== ======== ========
The rates used in computing the provision for federal income taxes vary from
the U. S. Federal statutory tax rate principally due to the following:
1994 1993 1992
------ ------ ------
U. S. Federal statutory tax rate 35.0% 35.0% 34.0%
Add (deduct):
Utilization of capital loss carryforward (2.1) (78.8) (3.6)
Dividends received deduction & tax exempt dividends (1.9) (85.9) ( .3)
Inc (dec) in deferred tax liab. for chg in tax rate 34.0 (2.0)
State and local taxes 2.3 106.1 5.9
Valuation allowance .7 269.7
All other (2.0) 41.9 (.3)
------ ------ ------
32.0% 322.0% 33.7%
====== ====== =====
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239
The components of the Corporation's deferred tax assets and liabilities at
December 31 are as follows:
(In thousands) 1994 1993
-------- --------
Deferred tax assets:
Environmental clean-up $ 7,323 $ 8,688
Postretirement/employment benefits 3,912 3,632
Inventories 2,032 1,665
Facility closing costs 1,081 1,290
Legal matters 1,147 1,190
Net capital losses and tax carryforward 5,460 5,861
Other 4,158 4,460
-------- --------
Total deferred tax assets 25,113 26,786
-------- --------
Deferred tax liabilities:
Pension 9,830 8,414
Depreciation 6,600 7,733
Contracts in progress 1,030
Other 1,465 1,220
-------- --------
Total deferred tax liabilities 17,895 18,397
-------- --------
Deferred tax asset valuation allowance (5,460) (5,861)
-------- --------
Net deferred tax assets $(1,758) $(2,528)
======== ========
Deferred tax assets and liabilities are reflected on the Corporation's
consolidated balance sheets as follows:
(In thousands) 1994 1993
-------- --------
Current deferred tax assets $(8,204) $(8,882)
Non-current deferred tax liabilities 6,446 6,354
-------- --------
Net deferred tax assets $(1,758) $(2,528)
======== ========
Income tax payments of $7,586,000 were made in 1994, $10,491,000 in 1993,
and $18,100,000 in 1992.
At December 31, 1994, the balance of undistributed earnings of foreign
subsidiaries was $538,000. It is presumed that ultimately these earnings will
be distributed to the Corporation. The tax effect of this presumption was
determined by assuming that these earnings were remitted to the Corporation in
the current period and that the Corporation received the benefit of all
available tax planning alternatives and available tax credits and deductions.
Under these two assumptions, no Federal income tax provision was required.
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240
8. LONG-TERM DEBT.
==================
Long-term debt at December 31 consists of the following:
(In thousands) 1994 1993
------- -------
Industrial Revenue Bonds and
Notes -- principal and interest payments
due from 1995 to 2007. Weighted average
interest rate is 2.82% and 2.52% per annum
for 1994 and 1993, respectively $14,401 $14,550
Less, portion due within one year 5,354 124
------- -------
$ 9,047 $14,426
======= =======
Aggregate maturities of long-term debt are as follows:
(In thousands)
1995 $5,354
2000 and subsequent 9,047
Interest payments of approximately $294,000, $573,000 and $1,429,000 were
made in 1994, 1993 and 1992, respectively.
9. CREDIT AGREEMENTS.
=====================
The Corporation has two credit agreements in effect aggregating $45,000,000
with a group of four banks. The Revolving Credit Agreement commits a maximum
of $22,500,000 to the Corporation for cash borrowings and letters of credit.
The unused credit available under this facility at December 31, 1994 was
$3,646,000. The commitments made under the Revolving Credit Agreement expire
in October 1997, but may be extended annually for successive one year periods
with the consent of the bank group. The Corporation also has in effect a Short
Term Credit Agreement which allows for cash borrowings of $22,500,000, all of
which was available at December 31, 1994. The Short Term Credit Agreement
expires October 29, 1995. At expiration the Short Term Credit Agreement may be
extended, with the consent of the bank group, for an additional period not to
exceed 300 days. No cash borrowings were outstanding at December 31, 1994 or
December 31, 1993. The Corporation is required under these Agreements to
maintain certain financial ratios, and meet certain net worth and indebtedness
tests for which the Corporation is in compliance. Under the provisions of the
Agreements, retained earnings of $26,024,000 were available for cash dividends
and stock acquisitions at December 31, 1994.
At December 31, 1994 substantially all of the industrial revenue bond
issues are collateralized by real estate, machinery and equipment. Certain of
these issues are supported by letters of credit which total approximately
$13,400,000. The Corporation has various other letters of credit outside the
Revolving Credit Agreement totaling approximately $614,000.
- 27 -
241
10. LEGAL MATTERS.
==================
In early 1994 Curtiss-Wright's wholly-owned subsidiary, Target Rock
Corporation, effectuated a settlement of $17,500,000 in connection with a 1990
law suit initiated by the U.S. Government in the U.S. District Court for the
Eastern District of New York. The suit asserted claims totaling approximately
$114,000,000 under the False Claims Act and at common law in connection with
embezzlements from Target Rock by certain former employees and alleged mis-
charging of labor hours to Government subcontracts by those former employees.
The settlement amount to the Government was offset by $8,035,000 of Target
Rock receivables, the payment of which had been withheld by a customer at the
direction of the Government, and by a small credit previously applied. The
cash portion of the settlement amounted to $8,880,000 and was included in
"other current liabilities" at December 31, 1993. (See Note 6.) The settle-
ment, net of insurance proceeds previously received under policy, the small
credit and applicable tax benefits, reduced consolidated net earnings for the
fourth quarter and the full year of 1993 by $8,600,000 of $1.70 per share.
11. CONTINGENCIES.
==================
The Corporation is involved in various litigations, claims and adminis-
trative proceedings, including the matter discussed below, arising in the
normal course of business. Based on the advice of counsel, management believes
that recovery or liability with respect to these matters would not have a
material effect on the financial condition or the results of operations of the
Corporation for any year.
The Corporation is defending a class action instituted in the United States
District Court for the District of New Jersey by the International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America and
its Locals 300 and 699 (collectively the "Union"), and five former employees of
the Corporation. The Union alleges that the Corporation's termination of
medical benefits to retirees of the Wood-Ridge facility constituted a breach of
its collective bargaining agreement. The individual plaintiffs, representing
union employees as a class, allege that the termination of their benefits was
contrary to the terms of the plan and in breach of alleged written and oral
promises to provide them with benefits for life. The Corporation denies the
substantive allegations of the plaintiffs' claims. The case was tried without a
jury during the summer of 1994, but the trial judge has not yet announced a
decision.
12. CAPITAL STOCK AND STOCK OPTIONS.
====================================
The Corporation has authorized 650,000 shares of $1 par value preferred
stock (none issued), and 12,500,000 shares of $1 par value common stock.
Stock Option Plan: Under the 1985 Stock Option Plan as amended November 16,
1993, there are 175,000 shares of common stock reserved in treasury, until
February 13, 1995, for issuance to key employees. The Corporation granted
non-qualified stock options, to certain key employees, in 1994 and 1993, to
purchase shares of common stock totaling 51,625 and 43,400, respectively, at
prices of $36.00 and $32.44 per share, respectively, the market prices on the
dates of the grants. The options expire ten years after the date of grant, and
are exercisable as follows:
Up to one-third of the grant after one full year, up to two-thirds of the
grant after two full years and in full three years from the date of grant. As
of December 31, 1994, all stock options remained outstanding.
- 28 -
242
Restricted Stock Purchase Plan: Under a Restricted Stock Purchase Plan
approved by the stockholders in 1989, 400,000 shares of common stock were
reserved for sale until December 31, 1998 to selected key employees. No options
were granted under this Plan in 1994, 1993 or 1992. The Corporation
repurchased 450 shares of outstanding restricted stock in 1992. At December 31,
1994, 331,835 shares of common stock are available under this Plan.
13. ENVIRONMENTAL COSTS.
========================
The Corporation has other non-current liabilities consisting primarily of
environmental obligations which totaled $15,550,000 at December 31, 1994 and
$18,045,000 at December 31, 1993.
The Corporation recognized expenses of $499,000, $4,472,000 and $1,813,000
in 1994, 1993 and 1992, respectively. Inclusive in these amounts recognized
are provisions for future remedial costs and costs for engineering, evaluation
and consulting.
During 1994 the Corporation paid $2,262,000 for remediation for the
Corporation's Wood-Ridge, New Jersey property where in 1990 a provision of
$21,000,000 was established. Some progress has been made in the remediation of
this site, although most effort to date has been directed at determinating the
nature and extent of contamination and in identifying suitable remediation
methods. However, the New Jersey Department of Environmental Protection and
Energy (NJDEPE) has conditionally approved soil and water remediation plans
submitted by the Corporation, so that large scale remediation efforts will now
begin.
Remediation efforts at other Corporation owned sites totaled $861,000 in
1994, all charged to reserves previously established.
The Corporation and other members of a group of potentially responsible
parties ("PRP's") associated with Caldwell Trucking Company Superfund Site each
paid $1,100,000 in 1994 for past EPA costs and to begin soil remediation on the
Fairfield, New Jersey site. This PRP Group is operating under an EPA Consent
Decree and two EPA Administrative Orders that obligated them to reimburse
certain past costs, to remediate the site, and to conduct some additional
groundwater and natural resources study and remediation.
The Corporation is one of a number of defendants in environmental suits by
both the State of New Jersey and the Federal government relating to the Sharkey
Landfill Superfund site in Parsippany, New Jersey. Remediation of the site is
in progress pursuant to a Consent Order entered in settlement of both suits,
and the various defendants and other responsible parties have gone through an
allocation process in which each party's share in the potential liability has
been fixed. Although the two law suits have been settled as they relate to the
liability of the primarily responsible parties, they remain open as against a
number of additional parties from whom contribution is being sought.
Other potentially significant environmental matters in which the Corpor-
ation is involved are the Chemsol, Inc. Superfund site, Piscataway, New Jersey
and the Pfohl Brothers Landfill site, Cheektowaga, New York. Little progress
has been made in 1994 regarding these sites and determination of the level of
the Corporation's involvement or possible change in estimated liability.
The Corporation establishes a reserve for a potential environmental
responsibility when it concludes that a determination of legal liability is
probable, and then in an amount (if such an amount can be determined) that
reflects the Corporation's estimate of the amount of that liability. If only a
range of potential liability amounts can be estimated, the reserve will be
set at the low end of such range. Subject to these limitations, reserve totals
- 29 -
243
reflect the anticipated gross cost to the Corporation. It is believed the
outcome of any of these matters would not have a material adverse effect on the
Corporation's results of operations or financial condition. These reserves
represent today's values of anticipated remediation not recognizing any
recovery from third party legal actions, and are not discounted as permitted
under certain conditions.
14. RESTRUCTURING CHARGES.
==========================
The Corporation recorded restructuring charges of $3,626,000 in 1993 for
the closing of its composites facility in Texas, consolidation of two east
coast shot-peening facilities and to provide for the expected sale of its
Buffalo Extrusion Facility. Reserves of $744,000 remain at December 31, 1994
primarily for anticipated carrying costs during the sale process of company
owned properties. However, the timing of completion for these sale processes
cannot accurately be determined. The following table sets forth the components
of the 1993 restructuring charge and the related reserves at December 31, 1993
and 1994, respectively:
CASH NON-CASH
(In thousands) 1993 CHARGES CHARGES 1994
------- ------- ------- -------
Write-down of fixed assets to net
realizable value $2,666 $ 82 $(2,748)
Loss on operations through disposal
date 386 (270) $116
Facility closure costs 245 (9) 392 628
Write-down of inventory 159 (159)
Severance 170 (20) (150)
------- ------- ------- -------
Total $3,626 $(217) $ (2,665) $ 744
======= ======= ======== =======
15. RESEARCH AND DEVELOPMENT COSTS.
===================================
Research and development expenditures of the Corporation amounted to
approximately $1,196,000, $1,420,000 and $1,626,000 in 1994, 1993 and 1992,
respectively. These expenditures were for Corporation-sponsored activities,
and were included in product and engineering costs.
16. POSTEMPLOYMENT BENEFITS.
============================
Effective January 1, 1994, Curtiss-Wright adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (SFAS No. 112). This statement requires that provision be made for
benefits applicable to former or inactive employees, after employment but
before retirement. These benefits primarily include severance benefits and
disability-related items. Under the new accounting rules, the Corporation
recorded a projected obligation for these benefits of $375,000. This obligation
resulted in an after-tax charge to earnings for the first quarter of 1994 of
$244,000 or $.05 per share.
- 30 -
244
17. POSTRETIREMENT BENEFITS.
============================
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" (SFAS No. 106), which changed the Corporation's
method of accounting for retiree health care.
The new standard requires benefits to be accrued over the employee's service
period until the employee becomes fully eligible to receive benefits, assuming
that the Corporation will continue these benefits indefinitely.
The Corporation provides postretirement benefits, consisting only of
health-care benefits, covering the majority of its employees. However, the
benefits are not vested and as such are subject to modification or termination
in whole or in part. The Corporation does not prefund its postretirement
health-care benefits and expects to continue to fund these benefits on a pay-
as-you-go basis. Previously, these benefits were expensed when cash payments
were made. The actual payments made to provide certain non-vested health-care
benefits for specific groups of retired employees totaled $491,000, $358,000
and $450,000 in 1994, 1993 and 1992, respectively.
The adoption of SFAS No. 106 resulted in recognition of the full
transition obligation of $9,750,000 for 1993. Net expenses for the retiree
health-benefit plans for the years ended December 31, 1994 and 1993 included
the following components:
(In thousands) 1994 1993
---- ----
Service cost -benefits attributed to service
during the period $328 $282
Interest cost on accumulated post-retirement
benefit obligation 589 702
---- ----
Net periodic postretirement-benefit cost $917 $984
==== ====
The following table sets forth the actuarial present values of benefit
obligations and funded status at December 31, 1994 and December 31, 1993, for
the Corporation's domestic plans:
(In thousands) 1994 1993
------- -------
Actuarial present value of benefit obligations:
Retired employees $ 5,357 $ 6,929
Active employees -- fully eligible 886 1,253
Other active $328 $282
Interest cost on accumulated post-retirement
benefit obligation 589 702
---- ----
Net periodic postretirement-benefit cost $917 $984
==== ====
The following table sets forth the actuarial present values of benefit
obligations and funded status at December 31, 1994 and December 31, 1993, for
the Corporation's domestic plans:
(In thousands) 1994 1993
------- -------
Actuarial present value of benefit obligations:
Retired employees $ 5,357 $ 6,929
Active employees -- fully eligible 886 1,253
Other active employees 2,134 1,863
------- -------
Accumulated postretirement-benefit obligation 8,377 10,045
Unrecognized net gain from past experience
different from that assumed and from
changes in assumptions 2,425 331
------- -------
Accrued postretirement-benefit cost $10,802 $10,376
======= =======
The weighted average discount and health-care cost trend rates used in
determining the accumulated postretirement-benefit obligation and periodic
postretirement-benefit cost are as follows:
- 31 -
245
1994 1993
------- -------
Weighted average discount rate 8.00 % 6.50 %
Assumed health care cost trend rates:
Current 10.22% 10.61%
Ultimate 5.50% 5.50%
Years to ultimate 13 14
The effect of a 1% increase in health-care cost trends would result in an
increase to the accumulated postretirement-benefit obligation as of
December 31, 1994 of $806,000 and an increase in the net periodic post-
retirement-benefit cost for the year then ended of $126,000.
18. PENSION AND RETIREMENT PLANS.
=================================
Effective September 1, 1994, the Corporation amended its retirement plan,
merging the retirement plans of two subsidiaries into the new Curtiss-Wright
Corporation Retirement Plan. The new plan continues to cover substantially all
employees while offering improved benefits for most employees, and reducing the
administrative costs associated with multiple plans. The amended plan remains a
defined-benefit plan, eliminates all employee contributions and provides future
service benefits calculated using the five highest consecutive years'
compensation during the last ten years of service and a "cash balance" benefit.
In addition, all participants of the former contributory plans will
receive an accrued benefit based upon service as of August 31, 1994, adjusted
to reflect future compensation growth. Employees are eligible to participate
in this plan after one year of service and are vested in the defined-benefit
portion after five years of service. Vesting in the "cash balance" portion
occurs at 20% per year, reaching 100% vesting at five years of service.
Prior to September 1, 1994, the Corporation and its U.S. subsidiaries had
contributory defined-benefit pension and retirement plans covering
substantially all employees. The contributory plans' benefits were generally
based on length of service and on the highest five consecutive years'
compensation during the last ten years of service while benefit payments for
employees covered under non-contributory provisions of the plans were based
on fixed amounts for each year of service. Employees had been eligible to
participate in these plans at the time of employment and were vested after five
years of service. Employees of foreign operations continue to participate in
various local plans.
The Corporation's funding policy is to provide contributions within the
limits of deductibility under current tax regulations, thereby accumulating
funds adequate to provide for all accrued benefits. At December 31, 1994, the
amended retirement plan is overfunded so that plan assets exceed accumulated
benefit obligations. All domestic plans were also overfunded at December 31,
1993.
The Corporation had pension credits in 1994, 1993 and 1992 of $4,016,000,
$3,029,000 and $3,738,000, respectively, for domestic plans and had foreign
pension costs in 1994, 1993 and 1992 under defined contribution retirement
plans of $188,000, $170,000 and $181,000, respectively. The funded status of
the Corporation's domestic plans at December 31 are set forth in the following
table:
- 32 -
246
(In thousands) 1994 1993
-------- --------
Actuarial present value of benefit obligations:
Vested $104,349 $120,718
Nonvested 1,485 1,662
-------- --------
Accumulated benefit obligation 105,834 122,380
Impact of future salary increases 1,550 2,194
-------- --------
Projected benefit obligation 107,384 124,574
Plan assets at fair value 169,597 187,462
-------- --------
Plan assets in excess of projected benefit obligation 62,213 62,888
Unrecognized net gain (22,693) (26,501)
Unrecognized prior service cost (220) 40
Unrecognized net transition asset (11,208) (12,365)
-------- --------
Prepaid pension cost $ 28,092 $ 24,062
======== ========
At December 31, 1994, approximately 44% of the plans' assets are invested
in debt securities, including a small portion in U.S. Government issues. Other
plan assets are invested in equity securities comprising approximately 53% with
the remainder of the assets in cash equivalents.
Included in earnings is net pension income for 1994, 1993 and 1992
comprised of the following:
(In thousands) 1994 1993 1992
-------- -------- --------
Service costs -- benefits earned
during the period $2,623 $ 1,445 $ 1,122
Interest cost on projected benefit
obligations 7,706 7,910 7,452
Actual return on plan assets 3,301 (17,762) (8,511)
Net amortization and deferral (17,646) 5,378 (3,801)
-------- ------- --------
Net pension income $(4,016) $(3,029) $(3,738)
======== ======== ========
The major assumptions used in accounting for the Corporation's defined-
benefit pension and retirement plans at December 31 are as follows:
1994 1993 1992
----- ----- -----
Discount rate 8.0% 6.5% 6.5%
Rate of increase in future compensation levels 4.5% 4.5% 4.5%
Expected long-term rate of return on plan assets 8.0% 7.0% 7.0%
Net pension income is determined using the assumptions as of the beginning
of the year. The funded status is determined using the assumptions as of the
end of the year.
- 33 -
247
19. LEASES.
===========
Buildings and Improvements Leased to Others: The Corporation leases certain
of its buildings and related improvements to outside parties under non-
cancellable operating leases. Cost and accumulated depreciation of the leased
buildings and improvements at December 31, 1994, were $50,629,000 and
$42,713,000, respectively, and at December 31, 1993, were $49,576,000 and
$41,734,000, respectively.
Facilities Leased from Others: The Corporation conducts a portion of its
operations from leased facilities, which include manufacturing plants,
administrative offices and warehouses. In addition, the Corporation leases
automobiles and office equipment under operating leases. Rental expenses for
all operating leases amounted to approximately $1,840,000 in 1994, $1,815,000
in 1993 and $2,102,000 in 1992.
At December 31, 1994, the approximate future minimum rental income and
commitment under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year are as follows:
RENTAL RENTAL
(In thousands) INCOME COMMITMENT
------- ----------
1995 $ 4,418 $1,386
1996 3,560 1,193
1997 2,746 1,002
1998 1,769 792
1999 1,180 472
2000 and beyond 10,885 984
-------- -------
$24,558 $5,829
======== =======
20. INDUSTRY SEGMENTS.
======================
The Corporation operates principally in three industry segments as
described on pages 9 through 13.
Consolidated Industry Segment Information:
(In millions) 1994 1993 1992
------- ------- -------
SALES AND OTHER REVENUES:
Aerospace $ 83.5 $ 96.9 $111.9
Industrial 45.8 37.2 37.5
Flow Control and Marine 25.7 24.7 30.3
------ ------ ------
Total sales 155.0 158.8 179.7
Rental revenues 8.7 8.3 8.0
Other revenues 2.5 3.2 5.4
------ ------ ------
Total sales and other revenues $166.2 $170.3 $193.1
====== ====== ======
- 34 -
248
PRE-TAX EARNINGS FROM OPERATIONS: 1994 1993 1992
------ ------ ------
Aerospace $ 15.8 $ 15.4 $ 23.0
Industrial 7.2 2.6 5.1
Flow Control and Marine 3.5 2.0 3.6
------ ------ ------
Total segments 26.5 20.0 31.7
Provision for legal settlement (13.9)
Net pension income 4.0 3.0 3.7
Rental earnings 2.9 2.8 1.7
Other earnings 1.6 3.1 6.6
Other expenses (5.8) (13.2) (9.7)
Interest expense (.4) (.5) (1.3)
------ ------ ------
Total pre-tax earnings $ 28.8 $ 1.3 $ 32.7
====== ====== ======
IDENTIFIABLE ASSETS:
Aerospace $ 59.5 $ 63.8 $ 74.9
Industrial 33.0 31.1 30.8
Flow Control and Marine 22.0 25.1 30.7
------ ------ ------
Total segments 114.5 120.0 136.4
Cash and short-term investments 76.4 75.2 67.5
Other general and corporate 47.8 41.7 35.0
------ ------ ------
Total assets at December 31 $238.7 $236.9 $238.9
====== ====== ======
CAPITAL EXPENDITURES:
Aerospace $ 2.4 $ 2.6 $ 3.2
Industrial .7 .6 1.4
Flow Control and Marine .5 .8 1.2
------ ------ ------
Total segments 3.6 4.0 5.8
General and corporate 1.0 .9 1.0
------ ------ ------
Total capital expenditures $ 4.6 $ 4.9 $ 6.8
====== ====== ======
DEPRECIATION:
Aerospace $ 5.6 $ 6.3 $ 6.5
Industrial 2.9 2.6 2.4
Flow Control and Marine 1.4 1.5 1.8
------ ------ ------
Total segments 9.9 10.4 10.7
General and corporate 1.0 1.0 1.2
------ ------ ------
Total depreciation $ 10.9 $ 11.4 $ 11.9
====== ====== ======
Flow Control and Marine sales included one customer that accounted for
10%, 10% and 8% of total sales in 1994, 1993 and 1992, respectively. Aerospace
sales did not include any customers which exceeded 10% of total sales in 1994.
However, there was one customer that accounted for 11% and 12% of total sales
in 1993 and 1992, respectively. Industrial sales did not include any customer
exceeding 10% of total sales in those respective periods.
- 35 -
249
Revenues from major product lines consist of:
1994 1993 1992
----- ----- -----
Actuation & control systems & components 32 % 37 % 36 %
Shot-peening and peen-forming 30 27 28
Valves 15 14 13
All others 23 22 23
---- ---- ----
100 % 100 % 100 %
==== ==== ====
Direct sales to the U.S. Government and sales for U.S. and Foreign
government end use accounted for 31%, 34% and 36% of total sales in 1994, 1993
and 1992, respectively, and were included in all segments as follows:
(In thousands) 1994 1993 1992
------- ------- -------
Aerospace $27,200 $35,500 $41,700
Flow Control and Marine 16,800 16,900 20,600
Industrial 3,700 2,000 3,300
------- ------- -------
Total military sales $47,700 $54,400 $65,600
======= ======= =======
Geographic revenues and earnings are as follows:
(In thousands) 1994 1993 1992
-------- -------- --------
Revenues:
United States $144,140 $148,422 $164,917
Europe 18,486 18,004 22,731
Canada 3,563 3,838 5,440
-------- -------- --------
Total $166,189 $170,264 $193,088
======== ======== ========
Pre-tax earnings (loss):
United States $ 24,009 $ (1,639) $ 28,246
Europe 4,273 2,260 3,683
Canada 475 709 788
-------- -------- --------
Total $ 28,757 $ 1,330 $ 32,717
======== ======== ========
Geographic assets outside the United States were less than 10% of total
assets in each period reported.
Export sales were less than 10% of total sales in each period reported.
Intersegment sales, the amount of which are insignificant, are accounted
for on substantially the same basis as sales to unaffiliated customers and have
been eliminated.
Identifiable assets by segments are those assets that are used in the
Corporation's operations included in that segment.
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250
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
-------------------------------------------
(In thousands except per share data) First Second Third Fourth
1994 QUARTERS:
Sales $ 38,538 $ 37,489 $ 38,792 $ 40,182
Other revenues 3,123 2,937 3,109 2,019
Gross profit 12,446 13,191 11,675 13,122
Earnings before cumulative effect of changes in accounting principles $ 4,305 $ 5,325 $ 4,167 $ 5,750
Cumulative effect of changes in accounting principles (244)
-------- -------- -------- --------
Net earnings $ 4,061 $ 5,325 $ 4,167 $ 5,750
======== ======== ======== ========
Earnings per share:
Earnings before cumulative effect of changes in accounting principles $ .85 $ 1.05 $ .82 $ 1.14
Cumulative effect of changes in accounting principles (.05)
-------- -------- -------- --------
Net earnings per common share $ .80 $ 1.05 $ .82 $ 1.14
======== ======== ======== ========
1993 QUARTERS:
Sales $ 40,727 $ 40,909 $ 36,296 $ 40,932
Other revenues 3,256 2,699 2,508 2,937
Gross profit 12,251 14,123 10,850 12,286
Earnings (loss) before cumulative effect of changes in accounting principles $ 3,807 $ 4,333 $ 2,672 $(13,764)
Cumulative effect of changes in accounting principles (2,671)
-------- -------- -------- --------
Net earnings (loss) $ 1,136 $ 4,333 $ 2,672 $(13,764)
======== ======== ======== ========
Earnings per share:
Earnings (loss) before cumulative effect of changes in accounting principles $ .75 $ .86 $ .53 $ (2.72)
Cumulative effect of changes in accounting principles (.53)
-------- -------- -------- --------
Net earnings (loss) per common share $ .22 $ .86 $ .53 $ (2.72)
======== ======== ======== ========
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251
1994:
Net earnings in the first quarter of 1994 were reduced by $244,000 or $.05
per share for the cumulative effect of changes in Accounting for Postemployment
Benefits (See Note 16).
1993:
Earnings for the fourth quarter of 1993 were reduced by a provision for the
settlement of litigation against the Corporation's Target Rock subsidiary (see
Note 10). This settlement reduced net earnings for the fourth quarter by
$8,600,000, or $1.70 per share. The Corporation also established provisions in
the fourth quarter of 1993 for restructuring costs, which reduced net earnings
for the quarter by $2,357,000 or $.47 per share (see Note 14), and for
anticipated environmental costs (see Note 13), which reduced net earnings for
the quarter by $1,325,000 or $.26 per share.
Further reducing net earnings for the fourth quarter of 1993 was a change
in the estimated realization of deferred tax assets as recorded by the adoption
of SFAS No.109 (see Note 7). The estimated valuation allowance against future
capital gains income, considered unlikely to be realized, reduced fourth
quarter net earnings by $3,586,000 or $.71 per share. This valuation allowance
reduced the impact of tax benefits recognized in the first quarter of 1993,
as described below, thereby resulting in a net tax benefit for the full year
1993 of $178,000 or $.04 per share.
Net earnings in the first quarter of 1993 were reduced by $2,671,000 or
$.53 per share for the net cumulative effect of changes in two accounting
principles. The adoption of new accounting rules for postretirement benefit
costs resulted in a charge of $9,750,000 (see Note 17), which reduced net
earnings by $6,435,000 or $1.27 per share. This charge was partially offset
by a nonrecurring benefit from new accounting rules for deferred income taxes
(see Note 7), which added $3,764,000 or $.74 per share to net earnings for the
period.
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CONSOLIDATED SELECTED FINANCIAL DATA
====================================
(In thousands except per share data) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------------
Sales $155,001 $158,864 $179,737 $191,250 $198,884
Other revenues 11,188 11,400 13,351 11,830 13,969
Earnings (loss) before changes in accounting
principles 19,547 (2,952)(A) 21,687 21,253 6,884(C)
Net earnings (loss) 19,303 (5,623)(B) 21,687 21,253 6,884
Total assets 238,694 236,947 238,898 233,226 229,726
Long-term debt 9,047 14,426 16,266 22,261 27,301
Per common share:
Earnings (loss) before changes in accounting
principles 3.86 (.58) 4.29 4.21 1.37
Net earnings (loss) 3.81 (1.11) 4.29 4.21 1.37
Cash dividends 1.00 1.00 1.00 1.00 31.30(D)
------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements for additional financial information.
(A) Includes after-tax charges for: a litigation settlement of $8,600,000, environmental remediation costs of $2,462,000,
restructuring charges of $2,357,000 and a deferred tax asset valuation allowance under SFAS No. 109 of $3,586,000.
(B) Includes an after-tax charge of $6,435,000 from the cumulative effect of a change in accounting principles for the
adoption of SFAS No.106 "Employers' Accounting for Postretirement Benefits" and an after-tax benefit of $3,764,000 from the
adoption of SFAS No.109 "Accounting for Income Taxes."
(C) Includes the after tax charge of $13,860,000 from a provision for an environmental clean-up program.
(D) Reflects a special cash dividend of $30.00 per common share paid in 1990.
Common Stock:
Common Stock Price Range
------------------------------------------------------------
1994 1993 Dividends
------------------------- -------------------------- --------------------
High Low High Low 1994 1993
------------------------------------------------------------------------------------------------------------------------------
First Quarter $37.000 $33.675 $40.250 $31.125 $.25 $.25
Second Quarter 35.750 33.125 38.625 35.250 .25 .25
Third Quarter 36.375 32.875 32.625 31.875 .25 .25
Fourth Quarter 37.250 34.625 36.000 31.500 .25 .25
------------------------------------------------------------------------------------------------------------------------------
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251
CORPORATE DIRECTORY
===================
DIRECTORS
---------
[S] [C]
Thomas R. Berner Partner, Law firm of Berner & Berner, P.C.
S. D. Brinsfield Chairman of the Board
John S. Bull Former Director, Moran Towing & Transportation Co.,
Inc.; Marine transportation company
David Lasky President
Dr. William W. Sihler Ronald E. Trzcinski Professor of Business Administra-
tion, Darden Graduate School of Business Administration,
University of Virginia
J. McLain Stewart Director, McKinsey & Co.; Management consultants.
OFFICERS
--------
David Lasky President
Robert E. Mutch Executive Vice President
Gerald Nachman Executive Vice President
Robert A. Bosi Vice President -- Finance
George J. Yohrling Vice President
Dana M. Taylor General Counsel and Secretary
Kenneth P. Slezak Controller
Gary J. Benschip Treasurer
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252
CORPORATE INFORMATION
=====================
CORPORATE HEADQUARTERS:
-----------------------
1200 Wall Street West
Lyndhurst, New Jersey 07071-0635
Tel. (201) 896-8400
Fax (201) 438-5680
ANNUAL MEETING:
---------------
The 1995 Annual Meeting of Shareholders will be held on May 5, 1995 at 2:00
p.m. at the Novotel Meadowlands Hotel, One Polito Avenue, Lyndhurst, New Jersey
07071.
STOCK EXCHANGE LISTING:
-----------------------
The Corporation's common stock is listed and traded on the New York Stock
Exchange. The stock transfer symbol is CW.
COMMON STOCKHOLDERS:
--------------------
As of December 31, 1994, the approximate number of holders of record of common
stock, par value $1.00 per share, of the Corporation was 6,400.
STOCK TRANSFER AGENT AND REGISTRAR:
-----------------------------------
For services such as changes of address, replacement of lost certificates or
dividend checks, and changes in registered ownership, or for inquiries as to
account status, write to:
Chemical Bank
JAF Building
P.O. Box 3068
New York, New York 10116-3068
Please include your name, address, and telephone number with all
correspondence. Telephone inquiries may be made to (800) 851-9677.
INVESTOR INFORMATION:
---------------------
Investors, stockbrokers, security analysts, and others seeking information
about Curtiss-Wright Corporation, should contact Robert A. Bosi, Vice President
-- Finance, or Gary Benschip, Treasurer, at the Corporate Headquarters,
telephone (201) 896-1751.
FINANCIAL REPORTS:
------------------
This Annual Report includes most of the periodic financial information required
to be on file with the Securities and Exchange Commission. The company also
files an Annual Report on Form 10-K, a copy of which may be obtained free of
charge. These reports, as well as additional financial documents such as
quarterly shareholder reports, proxy statements, and quarterly reports on Form
10-Q, may be received by written request to Gary J. Benschip, Treasurer, at the
Corporate Headquarters.
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253
BUFFALO EXTRUSION FACILITY Donald H. Osborn, General Manager
60 Grider Street
Buffalo, New York 14215-4095
CURTISS-WRIGHT FLIGHT SYSTEMS, INC. Robert E. Mutch, President
300 Fairfield Road
Fairfield, New Jersey 07004-1962
CURTISS-WRIGHT FLIGHT SYSTEMS/SHELBY, INC. George J. Yohrling, Senior Vice
201 Old Boiling Springs Road President & General Manager
Shelby, North Carolina 28152-8008
METAL IMPROVEMENT COMPANY, INC. Gerald Nachman, President
10 Forest Avenue
Paramus, New Jersey 07652-5214
TARGET ROCK CORPORATION Martin R. Benante, Vice President
1966 East Broadhollow Road & General Manager
East Farmingdale, New York 11735-1768
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254
CORPORATE HEADQUARTERS:
1200 Wall Street West
Lyndhurst, New Jersey 07071-0635
Tel. (201) 896-8400
Fax (201) 438-5680
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