Cover of Annual Report
Curtiss-Wright Corporation 1995 Annual Report
/Graphic of partial globe/
I n v e s t i n g
Today
for
T o m o r r o w ' s
Growth
Inside Cover
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 & Marine and Industrial markets. The Company employs approximately
1,500 people with its principal operations including three domestic
manufacturing facilities, thirty-two Metal Improvement service facilities
located in North America and Europe, and an overhaul facility in Denmark.
Contents
Industry Issues / p.1
Financial Highlights / p.2
Letter to Shareholders / p.3
Foundations of Growth / p.8
The Curtiss-Wright Vision / p.10
Management's Discussion and Analysis of
Financial Condition and Results of Operations / p.13
Report of the Corporation / p.17
Report of Independent Accountants / p.17
Consolidated Financial Statements / p.18
Notes to Consolidated Financial Statements / p.22
Quarterly Results of Operations (Unaudited) / p.32
Consolidated Selected Financial Data / p.32
Corporate Information / p.33
Corporate Directory / p.34
1
INDUSTRY
THE CURTISS-WRIGHT ROLE IN A CHANGING INDUSTRY
ISSUES
Change continues to accelerate in every sector of the global economy.
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In aerospace and defense-related industries, change has been driven by the
uncertainty of future military procurements and reduced production levels at
commercial airframe assemblers. Curtiss-Wright's strategies for successful
future growth identify and respond to the industries' critical change drivers:
Industry Concentration. Defense and aerospace companies are fewer and larger
than ever before; reduced production levels and the need for greater
cost-effectiveness have produced a wave of mergers and acquisitions in the
industry. In addition, by acquiring backlog, companies insure their production
base over the near term while building their participation across a broader
range of programs.
Globalization. The customer base for commercial aircraft has grown increasingly
international, with foreign carriers expected to represent approximately
two-thirds of all deliveries between now and the end of the century. To better
serve all their customers, aerospace companies--like those in other
industries--are broadening their geographical base and developing production
facilities in countries where there was only limited participation until now.
The result: better customer service, reduced costs, and improved management of
currency rate fluctuations.
Recognizing and responding to the forces of change is one of the principal
challenges facing Curtiss-Wright--but not a new one. Founded in a technology
that helped revolutionize modern life, Curtiss-Wright has maintained a position
of stability and longevity in a fast-moving field. Its continued success is
based on its ability to meet changing needs with unchanging quality.
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CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Dollar's in thousands except per share data)
1995 1994 1993
PERFORMANCE:
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Sales and other revenues $167,551 $166,189 $170,264
Earnings before interest, taxes,
depreciation and amortization 37,553 40,041 13,343
Net earnings (loss) before accounting changes 18,169 19,547 (2,952)
Net earnings (loss) 18,169 19,303 (5,623)
Net earnings (loss) per share
before accounting changes 3.59 3.86 ( .58)
Net earnings (loss) per common share 3.59 3.81 (1.11)
Return on sales 11.8% 12.5% (3.5)%
Return on assets 7.4% 8.1% (2.4)%
Return on average stockholders' equity 11.0% 12.7% (2.0)%
Research and development costs
(Corporation and customer sponsored) 18,542 10,255 5,100
New orders 150,870 122,367 155,990
Backlog at year-end 103,566 116,554 149,188
YEAR-END FINANCIAL POSITION:
- - ----------------------------
Working capital $120,571 $108,329 $ 92,712
Current ratio 4.6 to 1 4.0 to 1 3.1 to 1
Total assets $246,201 $238,694 $236,947
Stockholders' equity $172,179 $158,769 $144,231
Stockholders' equity per common share $ 33.91 $ 31.37 $ 28.50
OTHER YEAR-END DATA:
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Depreciation $ 9,512 $ 10,883 $ 11,483
Capital expenditures $ 6,985 $ 4,609 $ 4,914
Shares of common stock outstanding 5,077,823 5,060,743 5,060,743
Number of stockholders 5,944 6,409 6,881
Number of employees 1,482 1,496 1,557
DIVIDENDS PER COMMON SHARE $1.00 $1.00 $1.00
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Letter to Shareholders
Fellow Shareholders:
IN SUMMARY
Overall, 1995 was a good year for Curtiss-Wright. Earnings continued to be
strong, although not quite at the 1994 level. These earnings were achieved
despite major challenges and a mixed performance in the aerospace area. Our
industrial markets showed considerable strength and there were indications that
the commercial aerospace market may be emerging from its depressed state. To
take advantage of these and other opportunities, we have been making
significant investments for both our immediate and longer-term future.
Sales in 1995 of $154.4 million were about the same as last year's level of
$155.0 million. Net earnings of $18.2 million, or $3.59 per share, declined 6%
from $19.3 million or $3.81 per share in 1994. Our 1995 returns on sales and
assets, at 11.8% and 7.4%, respectively, were quite respectable. Despite our
capital structure we achieved a return on equity of 11.0%. Profit performance
was adversely affected in 1995 by design and development program costs which
were not reimbursable from our customers. Curtiss-Wright made these investments
knowing the potential significance of these programs to the future of the
Company.
MOVING FORWARD
The defense industry has gone through a period of mergers, acquisitions and
company "resizings" to match capacity to demand. In the aerospace market, lower
defense spending has made the commercial sector even more competitive as
suppliers seek to expand their participation in this segment.
Curtiss-Wright has been addressing these changes, shaping today what it will be
tomorrow. Some benefits from these activities already have been realized.
Curtiss-Wright, with new contract awards in 1995 from The Boeing Company, is
assuming a major supplier role on Boeing's existing and new aircraft.
Curtiss-Wright has been awarded contracts to supply the trailing edge flap
transmissions for the Boeing 757 commercial transport and the trailing edge
flap rotary actuators for the 767 airliners. We are pleased to report that we
shipped our first 767 units in December, ahead of schedule. In addition, we
have been selected by Boeing to furnish the trailing edge flap transmissions
for the new, redesigned 737 family of aircraft. These production contracts run
through the year 2002 and will result in Curtiss-Wright being a provider to
Boeing of products for the entire family of Boeing commercial aircraft
currently in production. These new business successes are attributable to the
recognition of our Flight Systems Group as a quality provider able to deliver
products to its customers at competitive prices.
The Flight Systems Group also has successfully developed a commercial aircraft
overhaul business to the point where it is an important element of our
aerospace activities. We are continuing to build this business by adding new
services and expanding geographically.
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We have been taking advantage of the growing trend on the part of airlines and
other aircraft operators to "contract out" overhaul work formerly done by
themselves. The Flight Systems Group also has established a joint venture in
Denmark to service the European, Middle Eastern and African markets. It is
anticipated that this business also will be extended into Asia and the Pacific
Rim. By entering this aftermarket segment, we have increased the size of the
market in which we participate. We are now a more effective competitor for new
actuation and control components or systems because of the additional potential
of overhaul sales of such equipment.
Our Metal Improvement Company, Inc. ("MIC") subsidiary celebrates its 50th
anniversary in 1996. It is the largest and oldest technical shot-peening
company globally servicing the metalworking industry. MIC will be expanding on
its base of six facilities in Europe with additions planned for two new
shot-peening locations. Domestically, a new facility has been established in
Lynwood, California, and the Charlotte, North Carolina operation is relocating
to a larger building. Equipment additions for MIC's heat-treating operations in
Wichita, Kansas also will take place in 1996. To improve cost efficiencies and
turnaround time to the customer, new equipment is under development. We expect
that if the development program now in progress is successful, this equipment
ultimately will be utilized in all of MIC'S shot-peening facilities. MIC also
is looking forward to "growing" its "flapper valve" and heat-treating
businesses. MIC's valve facility in Bloomfield, Connecticut recently underwent
a major expansion.
Target Rock Corporation ("TRC") remains highly involved with the nuclear navy
and in the development of valves for our nation's new attack
submarine--Centurion. Target Rock has received contracts to design and build
valves for this program and received production contracts for the first boat.
TRC's customer base in the nuclear electrical utility industry is facing
increasing competitive pressures. In response to the needs of its customers,
TRC has addressed their maintenance concerns. Products have been specifically
designed to simplify maintenance procedures and allow for the quick replacement
of parts during refueling outages. This reduces non-revenue producing down time
for electrical generating plants.
The positioning of the Company for the future also involved the evaluation of
markets in which we had a presence but which we considered unattractive. Our
Buffalo Extrusion facility was an example of this and the divestiture of that
operation was completed in 1995. We had concluded that the resources and
management efforts associated with that relatively small business would be more
productively utilized if redeployed to other areas.
BUILDING ON CURRENT LEADERSHIP POSITIONS
Curtiss-Wright expects to continue to concentrate on the markets it currently
serves. We also will endeavor to generate growth through geographical expansion
and natural extension into related markets. We will seek opportunities for
additional applications of our technologies and expansion of product lines
through both internal development and acquisition to broaden our base in those
markets which we already serve.
The Company will continue to be active in the defense industry despite the
reductions in available business which have taken place. Curtiss-Wright
believes it has a strong position
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in this market and is aggressively pursuing
those opportunities to which it can apply its core competencies. A key to
success will be our ability to utilize the reputation Curtiss-Wright's business
units have developed in the areas of technology, quality and customer service
to capture additional business. We also will continue to press for continuing
cost reductions to enhance our competitive position.
The Company believes that it has positioned itself successfully on new military
aerospace programs which offer significant opportunities for future business.
This was accomplished by building on an established base in this market to
obtain awards of the required engineering and development work on actuation and
control equipment for the F-22, V-22 and F/A-18 E/F aircraft programs. This has
required investment in design and development activities to position the
Company for production in future years, beginning about the turn of the
century. Our effort in 1996 on these programs will be devoted primarily to
testing our equipment. Based upon current Pentagon projections, we anticipate
that with these programs attaining production status, Curtiss-Wright's
performance in the military sector would exceed that which it has experienced
in its recent past.
The Company plans to pursue both internal development and acquisitions. There
are a number of "natural extensions" which our business units can make in their
existing markets. MIC operates several heat-treating facilities and is
exploring an expansion of its participation in this area. This could be
accomplished through the establishment of new facilities in selected markets
and/or through the acquisition of existing businesses owned by others. The
Flight Systems Group seeks to expand its systems capabilities to enable it to
broaden its participation in the aerospace market. Target Rock Corporation is
following a similar strategy regarding its flow-control technology and in
expanding its commercial valve product line. Target Rock also plans to utilize
its long proven technology in the commercial nuclear power market by applying
similar leakless valve technology to the process industries. While no
acquisitions occurred in 1995, our activity level was increased and will
continue.
INVESTING FOR THE FUTURE
Curtiss-Wright's business units have made progress in positioning themselves
for the future. Investments have been made in the
/sketch of David Lasky - President /
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development, engineering and design of products and services that are expected
to improve the future profitability of the Company. In addition, plans are in
place for selective expansion of capacity. In 1996, the Flight Systems Group
will be expanding its plant in Shelby, North Carolina. The addition will
approximately double the size of the facility to 124,000 square feet. The
additional capacity is needed because of the new Boeing contract awards,
forecasted increases in the production levels of commercial aircraft, and the
successful growth of our overhaul services. MIC is establishing new shot-
peening locations as and where market demand justifies the investment.
Target Rock Corporation has invested in the design, testing and qualification
of flow-control valves for new nuclear plant construction taking place in
Korea. These products represent a platform for supplying new overseas plant
construction opportunities as they develop.
Curtiss-Wright will actively continue to seek out investment opportunities. We
believe that our current businesses have the potential for growth at attractive
returns. Most important, the Company's strong balance sheet will permit it to
take advantage of those opportunities as they are identified.
PROPERTY MANAGEMENT
Occupancy levels at our Wood-Ridge, New Jersey Business Complex will reach the
99% level when our newest tenant takes occupancy over the course of 1996.
Environmental cleanup activities for soil remediation at that location are
already under way. Ground water remediation is moving from the planning and
design stages to construction and actual cleanup. State approvals have been
granted on the cleanup program and systems design and it is expected that all
equipment will be in place and operational by the end of 1996. Our current
estimates of cost to complete the cleanup remain within the original provisions
against earnings in 1990.
EXPANSION OF THE BOARD OF DIRECTORS
Over the past year, Curtiss-Wright has been in the process of adding new
Directors, seeking to increase the expertise of the Board, particularly in
respect of operational matters. Last May, stockholders elected Admiral James B.
Busey IV, USN (Ret.) to the Board. While active in the United States Navy,
Admiral Busey held positions in naval aviation and was Commander-in-Chief of
U.S. Naval Forces in Europe and Commander-in-Chief of Allied Forces in Southern
Europe, a NATO Command, prior to his retirement from the military in 1989.
Afterwards he served as the Federal Aviation Administrator and Deputy Secretary
of the Department of Transportation. Currently, Admiral Busey is the
International President and CEO of the Armed Forces Communications and
Electronics Association.
In January, the Board added John R. Myers to its membership. Mr. Myers is
Chairman of the Board of Garrett Aviation Services and formerly was the chief
executive of Thiokol Corporation. Earlier, he served as President of the Engine
Group of Textron Corporation and the President of the Turbine Engine Business
of Avco Corporation. He also held a succession of management positions at the
General Electric Company.
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Mr. William B. Mitchell has been nominated by the Board for election by the
shareholders in April 1996. Mr. Mitchell is a Vice Chairman of Texas
Instruments Incorporated. He also has been the President of that Corporation's
Systems and Equipment Sector, which included the Defense Systems & Electronics
and other groups. Earlier, he held a number of other management positions
relating to missile programs at Texas Instruments.
We look forward to the active participation and counsel of these new Directors
in the affairs of Curtiss-Wright.
OUTLOOK
Commercial aircraft orders by airlines increased in 1995 over the depressed
levels of 1994. This was a reflection of the return to improved profitability
by the airline industry, orders by foreign carriers to meet growth demands, and
the need to replace aging aircraft fleets. Production levels are expected to
increase in 1996 and Curtiss-Wright would benefit from any general rise in such
activity. Our Flight Systems Group will be providing, for the first time,
production on the Boeing 757, 767 and the redesigned 737 platforms. A temporary
reduction in production for Boeing is anticipated as a result of the ten-week
labor strike it experienced at the end of 1995. However, Boeing has announced
increased production rates in the fourth quarter of 1996, both reflecting
recovery from the strike and increased demand for new aircraft. Increased sales
of the F-16 Fighting Falcon to foreign governments are expected to add to
military sales for our Flight Systems Group in 1996.
The industrial segment of our business reflects the general direction of the
U.S. and European economies. While MIC is a diversified service provider, it
has established a significant sales base in that industry for shot-peening and
heat-treating services. Target Rock's industrial sales are tied to the
requirements for replacement valves on the part of the utility industry and
construction of new foreign nuclear power plants. Sales to the utility sector
are expected to be about equal in 1996 with those experienced in 1995.
We believe that we have the opportunity in 1996 to begin to produce the
profitable growth which is essential for Curtiss-Wright's future. We will
endeavor to deliver such results for you, our shareholders.
/s/ David Lasky
David Lasky
Chairman and President
January 31, 1996
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L E A D E R S H I P
/ sketch of the F-22 /
Curtiss-Wright will provide three major systems on the U.S. Air Force's next
generation fighter, the F-22.
Foundations of Growth
Throughout the history of Curtiss-Wright, which extends back to the origins of
aviation, the Company has continued to develop its core competencies and
strengths. They are a fundamental part of its unique position in the
marketplace, and will be even more important to its future.
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Quality reputation
Curtiss-Wright has built an acknowledged position of leadership based on its
reputation for quality products and high levels of customer service. In today's
economic environment, quality and service--once considered luxuries--are
increasingly recognized as essential for the value they add. Curtiss-Wright's
reputation for quality and service are helping the Company gain customer
acceptance in introducing new product lines and entering new markets.
Financial resources
It takes more than good management and good ideas to take advantage of new
opportunities; it takes the ability to invest. Curtiss-Wright has the financial
resources to take decisive action when needed. The Company's strong balance
sheet provides the availability of capital to finance both internal growth and
strategic acquisitions that fit the Company's existing businesses.
R E S O U R C E S
The people of Curtiss-Wright
More than any other single factor, the people of Curtiss-Wright will determine
the strength of the Company's future. Historically, Curtiss-Wright has always
invested in attracting, retaining, and developing the most professional
workforce in its industries--and Curtiss-Wright people, in turn, have
distinguished themselves in their ability to meet the challenges of leadership.
They are the reason why the Company can be confident in seeking out new growth
opportunities.
/sketch of two men at a workstation
with a schematic of a Valve in the background /
Target Rock
Corporation has
redesigned its valve
used in nuclear
applications to
address needs in the
process industries.
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V I S I O N
/sketch of a commercial airliner/
Airline orders for commercial airplanes improved substantially in 1995, raising
expected production levels in 1996.
The Curtiss-Wright Vision
Curtiss-Wright's horizons are expanding. The Company remains committed to the
defense and aerospace industries, and has identified sectors of these
industries that will continue to sustain profitable growth for program
participants. But it is also expanding the scope of its operations to take
advantage of new growth opportunities.
/sketch of different manufacturing parts /
Metal Improvement Company treats parts for thousands of customers: improving
performance for a wide range of products.
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Geographic expansion
The Curtiss-Wright reputation is already strong in many overseas markets where
the Company has never had operations. From its base in North America,
Curtiss-Wright is establishing locations and joint ventures to serve these
markets. Such expansion is already underway in Europe and elsewhere, with other
regions under active consideration. Metal Improvement Company has plans in 1996
for the addition of two new shot-peening facilities overseas to expand our
presence there.
Global
E X P A N S I O N
Expansion of operations
Curtiss-Wright is leveraging its knowledge base and reputation for quality to
expand participation in new and existing markets. For example, the Flight
Group's Shelby plant is currently being expanded to accommodate its recent
Boeing contract awards. Metal Improvement Company has established an expansive
network for shot-peening; opportunities to duplicate this success in the
heat-treating market are now under evaluation. The Flight Systems Group and
Target Rock are well positioned to expand their lines of products and services
in the aerospace and flow-control industries.
Wherever the opportunities lie--in new product lines such as rescue equipment,
in allied services such as overhaul and repair, in OEM manufacturing or in
establishing the Company as a supplier for future defense programs--Curtiss-
Wright has the people and the resources to profitably grow its operations.
/Curtiss-Wright logo with a sketch of partial earth in background/
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Curtiss-Wright Corporation and Subsidiaries
CURTISS-WRIGHT AT A GLANCE
Segment Business: Products and Services: Markets:
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Aerospace & Marine Control and Actuation Components U.S. Government Agencies
Systems Foreign Governments
Shot-peening & Peen-forming Svcs Commercial Airlines /
Aerospace Overhaul Services Military /
Military Nuclear/Non-nuclear General Aviation
Valves Aerospace Manufacturers
(globe, gate, control, safety, Helicopter Manufacturers
solenoid and relief) Missile Manufacturers
Windshield Wiper Systems US Navy Propulsion Sys.
U.S. Navy Shipbuilding
Industrial Shot-peening & Heat-treating Svcs Metal Working Industries
Compressor Valve Reeds Oil/Petrochemical/
Commercial Nuclear/Non-nuclear Chemical
Valves Construction
(globe, gate, control, safety, Oil and Gas Drilling/
solenoid and relief) Exploration
Rescue Tools Power Generation
Nuclear and Fossil Fuel
Power Plants
Agricultural Equipment
Automotive & Truck
Manufacturers
Rescue Tool Industry
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CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 compared with 1994
Curtiss-Wright Corporation posted consolidated net earnings for 1995
totaling $18.2 million, or $3.59 per share, down 6% when compared with
consolidated net earnings for 1994 of $19.3 million, or $3.81 per share. The
decline in net earnings for the Corporation primarily reflects the downturn
within our Aerospace & Marine markets, which was offset, in part, by a
substantial improvement in our Industrial segment.
Sales for the Corporation totaled $154.4 million in 1995, slightly below sales
of $155.0 million for 1994. Sales for the Aerospace & Marine segment in 1995
showed an 8% decline from 1994, while sales for our Industrial segment in 1995
improved 13% over the prior year.
New orders received by the Corporation in 1995 totaled $150.9 million, a 23%
increase over orders received in the prior year. The improvement in new orders
primarily reflects contracts received for actuation and control systems on new
commercial aircraft. Orders for 1994 had been hindered by a general decline in
the availability of new aerospace and military shipbuilding production
programs. The total backlog of unshipped orders at December 31, 1995, amounted
to $103.6 million, an 11% decline from the total backlog at December 31, 1994,
which totaled $116.6 million. 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 1995, are sold
with very modest lead times. Accordingly, backlog for these product lines is
less of an indication of future sales activity than the Corporation's backlog
of long-term Aerospace & Marine contracts.
SEGMENT PERFORMANCE
As highlighted above, the Corporation's Aerospace & Marine segment posted
substantial declines in both sales and operating earnings for 1995, as compared
with 1994. Sales for 1995 totaled $92.4 million, compared with sales of $100.3
million for 1994. Sales reductions reflect the absence this year of
significant shipments from actuation production programs, primarily for
military customers, that characterized earlier years; specifically, sales of
actuation and control systems for the F-16 program, the retrofit portion of
which was completed late in 1994. Sales of shot-peening and peen-forming
aerospace services also declined, as did the volume of shipments for military
valve products, when comparing 1995 with the prior year.
Despite an overall decline in sales when compared with the prior year, the
Aerospace & Marine segment showed substantial improvements during the second
half of 1995, primarily due to the continued growth of our commercial domestic
component overhaul services. Overhaul services were also strengthened by the
addition of sales provided by Curtiss-Wright Flight Systems/Europe, which began
its operations during the second quarter of 1995. The decline in volume for
military valve products was also partially offset by revenue from the
settlement of a termination claim relating to part of a military valve
actuation contract.
Operating income for the Aerospace & Marine segment also declined for 1995,
totaling $11.7 million, 38% below operating income of $18.7 million posted in
1994. In addition to the lower sales levels, operating income levels for 1995
were further impaired by significant non-reimbursed engineering
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costs on actuation and control developmental contracts relating to the
Lockheed/Martin F-22, the Bell Boeing V-22 Osprey and the McDonnell Douglas
F/A-18 E/F aircraft and start-up costs on our European facility.
The Corporation's Industrial segment showed substantial improvements in both
sales and operating income when comparing 1995 with 1994. Sales for the
Industrial segment totaled $62.0 million for 1995, compared with sales of $54.7
million posted in 1994. The Corporation's Metal Improvement Company
subsidiary, which provides shot-peening services in North America and Europe,
experienced substantial improvements in all sectors of its industrial markets
during 1995. Sales of the segment increased 13% despite the absence of sales
in the second half of the year from the Buffalo Extrusion Facility, which was
sold in June 1995. Excluding results generated by the Buffalo Facility from
both years, sales of this segment for 1995 were 24% higher than those of the
prior year. Sales of commercial valve products also improved for 1995, as
compared with 1994 sales, primarily due to an increase in shipments of valve
products for foreign nuclear construction.
Operating income for the Industrial segment totaled $11.5 million for 1995, an
improvement of 47% from operating income of $7.8 million posted in 1994.
Improvements in the Industrial segment's operating income are largely
reflective of higher sales of shot-peening and heat-treating services to
automotive and other customers. Despite higher sales, operating income from
commercial valve products for 1995 was lower than that of the prior year,due to
cost overruns on foreign nuclear contracts and lower sales of commercial valve
spare parts. The sale of the Buffalo Facility did not have a material impact
on operating income for either year.
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OTHER REVENUES AND COSTS
Other revenue for 1995 totaled $13.1 million, compared with $11.2 million for
1994. The improvement in other revenue is partially attributable to net gains
on sales of real estate and equipment which totaled $.2 million in 1995,
compared with net losses of $.9 million recorded in 1994. During 1995, the
Corporation sold excess properties located in Long Island, New York, Ontario,
Canada and South Hackensack, New Jersey, resulting in an aggregate net gain of
$.7 million. Revenue generated by our portfolio of short-term investments
increased by $1.1 million, or 36% for 1995, when compared to 1994, generally
due to higher interest rates.
Product, engineering and selling costs incurred by our operating segments in
1995 were on par with costs incurred in 1994 in the aggregate. Declines in
product costs generally reflect the lower sales volume from our Aerospace &
Marine segment in 1995, as discussed above, offset by a 13% increase in selling
expenses due to enhanced marketing efforts overall.
General and administrative expenses for 1995 were $2.9 million, or 12%, higher
than those of 1994. Higher expense levels for 1995 are partially attributable
to a reduction in non-cash pension income. Pension income before taxes amounted
to $3.0 million in 1995, as compared with $4.0 million recognized in 1994.
Pension income 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 17.
1994 compared with 1993
Curtiss-Wright Corporation posted consolidated net earnings for 1994 totaling
$19.3 million, or $3.81 per share, compared with a consolidated net loss for
1993 of $5.6 million, or $1.11 per share for 1993. The net loss for 1993 was a
direct result of four unusual or infrequently occurring items, discussed below,
which distort any comparison with the net earnings for 1994. Excluding the
impact of these unusual items, 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.
The major items affecting 1993 earnings were: (1) 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; (2) charges of $3.8 million for the
estimated future environmental clean-up 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; (3) restructuring charges associated with the anticipated sale and
closing of manufacturing properties totaling $3.6 million, which reduced net
earnings for the year by $2.4 million, or $.47 per share; and (4) the
recognition of 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.
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Total sales for the Corporation were $155.0 million in 1994, a 2% decline
from 1993 sales of $158.9 million. Despite the small decline in sales, pre-tax
operating profits from our two business segments improved 32%, totaling $26.5
million in 1994, compared with segment operating profits of $20.0 million in
1993. New orders received by the Corporation totaled $122.4 million in 1994,
22% below orders received in 1993. The decline in orders is largely
attributable to a high level of engineering and manufacturing development
orders received by our Aerospace & Marine 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, which totaled $149.2
million.
SEGMENT PERFORMANCE
(As restated-See note 19)
The Corporation's Aerospace & Marine segment posted sales of $100.3 million for
1994, a decline of 12% when compared with sales of $113.8 million for 1993.
The decreased sales, in comparison with the prior year, primarily reflects
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.
Sales of military valve products also increased for 1994, generally due to
progress achieved under long-term contracts, excluding sales recorded in 1993
under a Seawolf termination settlement. Sales of valve products for 1993
included $3.2 million reflecting a settlement of termination claims and
equitable price adjustments related to the cancellation of contracts on the
U.S. Navy's Seawolf program.
Despite a significant decline in sales, pre-tax operating income for the
Aerospace & Marine segment in 1994 increased slightly from operating income
reported for 1993, totaling $18.7 million in 1994, compared with $17.8 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 13, 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 1994, however, showed a substantial decline in
order levels from those received in 1993. Orders for this segment totaled
$61.5 million in 1994, 44% below orders received in the prior year. The
decline in orders reflects a nonrecurrence of the high level of engineering and
manufacturing development orders for the F-22 program, a high level of valve
production orders for use in the U.S. Navy's next aircraft carrier 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.
- 16 -
17
The Industrial segment posted sales and operating income in 1994 of $54.7
million and $7.8 million, respectively, both substantial improvements when
compared with sales and operating income reported in 1993, which had totaled
$45.0 million and $2.2 million, respectively. The improvement in both sales
and operating income, when comparing 1994 to 1993, is largely due to higher
sales of shot-peening and heat-treating services to automotive industry
customers and a higher level of commercial valves sales. Changes in the
results of our shot-peening and heat-treating services during 1994 were largely
due to a recovery in general worldwide economic conditions which had hindered
sales of these product lines during 1993. Operating earnings for 1993 were
also affected by cost overruns on a fixed price commercial valve contract. New
orders received in 1994 were $60.8 million compared with orders of $46.6
million received in 1993.
OTHER REVENUES AND COSTS
Other revenue for 1994 totaled $11.2 million, compared with $11.4 million for
1993. 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 with 1993, generally due to improved market performance.
Product, engineering and selling costs incurred by our operating segments
declined 6% in 1994, from costs incurred in 1993. The decline in costs
generally reflects the lower sales volume from our Aerospace & Marine segment
in 1994, as discussed above. Product and engineering costs reflect charges of
$.6 million and $1.6 million in 1994 and 1993, respectively, for nonrecoverable
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. General and administrative expenses were reduced by the Corporation's
non-cash pension income. Pension income before taxes amounted to $4.0 million
in 1994, as compared with $3.0 million recognized in 1993. 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 off-set by the impact of increased retirement benefits. The increase
in the long-term rate of return reflects changes in the asset allocation of the
Corporation's Retirement Plan for 1994.
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 applicalion 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.
- 17 -
18
CHANGES IN FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The financial position of the Corporation continues to be very strong. Working
capital at December 31, 1995, amounted to $120.6 million, an 11% increase over
working capital of $108.3 million at December 31, 1994. The ratio of current
assets to current liabilities at December 31, 1995, also improved to 4.6 to 1
from 4.0 to 1 at December 31, 1994.
The increase in working capital reflects an increase in cash and short-term
investments balances, which total $78.8 million at December 31, 1995, a 3%
increase from December 31, 1994. Net receivables at December 31, 1995 increased
when compared with net receivables at December 31, 1994, caused by the higher
current sales of shot-peening services to commercial customers and a slightly
longer collection period for the Corporation overall. Net inventories at
December 31, 1995 were also higher when compared with the prior yearend,
primarily due to increases in work-in-process inventory associated with
long-term development contracts.
During 1995, the Corporation repaid $4.1 million of longterm debt primarily
associated with an outstanding industrial revenue bond. An additional $1.3
million of bond debt, which was shown as a current item at December 31, 1994,
was reclassified to long-term liabilities. The bond holder had exercised a
call option during 1994 but rescinded the call in early 1995, returning the
bond to its original maturity date in the year 2001.
The Corporation continues to maintain its $22.5 million revolving credit
lending facility and its $22.5 million short-term credit agreement, which
provide additional sources of capital to the Corporation. The revolving credit
agreement, of which $7.8 million remains unused at December 31, 1995,
encompasses various letters of credit issued primarily in connection with
outstanding industrial revenue bonds. The maximum available credit unused at
December 31, 1995, was $30.3 million. There were no cash borrowings made on
the short-term credit agreement during 1995.
Capital expenditures were $7.0 million in 1995, an increase of 52% from 1994
levels and 43% from capital expenditures in 1993. Actual expenditures related
primarily to replacement equipment and building improvements. Aerospace-
related expenditures accounted for $5.7 million, or approximately 80%, of the
total spent in 1994. The Corporation also reduced its fixed asset base through
the sale of its Buffalo Extrusion Facility, other former manufacturing and
other non-business properties, and through the disposal of excess equipment.
The Corporation anticipates more than doubling its capital expenditures in
1996, from those made in 1995, to approximately $18.8 million. The projected
increase in expenditures for 1996 primarily represents expected facility
expansions within the Aerospace & Marine segment. At December 31, 1995, the
Corporation had committed approximately $2.1 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 and other working capital requirements.
- 18 -
19
REPORT OF THE CORPORATION
The consolidated financial statements appearing on pages 18 through 32 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 responsi-
bilities; 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 LLP, independent certified public 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.
- 19 -
20
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, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, 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 15 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefit's," effective January 1, 1994. Also, as
described in Notes 7 and 16 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.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Morristown, New Jersey
January 31, 1996
- 20 -
21
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS of EARNINGS
for the years ended December 31,
(In thousands except per share data)
1995 1994 1993
Revenues:
Sales $154,446 $155,001 $158,864
Rentals and gains (losses) on sales
and disposals of real estate and
equipment, net 8,757 7,877 8,101
Interest, dividends and gains
and (losses) on short-term
investments, net 4,147 3,040 2,783
Other income, net 201 271 516
Total revenues 167,551 166,189 170,264
Costs and Expenses:
Product and engineering 105,358 106,324 112,552
Selling and service 6,092 5,368 6,055
Administrative and general 27,748 24,840 27,784
Litigation settlement costs 13,915
Environmental remediation costs 312 499 4,472
Restructuring charges 3,626
Interest 549 401 530
Total costs and expenses 140,059 137,432 168,934
Earnings before income taxes and
cumulative effect of changes
in accounting principles 27,492 28,757 1,330
Provision for income taxes 9,323 9,210 4,282
Earnings (loss) before cumulative
effect of changes in accounting
principles 18,169 19,547 (2,952)
Cumulative effect of changes in
accounting principles (net of
applicable taxes) (244) (2,671)
Net earnings (loss) $ 18,169 $ 19,303 $ (5,623)
========= ========= =========
Net Earnings per Common Share:
Earnings (loss) before cumulative
effect of changes in accounting
principles $3.59 $3.86 $ (.58)
Cumulative effect of changes in
accounting principles (.05) (.53)
Net earnings (loss) per common
share $3.59 $3.81 $(1.11)
====== ====== =======
See notes to consolidated financial statements.
- 21 -
22
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(In thousands)
Assets:
1995 1994
Current assets: --------- ---------
Cash and cash equivalents $ 8,865 $ 4,245
Short-term investments 69,898 72,200
Receivables, net 36,277 32,467
Deferred tax assets 7,149 8,204
Inventories 29,111 24,889
Other current assets 2,325 2,338
Total current assets 153,625 144,343
Property, plant and equipment, at cost:
Land 4,504 4,655
Buildings and improvements 79,352 78,680
Machinery, equipment and other 114,195 119,653
-------- --------
198,051 202,988
Less, accumulated depreciation 141,782 142,550
-------- --------
Property, plant and equipment, net 56,269 60,438
Prepaid pension costs 31,128 28,092
Other assets 5,179 5,821
Total assets $246,201 $238,694
========= =========
See notes to consolidated financial statements.
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23
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(In thousands)
1995 1994
Liabilities:
Current liabilities:
Current portion of long-term debt $ 5,354
Accounts payable $ 6,286 5,482
Accrued expenses 10,958 9,768
Income taxes payable 2,000 2,105
Other current liabilities 13,810 13,305
Total current liabilities 33,054 36,014
Long-term debt 10,347 9,047
Deferred income taxes 7,447 6,446
Accrued postretirement benefit costs 10,488 10,802
Other liabilities 12,686 17,616
Total liabilities 74,022 79,925
Contingencies and Commitments (Notes 9, 10, & 18)
Stockholders' Equity:
Preferred stock, $1 par value, 650,000
authorized, none issued
Common stock, $1 par value, 12,500,000
authorized, 10,000,000 shares issued
(outstanding shares 5,077,823 for 1995
and 5,060,743 for 1994) 10,000 10,000
Capital surplus 57,141 57,139
Retained earnings 288,710 275,600
Unearned portion of restricted stock (780)
Equity adjustments from foreign
currency translation (1,330) (1,622)
353,741 341,117
Less, treasury stock at cost
(4,922,177 shares for 1995 and
4,939,257 shares for 1994) 181,562 182,348
Total stockholders' equity 172,179 158,769
Total liabilities and stockholders'
equity $246,201 $238,694
========= =========
See notes to consolidated financial statements.
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24
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
For the years ended December 31,
(In thousands)
1995 1994 1993
Cash flows from operating activities: ---------- ---------- ----------
Net earnings (loss) $ 18,169 $ 19,303 $ (5,623)
Adj 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 9,512 10,883 11,483
Net (gains) losses on sales and
disposals of real estate and
equipment (219) 855 249
Net gains on short-term investm'ts (1,134) (1,013) (772)
Deferred taxes 2,056 901 (1,502)
Changes in operating assets & liab.:
Proceeds from sales of trading
securities 270,923 216,992
Purchases of trading securities (271,833) (231,145)
(Increase) decrease in receivables (2,093) (10,135) 1,072
(Increase) decrease in inventories (6,533) (2,400) 2,526
Inc (dec) in progress payments 594 4,967 (2,640)
Increase (decrease) in accounts
payable and accrued expenses 1,994 260 (1,549)
Increase (decrease) in income
taxes payable (105) 2,360 (5,125)
Increase in other assets (2,380) (2,922) (2,836)
Inc (dec) in other liabilities (393) (5,562) 8,224
Litigation settlement (8,880)
Other, net (1,130) (2,321) 1,399
Total adjustments (741) (26,916) 27,115
Net cash provided by (used for)
operating activities 17,428 (7,613) 21,492
Cash flows from investing activities:
Proceeds from sales and disposals
of real estate and equipment 3,290 1,326 583
Additions to property, plant & equip. (6,985) (4,609) (4,914)
Proceeds from sales of short-
term investments 140,212
Purchases of short-term investments (155,841)
Net cash used for investing
activities (3,695) (3,283) (19,960)
Cash flows from financing activities:
Principal payments on long-term debt (4,054) (149) (4,258)
Dividends paid (5,059) (5,059) (5,059)
Net cash used for financing
activities (9,113) (5,208) (9,317)
Net inc (dec) in cash & cash equivalents 4,620 (16,104) (7,785)
Cash & cash equivalents at begin'g of yr 4,245 20,349 28,134
Cash and cash equivalents at end of year $ 8,865 $ 4,245 $ 20,349
========== ========== ==========
See notes to consolidated financial statements.
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25
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS of STOCKHOLDERS' EQUITY
(In thousands of dollars)
Equity
Common Stock Unearned Adjustments
----------------- Portion of from Foreign Treasury Stock
Shares Capital Retained Restricted Currency -------------------
Issued Amount Surplus Earnings Stock Awards Translation Shares Amount
- - ------------------- -------- ------ -------- -------- ------------ ---------- ----------- ---------
December 31, 1992 10,000,000 $10,000 $57,062 $272,038 $(317) $(1,231) 4,939,257 $182,348
Net earnings (loss) (5,623)
Common dividends (5,059)
Amortization of
earned portion
of restricted
stock 110 230
Translation adj, 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)
Amortization of
earned portion
of restricted
stock (33) 87
Translation adj., net 240
- - ------------------- ---------- ------ --------- -------- ------------- ---------- ----------- ---------
December 31, 1994 10,000,000 10,000 57,139 275,600 - (1,622) 4,939,257 182,348
Net earnings 18,169
Common dividends (5,059)
Exchange of common
shares for the
exercise of stock
options 1,513 71
Stock options exercised (31) (2,346) (110)
Stock awards issued 33 (780) (16,247) (747)
Translation adj., net 292
- - ------------------ ----------------- -------- -------- ------------- ---------- ----------- ---------
December 31, 1995 10,000,000 $10,000 $57,141 $288,710 $(780) $(1,330) 4,922,177 $181,562
See notes to consolidated financial statements.
- 25 -
26
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY of SIGNIFICANT ACCOUNTING POLICIES
Curtiss-Wright Corporation is a diversified multi-national
manufacturing concern which produces and markets precision
components and systems and provides highly engineered services
to Aerospace & Marine and Industrial markets. Its principal
operations include three domestic manufacturing facilities and
thirty-two Metal Improvement service facilities located in
North America and Europe, and an aircraft component overhaul
facility in Denmark.
A. Principles of Consolidation.
The financial statements of the Corporation have been prepared
in conformity with generally accepted accounting principles
and such preparation has required the use of management's
estimates in presenting the consolidated accounts of Curtiss-
Wright Corporation and all majority owned subsidiaries (the
Corporation), after elimination of all significant inter-
company transactions and accounts.
B. Cash Equivalents.
Cash equivalents consist of money market funds and commercial
paper 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 for the
majority of its operations as units are shipped, services are
rendered, or as engineering benchmarks are achieved. Sales
and estimated profits under long-term military valve contracts
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.
- 26 -
27
E. Property, Plant and Equipment.
Property, plant and equipment are carried at cost. Major
renewals and betterments are capitalized, 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 the straight-line method based
upon the estimated useful lives of the respective assets.
F. Income Taxes.
The Corporation records its income taxes using the asset and
liability approach for financial accounting and reporting for
deferred income taxes. Deferred tax assets are recognized, as
available, for temporary differences and loss carryforwards.
An offsetting valuation allowance is recognized when, based on
available evidence, it is more likely than not that those
deferred tax assets will not be realized.
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.
G. Financial Instruments.
The financial instruments with which the Corporation is
involved are primarily of a traditional nature. Short-term
investments consist primarily of money market preferred
stocks, investment-grade debt instruments and common equity
securities, which are carried at their fair value based on the
quoted market prices of these investments. The Corporation
also, where circumstances warrant, participates in derivative
financial instruments, as defined under Statement of Financial
Accounting Standards No. 119, "Disclosures about Derivative
Financial Instruments and Fair Value of Financial
Instruments," consisting of forward currency exchange
contracts and commitments to purchase stock. Derivative
financial instruments are included as short-term investments
in the Corporation's balance sheets and are carried at their
fair market value, information on which appears in Note 2.
The Corporation has entered into derivative financial
instruments for purposes other than trading. Forward exchange
contracts are purchased to hedge its exposure to foreign
currency fluctuations on short-term securities in foreign
markets, while other financial instruments are used to take
advantage of price fluctuations for the generation of capital
gain income. The Corporation's forward exchange contracts
affect its results of operations 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's
investments in utility common stocks are handled through a
financially responsible third party and are purchased in
conjunction with a commitment to deliver instruments of a
similar nature. The corresponding purchases and commitments
in these investments minimizes the Corporation's risk of
market fluctuation. Gains and losses on sales of specific
holdings are recognized in income as realized along with
unrealized gains and losses due to changes in the market
values of positions held at the end of the period.
- 27 -
28
H. 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 4% of the total outstanding billed receivables at
December 31, 1995 and 6% of the total outstanding billed
receivables at December 31, 1994. 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.
I. Environmental Costs.
The Corporation establishes a reserve for a potential
environmental responsibility when it concludes that a
determination of legal liability is probable, based upon the
advice of counsel. Such amounts, if quantified, reflect the
Corporation's estimate of the amount of that liability. If
only a range of potential liability can be estimated, a
reserve will be established at the low end of that range.
Such reserves represent today's values of anticipated
remediation not recognizing any recovery from insurance
carriers, or third-party legal actions, and are not
discounted.
J. Earnings per Share.
Earnings per share are computed by dividing the applicable
amount of earnings by the weighted average number of common
shares outstanding during each year (5,062,000 shares for 1995
and 5,061,000 shares for 1994 and 1993). The Corporation has
outstanding stock options for each of the three years
presented, as reported in Note 11. The assumed exercise of
these stock options had an immaterial dilutive effect on
earnings per share for 1995 and 1994 and an anti-dilutive
effect on the loss per share for 1993.
K. Newly Issued Pronouncements.
Accounting for the Impairment of Long-Lived Assets: In March
1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS No. 121). This statement establishes accounting
standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets
to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121
requires that long-lived assets to be held and used by the
Corporation be reviewed for impairment whenever events or
circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment is recognized to the
extent that the sum of undiscounted estimated future cash
flows expected to result from the assets used is less than the
carrying value. The Corporation has evaluated its asset base,
under the guidelines established by SFAS No. 121, and
determined that no impairment will be required upon adoption
effective January 1, 1996.
- 28 -
29
Accounting for Stock-Based Compensation: In October 1995,
the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123).
The statement defines a fair value based method of accounting
for an employee stock option. Companies may, however, elect to
adopt this new accounting rule through a pro forma disclosure
option, while continuing to use the intrinsic value based
method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employee". Under the
disclosure option, companies must make pro forma disclosures
of net income and earnings per share, as if the fair value
method of accounting described below had been applied.
Under the new fair value method, compensation cost is measured
at the grant date based on the value of the award and is
recognized over the service (or vesting) period. Under the
intrinsic value based method, compensation cost is the excess,
if any, of the quoted market price of the stock at grant date
over the amount an employee must pay to acquire the stock.
The Corporation is currently reviewing the effect on its
financial statements of a change in accounting principles for
stock-based compensation, as compared to using the optional
disclosure only method. The adoption of this statement is
required, either through adoption or disclosure, for its
fiscal year beginning January 1, 1996. The Corporation has
not yet decided on which method it will use for adoption of
SFAS No. 123.
2. SHORT-TERM INVESTMENTS.
The Corporation's short-term investments are comprised of
equity and debt securities, all classified as trading
securities, which are carried at their fair value based upon
the quoted market prices of those investments at December 31,
1995 and 1994. Accordingly, net realized and unrealized gains
and losses on trading securities are included in net earnings.
The composition of short-term investments at December 31 is as
follows:
(In thousands) ------ 1995 ----- ----- 1994 -------
Cost Fair Value Cost Fair Value
Investment type:
Treasury bills $ 3,494 $ 3,494 $ 3,198 $ 3,198
Money market
preferred stock 41,999 41,999 35,800 35,800
Tax-exempt money market
preferred stock 12,874 12,874 19,822 19,803
Common and preferred
stocks 1,135 1,064 1,970 1,746
Utility common stock
purchased 22,694 22,452 21,152 20,873
Utility common stock
sold short (11,599) (11,985) (9,192) (9,220)
Total short-term
investments $70,597 $69,898 $72,750 $72,200
- 29 -
30
Investment income for the years ended December 31 consists of:
(In thousands) 1995 1994 1993
Net realized gains on the
sale of trading
securities $ 1,282 $ 1,563 $ 772
Interest and dividend
income, net 3,014 2,027 2,011
Net unrealized holding
losses (149) (550)
Interest, dividends and
gains (losses) on short-
term investments, net $ 4,147 $ 3,040 $ 2,783
The Corporation had one forward currency exchange contract
outstanding at December 31, 1995 and 1994 to hedge its exposure to
foreign currency fluctuations on short-term Canadian securities.
This contract expires in August 1996. The carrying values of the
asset and related forward contract were $3,377,000 and $3,613,000,
respectively, at December 31, 1995 and $3,101,000 and $3,452,000,
respectively, at December 31, 1994.
3. RECEIVABLES.
Receivables 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 at December 31 is
as follows:
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31
(In thousands) 1995 1994
Billed Receivables:
U.S. Government receivables $ 2,333 $ 2,403
Less: progress payments
applied 358 711
Net U.S. Government receivables 1,975 1,692
Commercial and other receivables 29,903 25,718
Less: progress payments applied 3,981 3,753
Net commercial and other
receivables 25,922 21,965
Allowance for doubtful accounts (760) (694)
Net receivables billed 27,137 22,963
Unbilled Receivables:
Recoverable costs and estimated
earnings not billed 25,128 27,084
Less: progress payments applied 15,988 17,580
Net unbilled charges on long-
term contracts 9,140 9,504
Total receivables, net $36,277 $32,467
4. INVENTORIES.
Inventories are valued at the lower of cost (principally average
cost) or market. The composition of inventories at December 31 is
as follows:
(In thousands) 1995 1994
Raw material $ 3,757 $ 4,195
Work-in-process 14,489 9,819
Finished goods 4,353 3,477
Inventoried costs related
to U. S. Government
and other long-term
contracts 11,474 10,049
Gross inventories 34,073 27,540
Less: progress
payments applied,
principally related
to long-term contracts 4,962 2,651
Net inventories $29,111 $24,889
- 31 -
32
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 1995, the Corporation sold properties located in Long Island,
New York, Ontario, Canada and South Hackensack, New Jersey, having
an aggregate net book value of $1,566,000. These transactions
resulted in a net gain to the Corporation of $686,000. During
1994, the Corporation had 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) 1995 1994
Property held for sale $ 3,436 $ 5,002
All other 1,743 819
Total other assets $ 5,179 $ 5,821
6. ACCRUED EXPENSES and OTHER CURRENT LIABILITIES
Accrued expenses at December 31 consist of the following:
(In thousands) 1995 1994
Accrued compensation $ 3,832 $ 3,607
Accrued taxes other than
income taxes 1,355 1,072
Accrued insurance 2,177 1,659
All other 3,594 3,430
Total accrued expenses $10,958 $ 9,768
Other current liabilities at December 31 consist of the following:
(In thousands) 1995 1994
Current portion of environmental
reserves $ 6,236 $ 4,982
Anticipated losses on long-
term contracts 905 1,920
Litigation reserves 3,101 3,101
Restructuring reserves 744
All other 3,568 2,558
Total other current liabilities $13,810 $13,305
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33
7. INCOME TAXES.
Effective January 1, 1993 the Corporation adopted SFAS No.
109, "Accounting for Income Taxes." Pursuant to SFAS No. 109,
the Corporation recognized a net tax benefit of $5,861,000 (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. Correspondingly, a valuation allowance was
recorded to offset this deferred tax asset, based on
management's assessment of the likely realization of future
capital gain income.
During 1995 and 1994, the Corporation realized a net reduction
to the valuation allowance of $4,366,000 and $401,000,
respectively. This resulted from tax benefits of $1,360,000
in 1995 and $594,000 in 1994, respectively, for realized net
capital gains. These tax benefits were offset by $52,000 in
1995 and $193,000 in 1994 for net unrealized losses on
securities. The valuation allowance was further reduced by
$3,058,000 in 1995, due to the expiration of the 1990 capital
loss carryforward. The Corporation had available, at December
31, 1995, a capital loss carryforward of $3,940,000 that will
expire on December 31, 1997.
Earnings (loss) before income taxes and cumulative effect of
changes in accounting principles for domestic and foreign
operations for the years ended December 31 are:
(In thousands) 1995 1994 1993
Domestic $21,861 $24,009 $(1,639)
Foreign 5,631 4,748 2,969
Total $27,492 $28,757 $ 1,330
The provisions for taxes on earnings before cumulative effect
of changes in accounting principles for the years ended
December 31 consist of:
- 33 -
34
(In thousands) 1995 1994 1993
Federal income taxes
currently payable $ 3,715 $ 4,755 $ 3,100
Foreign income taxes
currently payable 1,963 1,991 1,035
State and local income
taxes currently payable 1,311 668 1,411
Deferred income taxes 2,282 1,603 (5,303)
Adjustment for deferred
tax liability rate
change 453
Federal income tax on
net capital gains 698 594 367
Utilization of capital
loss carryforwards (698) (594) (367)
Valuation allowance 52 193 3,586
Provision for income tax $ 9,323 $ 9,210 $ 4,282
The effective tax rate varies from the U. S. Federal statutory
tax rate for the years ended December 31 principally due to the
following:
1995 1994 1993
U. S. Federal statutory
tax rate 35.0% 35.0% 35.0%
Add (deduct):
Utilization of capital
loss carryforward (2.5) (2.1) (78.8)
Dividends received
deduction and tax
exempt dividends (2.5) (1.9) (85.9)
Increase in deferred
tax liability for
change in tax rate 34.0
State and local taxes 4.7 2.3 106.1
Valuation allowance .2 .7 269.7
All other (1.0) (2.0) 41.9
Effective tax rate 33.9% 32.0% 322.0%
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35
The components of the Corporation's deferred tax assets and
liabilities at December 31 are as follows:
(In thousands) 1995 1994
Deferred tax assets:
Environmental clean-up $ 6,453 $ 7,323
Postretirement/employment
benefits 3,801 3,912
Inventories 2,195 2,032
Facility closing costs 1,081
Legal matters 1,162 1,147
Net capital loss carry-
forwards 1,094 5,460
Other 3,370 3,966
Total deferred tax assets 18,075 24,921
Deferred tax liabilities:
Pension 10,888 9,830
Depreciation 5,041 6,600
Other 1,350 1,273
Total deferred tax
liabilities 17,279 17,703
Deferred tax asset valuation
allowance (1,094) (5,460)
Net deferred tax liabili-
ties/(assets) $ 298 $(1,758)
Deferred tax assets and liabilities are reflected on the
Corporation's consolidated balance sheets at December 31 as
follows:
(In thousands) 1995 1994
Current deferred tax assets $(7,149) $(8,204)
Non-current deferred tax
liabilities 7,447 6,446
Net deferred tax liabili-
ties/(assets) $ 298 $(1,758)
Income tax payments of $8,114,000 were made in 1995, $7,586,000
in 1994, and $10,491,000 in 1993.
At December 31, 1995, the balance of net undistributed earnings
of foreign subsidiaries was $667,000. 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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36
8. LONG-TERM DEBT.
Long-term debt at December 31 consists of the following:
(In thousands) 1995 1994
Industrial Revenue Bonds and Notes -
due from 2001 to 2007. Weighted
average interest rate is 3.94%
and 2.82% per annum for 1995 and
1994, respectively $10,347 $14,401
Less, portion due within one year 5,354
Total long-term debt $10,347 $ 9,047
Aggregate maturities of long-term debt are as follows:
(In thousands)
2001 $1,300
2002 4,047
2007 5,000
Interest payments of approximately $684,000, $294,000 and
$573,000 were made in 1995, 1994 and 1993, 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, 1995, was
$7,753,000. The commitments made under the Revolving Credit
Agreement expire October 29, 1998, 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, 1995. The Short-Term
Credit Agreement expires October 27, 1996. 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,
1995, or December 31, 1994. 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 $25,130,000 were available for
cash dividends and stock acquisitions at December 31, 1995.
At December 31, 1995, 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 $9,300,000. The
Corporation has various other letters of credit outside the
Revolving Credit Agreement totaling approximately $596,000.
- 36 -
37
10. LEGAL MATTERS AND CONTINGENCIES.
The Corporation is involved in various litigations, claims and
administrative proceedings, including the matter discussed
below, arising in the normal course of business.
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.
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.
In late 1993, Curtiss-Wright's wholly-owned subsidiary, Target
Rock Corporation, recognized a settlement of $17,500,000 in
connection with a 1990 lawsuit 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 mischarging 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 settlement, net
of insurance proceeds previously received under a blanket crime
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, or $1.70 per share.
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38
11. STOCK COMPENSATION PLANS.
Long-Term Incentive Plan: Under a Long-Term Incentive Plan
approved by stockholders in 1995, 500,000 shares of common
stock were reserved in the aggregate for the grant of stock
options, stock appreciation rights, limited stock appreciation
rights, restricted stock awards, performance shares, and/or
performance units until May 5, 2005. The total number of
shares available for a grant to key employees in each year will
be one percent of the shares outstanding at the beginning of
that year, although that number may be increased by the number
of shares available but unused in prior years, and by the
number of shares covered by previously terminated or forfeited
awards. No more than 25,000 shares of common stock subject to
the Plan may be awarded in any year to any one participant in
the Plan.
In December 1995, the Corporation awarded 16,247 shares of
restricted common stock under this plan, to certain key
employees, at no cost to the employees. The shares have been
valued at a price of $48.00 per share, the market price on the
date of the award, and the cost of the issue will be amortized
over their three-year restriction period. In addition, the
Corporation granted non-qualified stock options under this
plan, to certain key employees, to purchase 32,498 shares of
common stock at a price of $48.00 per share, the market price
on the date of the grant. Stock options granted under this
plan expire ten years after the date of the 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 after three years from the date of grant.
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 1995, 1994 or 1993. The Restricted Stock
Purchase Plan was terminated by the stockholders on May 5,
1995, and the remaining 331,835 shares of common stock are no
longer available for issue under this Plan.
Stock Option Plan: The Corporation's 1985 Stock Option Plan as
amended November 16, 1993, expired on February 13, 1995. Under
this plan, 175,000 shares of common stock had been reserved in
treasury for issuance to key employees. With the expiration of
the plan, the remaining 79,975 shares of common stock are no
longer reserved for issuance.
- 38 -
39
During 1994 and 1993, the Corporation granted nonqualified
stock options under this plan, to certain key employees, 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 the 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 the grant. No
options were granted in 1995 under this plan prior to its
expiration.
During 1995, the Corporation issued 2,346 shares of common
stock from the exercise of stock options. As of December 31,
1995, options to purchase 92,679 shares of common stock remain
unexercised.
12. ENVIRONMENTAL COSTS.
The Corporation has other non-current liabilities consisting
primarily of environmental obligations which totaled
$10,806,000 at December 31, 1995 and $15,550,000 at December
31, 1994.
During 1995, the Corporation incurred expenses of $312,000
relating to the remediation, engineering and professional
services for environmental obligations. In 1994 and 1993, the
Corporation recognized costs of $499,000 and $4,472,000,
respectively.
In 1995, remediation costs paid for the Corporation's Wood-
Ridge, New Jersey, property totaled $2,705,000. This expense
had previously been provided in 1990 as part of the $21,000,000
reserve established to remediate the property. The Corporation
has received approval by the State of New Jersey Department of
Environmental Protection to begin actual remediation of the
groundwater and soil. The approved clean-up methods selected
are in various stages of installation. Groundwater and soil
remediation for the site is planned to begin in late spring
1996.
The Corporation is joined with many other corporations and
municipalities as potentially responsible parties (PRPs) in a
number of environmental cleanup sites, which include the
Sharkey Landfill Superfund Site, Parsippany, N.J., Caldwell
Trucking Company Superfund Site, Fairfield, N.J., and Pfohl
Brothers Landfill Site, Cheektowaga, N.Y., identified to date
as the most significant sites. Other environmental sites in
which the Corporation is involved include but are not limited
to Chemsol Inc. Superfund Site, Piscataway, N.J., and PJP
Landfill, Jersey City, N.J.
The Corporation believes that the outcome of any of these
matters would not have a material adverse effect on the
Corporation's results of operations or financial condition.
- 39 -
40
13. 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 sale of its Buffalo Extrusion Facility. During
1995, the Corporation completed its restructuring, fully
utilizing reserves provided.
The following table sets forth the components of the 1993
restructuring charge and the related reserves at December 31,
1993, 1994 and 1995, respectively:
Cash Non-Cash Cash
(In thousands) 1993 Charges Charges 1994 Charges 1995
-------- -------- -------- -------- -------- --------
Write-down of fixed assets
to net realizable value $2,666 $ 82 $(2,748)
Loss on operations through
disposal date 386 (270) $116 $(116) -
Facility closure costs 245 (9) 392 628 (628) -
Write-down of inventory 159 (159)
Severance 170 (20) (150)
-------- -------- -------- -------- -------- --------
Total $ 3,626 $ (217) $(2,665) $ 744 $ (744) $ -
14. RESEARCH and DEVELOPMENT COSTS.
Corporation-sponsored research and development expenditures
amounted to approximately $1,180,000, $1,196,000 and
$1,420,000 in 1995, 1994 and 1993, respectively. These
expenditures are included in product and engineering costs.
- 40 -
41
15. 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
required a provision 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 in 1994. This obligation resulted in an after-tax
charge to earnings for the first quarter of 1994 of $244,000,
or $.05 per share.
16. POSTRETIREMENT BENEFITS.
Effective January 1, 1993, the Corporation adopted SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other
than Pensions." The adoption of SFAS No. 106 resulted in
recognition of the full transition cost of $9,750,000 as a
cumulative effect of changes in accounting principles,
reducing net earnings by $6,435,000 or $1.27 per share for
1993.
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. The actual payments made
to provide certain nonvested health-care benefits for specific
groups of retired employees totaled $696,000, $491,000 and
$358,000 in 1995, 1994 and 1993, respectively.
Net expenses for the retiree health-benefit plans for the
years ended December 31 included the following components:
(In thousands) 1995 1994 1993
Service cost - benefits
attributed to service
during the period $ 180 $ 328 $ 282
Interest cost on accumu-
lated postretirement
benefits 494 589 702
Net amortization and
deferral (292)
Net periodic post-
retirement benefit
cost $ 382 $ 917 $ 984
- 41 -
42
The following table sets forth the actuarial present value of
benefits and the funded status at December 31 for the
Corporation's domestic plans:
(In thousands) 1995 1994
Actuarial present value of benefits:
Retired employees $ 4,575 $ 5,357
Active employees - fully eligible 712 886
Other active employees 1,869 2,134
Accumulated postretirement benefits 7,156 8,377
Unrecognized net gain from past
experience different from that
assumed and from changes in
assumptions 3,332 2,425
Accrued postretirement benefit cost $10,488 $10,802
The weighted average discount and health-care cost trend rates
used in determining the accumulated postretirement benefits
and periodic postretirement benefit cost are as follows:
1995 1994
------ -------
Weighted average discount rate 7.00% 8.00%
Assumed health care cost trend rates:
Current 9.83% 10.22%
Ultimate 5.50% 5.50%
Years to ultimate 12 13
A 1% increase in health-care cost trends would result in an
increase to the accumulated postretirement benefits as of
December 31, 1995 of $783,000 and an increase in the net
periodic postretirement benefit cost for the year then ended
of $86,000.
17. 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
have received 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.
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43
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 noncontributory
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, 1995, the
retirement plan is overfunded (i.e., plan assets exceed
accumulated benefit obligations). All domestic plans were
also overfunded at December 31, 1994.
The Corporation had pension credits in 1995, 1994 and 1993 of
$3,036,000, $4,016,000 and $3,029,000, respectively, for
domestic plans and had foreign pension costs in 1995, 1994 and
1993 under defined contribution retirement plans of $208,000,
$188,000 and $170,000, respectively. The funded status of the
Corporation's domestic plans at December 31 are set forth in
the following table:
- 43 -
44
(In thousands) 1995 1994
Actuarial present
value of benefit
obligations:
Vested $110,851 $104,349
Nonvested 2,832 1,485
Accumulated benefit
obligation 113,683 105,834
Impact of future
salary increases 3,271 1,550
Projected benefit
obligation 116,954 107,384
Plan assets at fair
value 183,497 169,597
Plan assets in excess
of projected benefit
obligation 66,543 62,213
Unrecognized net
gain (25,763) (22,693)
Unrecognized prior
service cost 400 (220)
Unrecognized net
transition asset (10,052) (11,208)
Prepaid pension cost $ 31,128 $ 28,092
At December 31, 1995, approximately 42% of the plans' assets
are invested in debt securities, including a small portion in
U. S. Government issues. Approximately 58% of plan assets are
invested in equity securities.
Included in earnings is net pension income for 1995, 1994 and
1993, comprised of the following:
(In thousands) 1995 1994 1993
Service costs - benefits
earned during the period $ 3,119 $ 2,623 $ 1,445
Interest cost on pro-
jected benefit obliga-
tions 8,457 7,706 7,910
Actual return on plan
assets (32,358) 3,301 (17,762)
Net amortization and
deferral 17,746 (17,646) 5,378
Net pension income $(3,036) $(4,016) $(3,029)
- 44 -
45
The major assumptions used in accounting for the Corporation's
defined-benefit pension and retirement plans at December 31
are as follows:
1995 1994
Discount rate 7.0% 8.0%
Rate of increase in
future compensation
levels 4.5% 4.5%
Expected long-term
rate of return on
plan assets 8.5% 8.0%
The net periodic pension credit 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.
18. LEASES.
Buildings and Improvements Leased to Others. The Corporation
leases certain of its buildings and related improvements to
outside parties under noncancelable operating leases. Cost
and accumulated depreciation of the leased buildings and
improvements at December 31, 1995, were $51,501,000 and
$43,674,000, respectively, and at December 31, 1994, were
$50,629,000 and $42,713,000, 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 $1,857,000
in 1995, $1,840,000 in 1994 and $1,815,000 in 1993.
At December 31, 1995, the approximate future minimum rental
income and commitment under operating leases that have initial
or remaining noncancelable lease terms in excess of one year
are as follows:
Rental Rental
(In thousands) Income Commitment
1996 $ 5,305 $1,447
1997 5,419 1,302
1998 4,438 1,179
1999 2,957 808
2000 2,278 213
2001 and beyond 16,219 907
-------- -------
$36,616 $5,856
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46
19. INDUSTRY SEGMENTS.
The Corporation has revised its industry segment presentation
in 1995 to better align its current components of revenue
producing products and services to the markets served. Prior-
year information has been restated to reflect the current
alignment.
The principal products and services and major markets of the
two industry segments are described on page 12.
Consolidated Industry Segment Information:
(In millions) 1995 1994 1993
Sales and Other Revenues:
Aerospace & Marine $ 92.4 $100.3 $113.8
Industrial 62.0 54.7 45.0
Total sales 154.4 155.0 158.8
Rental revenues 8.8 8.7 8.3
Other revenues 4.4 2.5 3.2
Total sales and other
revenues $167.6 $166.2 $170.3
Pre-tax Earnings from Operations:
Aerospace & Marine $ 11.7 $ 18.7 $ 17.8
Industrial 11.5 7.8 2.2
Total segments 23.2 26.5 20.0
Provision for legal
settlement (13.9)
Net pension income 3.0 4.0 3.0
Rental earnings 3.1 2.9 2.8
Other earnings 4.3 1.6 3.1
Other expenses (5.6) (5.8) (13.2)
Interest expense (.5) (.4) (.5)
Total pre-tax earnings $ 27.5 $ 28.8 $ 1.3
- 46 -
47
(In millions)
Identifiable Assets:
Aerospace & Marine $ 74.6 $ 71.9 $ 79.4
Industrial 56.7 42.6 40.6
Total segments 131.3 114.5 120.0
Cash and short-term
investments 78.8 76.4 75.2
Other general and corporate 36.1 47.8 41.7
Total assets at December 31 $246.2 $238.7 $236.9
Capital Expenditures:
Aerospace & Marine $ 5.7 $ 2.7 $ 3.1
Industrial .7 .9 .9
Total segments 6.4 3.6 4.0
General and corporate .6 1.0 .9
Total capital expenditures $ 7.0 $ 4.6 $ 4.9
1995 1994 1993
Depreciation:
Aerospace & Marine $ 5.4 $ 6.6 $ 7.4
Industrial 3.1 3.3 3.0
Total segments 8.5 9.9 10.4
General and corporate 1.0 1.0 1.0
Total depreciation $ 9.5 $ 10.9 $ 11.4
Aerospace & Marine sales had no single customer that accounted
for more than 10% of total sales in 1995. However, the
segment had one customer that accounted for 10% in 1994 and
two customers accounting for 11% and 10% of sales,
respectively, in 1993. Industrial segment sales did not
include any customers exceeding 10% of total sales in those
respective periods.
Revenues from major product lines consist of:
1995 1994 1993
Actuation & control systems and components 32% 32% 37%
Shot-peening and peen-forming 45 30 27
Valves 14 15 14
All others 9 23 22
----- ----- -----
Total 100% 100% 100%
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48
Direct sales to the U.S. Government and sales for U.S. and
Foreign government end use accounted for 39%, 31% and 34% of
total sales in 1995, 1994 and 1993, respectively, and were
included in all segments as follows:
(In thousands) 1995 1994 1993
Aerospace & Marine $ 38,000 $ 44,000 $ 52,400
Industrial 900 3,700 2,000
Total military sales $ 38,900 $ 47,700 $ 54,400
Geographic revenues and earnings are as follows:
(In thousands) 1995 1994 1993
Revenues:
United States $140,409 $144,140 $148,422
Europe 23,096 18,486 18,004
Canada 4,046 3,563 3,838
Total $167,551 $166,189 $170,264
Pre-Tax Earnings:
United States $ 21,861 $ 24,009 $ (1,639)
Europe 4,624 4,273 2,260
Canada 1,007 475 709
Total $ 27,492 $ 28,757 $ 1,330
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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49
QUARTERLY RESULTS of OPERATIONS (UNAUDITED).
(In thousands except
per share amounts) First Second Third Fourth
1995 Quarters:
Sales $37,543 $36,916 $35,929 $44,058
Other revenues 3,270 3,637 3,374 2,824
Gross profit 12,115 11,649 11,998 13,979
Net earnings 4,012 4,225 4,966 4,966
Net earnings per
common share .79 .83 .98 .98
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
a change in account-
ing principle (244)
Net earnings 4,061 5,325 4,167 5,750
Earnings per share:
Earnings before
cumulative effect
of a change in
accounting
principle .85 1.05 .82 1.14
Cumulative effect
of a change in
accounting
principle (.05)
Net earnings per
common share .80 1.05 .82 1.14
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 15).
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50
CONSOLIDATED SELECTED FINANCIAL DATA
(In thousands except per share data)
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
Sales $154,446 $155,001 $158,864 $179,737 $191,250
Other revenues 13,105 11,188 11,400 13,351 11,830
Earnings (loss) before chges
in accounting principles 18,169 19,547 (2,952)a 21,687 21,253
Net earnings (loss) 18,169 19,303 (5,623)b 21,687 21,253
Total assets 246,201 238,694 236,947 238,898 233,226
Long-term debt 10,347 9,047 14,426 16,266 22,261
Per common share:
Earnings (loss) before chges
in accounting principles 3.59 3.86 (.58) 4.29 4.21
Net earnings (loss) 3.59 3.81 (1.11) 4.29 4.21
Cash dividends 1.00 1.00 1.00 1.00 1.00
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".
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51
CURTISS-WRIGHT CORPORATION AND SUBSIDIARIE
CORPORATE INFORMATION
Corporate Headquarters
1200 Wall Street West
Lyndhurst, New Jersey 07071-0635
Tel.(201)896-8400 Fax(201)438-5680
Annual Meeting
The 1996 Annual Meeting of Shareholders will be held on April 12,1996 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, 1995, the approximate number of holders of record of common
stock, par value $1.00 per share, of the Corporation was 5,900.
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 Mellon Shareholder Services, L.L.C. at the
following addresses:
Shareholder inquiries/address changes/consolidations:
P.O. Box 590, Ridgefield Park, NJ 07660
Lost certificates/certificate replacement
Estoppel Department, P.O. Box 467, Washington Bridge Station,
New York, NY 10033
Certificate transfers
Stock Transfer Department,
P.O. Box 469, Washington Bridge Station,
New York, NY 10033
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 analysis, and others seeking information
about Curtiss-Wright Corporation, should contact Robert A. Bosi,
Vice President-Finance, or Gary J. Benschip, Treasurer, at the Corporate
Headquarters, telephone (201) 896-1751.
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52
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.
Common Stock Price Range ----- 1995 ------ ----- 1994 ------
High Low High Low
------- ------- ------- -------
First Quarter $38.250 $35.125 $37.000 $33.675
Second Quarter 45.250 36.875 35.750 33.125
Third Quarter 45.500 43.500 36.375 32.875
Fourth Quarter 53.750 43.625 37.250 34.625
Dividends -1995- -1994-
First Quarter $.25 $.25
Second Quarter .25 .25
Third Quarter .25 .25
Fourth Quarter .25 .25
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53
CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
CORPORATE DIRECTORY
DIRECTORS OFFICERS
Thomas R. Berner David Lasky Curtiss-Wright
Partner Chairman and President Flight Systems, Inc.
Law firm of Robert E. Mutch
Berner & Berner, PC. Robert E. Mutch President
Executive Vice President 300 Fairfield Road
John S. Bull Fairfield, New Jersey 07004-1962
Former Director Gerald Nachman
Moran Towing & Executive Vice President Curtiss-Wright
Transportation Co., Flight Systems/Shelby, Inc.
Inc. Marine Robert A. Bosi George J. Yohrling
transportation co. Vice President-Finance Senior Vice President and
General Manager
Admiral George J. Yohrling 201 Old Boiling Springs Road
James B. Busey IV Vice President Shelby, No. Carolina 28152-8008
President & Chief
Executive Officer Dana M. Taylor Curtiss-Wright
AFCEA International General Counsel Flight Systems/Europe A/S
and Secretary Preben Morso
David Lasky General Manager
Chairman & President Kenneth P. Slezak Karup Air Base
Controller Karup, Denmark
John R. Myers
Chairman of the Board Gary J. Benschip Metal Improvement Company, Inc.
Garrett Aviation Svcs Treasurer Gerald Nachman
President
10 Forest Avenue
Dr. William W. Sihler Paramus, New Jersey 07652-5214
Ronald E. Trzcinski
Professor of Business Target Rock Corporation
Administration, Martin R. Benante
Darden Graduate School President and General Manager
of Business 1966E Broadhollow Road
Administration, East Farmingdale, New York
University of Virginia 11735-1768
J. McLain Stewart
Director
McKinsey & Co.
Management consultants
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