SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1995 Commission File Number 1-134 CURTISS-WRIGHT CORPORATION (Exact name of Registrant as specified in its charter) Delaware 13-0612970 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1200 Wall Street West Lyndhurst, New Jersey 07071 (Address of principal executive offices) (Zip Code) (201) 896-8400 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $1.00 per share: 5,059,293 shares (as of October 31, 1995)
2 CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements: Consolidated Balance Sheets 3 Consolidated Statements of Earnings 4 Consolidated Statements of Cash Flows 5 Consolidated Statements of Stockholders' Equity 6 Notes to Consolidated Financial Statements 7 - 9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 13 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 14 Exhibit Index 15
3 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 1995 1994 Assets: ------------ ----------- Cash and cash equivalents $ 6,264 $ 4,245 Short-term investments 75,205 72,200 Receivables, net 35,706 32,467 Deferred tax asset 7,425 8,204 Inventories 27,517 24,889 Other current assets 2,088 2,338 --------- --------- Total current assets 154,205 144,343 Property, plant and equipment, at cost 196,911 202,988 Less, accumulated depreciation 140,515 142,550 --------- --------- Property, plant and equipment, net 56,396 60,438 Prepaid pension costs 30,134 28,092 Other assets 4,994 5,821 --------- --------- Total assets $245,729 $238,694 ========= ========= Liabilities: Current portion of long-term debt $ 4,000 $ 5,354 Accounts payable and accrued expenses 16,690 15,250 Dividends payable 1,264 Income taxes payable 31 2,105 Other current liabilities 11,406 13,305 --------- --------- Total current liabilities 33,391 36,014 Long-term debt 10,347 9,047 Deferred income taxes 7,030 6,446 Accrued post retirement benefit costs 10,892 10,802 Other liabilities 15,323 17,616 --------- --------- Total liabilities 76,983 79,925 Stockholders' equity: Common stock, $1 par value 10,000 10,000 Capital surplus 57,135 57,139 Retained earnings 285,009 275,600 Equity adjustments from foreign currency translation (1,061) (1,622) --------- --------- 351,083 341,117 Less, cost of treasury stock 182,337 182,348 --------- --------- Total stockholders' equity 168,746 158,769 Total liabilities and stockholders' -------- -------- equity $245,729 $238,694 ========= ========= [FN] See notes to consolidated financial statements.
4 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS of EARNINGS (UNAUDITED) (In thousands except per share data) Nine Months Ended Three Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues: --------- --------- -------- -------- Sales $110,388 $114,819 $35,929 $38,792 Rentals and gains on sales of real estate and equipment 6,696 6,411 2,227 2,273 Interest, dividends and gains (losses) on sales of short- term investments, net 3,396 2,509 1,097 819 Other income, net 189 249 50 17 --------- --------- -------- -------- Total revenues 120,669 123,988 39,303 41,901 Costs and expenses: Product and engineering 75,662 79,387 24,077 27,142 Selling and service 4,425 4,108 1,388 1,462 Administrative and general 20,586 19,464 6,493 6,477 Interest 431 274 142 93 --------- --------- -------- -------- Total costs and expenses 101,104 103,233 32,100 35,174 Earnings before taxes & cumulative effect of a change in accounting principle 19,565 20,755 7,203 6,727 Provision for income taxes 6,362 6,958 2,237 2,560 Earnings before cumulative effect --------- --------- -------- -------- of a change in acctg principle 13,203 13,797 4,966 4,167 Cumulative effect of a change in accounting principle (net of applicable taxes) (244) --------- --------- -------- -------- Net earnings $ 13,203 $ 13,553 $ 4,966 $ 4,167 ========= ========= ======== ======== Weighted average number of common shares outstanding 5,061 5,061 5,061 5,061 ========= ========= ======== ======== Net earnings per common share: Earnings before cumulative effect of a change in accounting principle $2.61 $2.73 $ .98 $ .82 Cumulative effect of a change in accounting principle (.05) --------- --------- -------- -------- Net earnings per common share $2.61 $2.68 $ .98 $ .82 ========= ========= ======== ======== Dividends per common share $ .75 $ .75 $ .25 $ .25 [FN] See notes to consolidated financial statements.
5 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED) (In thousands) Nine Months Ended September 30, 1995 1994 Cash flows from operating activities: --------- --------- Net earnings $ 13,203 $ 13,553 Adjustments to reconcile net earnings to net cash provided by (used for) operating activities: Cum effect of a change in acctg principle 244 Depreciation and amortization 7,814 8,109 Net gains on sales of short-term investments (1,044) (1,246) Increase in deferred taxes 1,363 684 Changes in operating assets and liabilities: Proceeds from sales of trading securities 137,570 103,699 Purchases of trading securities (139,155) (116,691) Increase in receivables (2,332) (7,155) Increase in inventories (6,840) (2,847) Increase in progress payments 3,305 3,549 Inc in accts payable & accrued expenses 1,440 922 Increase (decrease) in income taxes payable (2,074) 2,182 Increase in other assets (963) (2,267) Decrease in other liabilities (4,480) (4,814) Litigation settlement (8,880) Other, net (1,065) 1,003 --------- -------- Total adjustments (6,461) (23,508) --------- -------- Net cash provided by (used for) operating activities 6,742 (9,955) --------- -------- Cash flows from investing activities: Proceeds from sales of real estate and equipment 3,219 759 Additions to property, plant and equipment (5,359) (3,303) --------- -------- Net cash used for investing activities (2,140) (2,544) --------- -------- Cash flows from financing activities: Principal payments on long-term debt (54) (112) Dividends paid (2,529) (2,530) --------- -------- Net cash used for financing activities (2,583) (2,642) --------- -------- Net inc/(dec) in cash & cash equivalents 2,019 (15,141) Cash and cash equivalents at beginning of period 4,245 20,349 --------- -------- Cash and cash equivalents at end of period $ 6,264 $ 5,208 ========= ======== [FN] See notes to consolidated financial statements.
6 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS of STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands of dollars) <TABLE> Equity Unearned Adjustments Common Stock Portion of from Foreign Shares Capital Retained Restricted Currency Treasury Stock Issued Amount Surplus Earnings Stock Translation Shares Amount <S> <C> <C> <C> <C> <C> <C> <C> <C> - ----------------- ----------- -------- -------- ----------- ----------- ---------- --------- ------- 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 unearned portion of restricted stock (33) 87 Translation ad- justments, net 240 - ----------------- ----------- -------- -------- ----------- ----------- ---------- --------- ------- December 31, 1994 10,000,000 10,000 57,139 275,600 -- (1,622) 4,939,257 182,348 Net earnings 13,203 Common dividends (3,794) Exercise of stock options (4) (240) (11) Translation ad- justment, net 561 - ----------------- ----------- -------- -------- ----------- ----------- ---------- --------- ------- September 30, 1995 10,000,000 $10,000 $57,135 $285,009 $ - $(1,061) 4,939,017 $182,337 =========== ======== ======== =========== =========== ========== ========= ======= </TABLE> [FN] See notes to consolidated financial statements. -6-
7 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The financial statements present the consolidated accounts of Curtiss-Wright Corporation and all majority owned subsidiaries (the "Corporation"), after elimination of all significant intercompany transactions and accounts. The information furnished in this report reflects all adjustments, consisting primarily of normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation's 1994 Annual Report on Form 10-K. The results of operations for these interim periods are not necessarily indicative of the operating results for a full year. 2. SHORT-TERM INVESTMENTS The Corporation accounts for its short-term investments in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS No. 115). The Corporation's short-term investments are comprised of marketable equity and non-equity securities, all classified as trading securities under SFAS No. 115 and, accordingly, are carried at their fair value, which is based on quoted prices for these investments. Short-term investments have an aggregate cost of $74,628,000 and an aggregate fair value of $75,205,000 at September 30, 1995, compared with an aggregate cost of $72,750,000 and an aggregate fair value of $72,200,000 at December 31, 1994. Included in the determination of net earnings were net realized gains and losses on the sales of short-term investments, determined on the specific identification cost basis. The composition of investment income for the first nine months and third quarter of 1995 and 1994, respectively, is as follows: (In thousands) Nine Months Ended Three Months Ended September 30, September 30, 1995 1994 1995 1994 ------- ------- ------- ------- Net realized gains (losses) on the sale of marketable securities $ (82) $2,800 $ 65 $ 488 Interest and dividend income, net 2,352 1,263 767 538 Net unrealized holding gains (losses) 1,126 (1,554) 265 (207) ------- ------- ------- ------- Interest, dividends & gains (losses) on short-term investments, net $3,396 $2,509 $1,097 $ 819 ======= ======= ======= =======
8 3. RECEIVABLES Receivables, at September 30, 1995 and December 31, 1994, include amounts billed to customers and unbilled charges on long-term contracts consisting of amounts recognized as sales but not billed at the dates presented. Substantially all amounts of unbilled receivables are expected to be billed and collected within a year. The composition of receivables for those periods is as follows: (In thousands) September 30, December 31, 1995 1994 -------- -------- Accounts receivable, billed $30,084 $28,121 Less: progress payments applied 3,205 4,464 -------- -------- 26,879 23,657 -------- -------- Unbilled charges on long-term contracts 27,415 27,084 Less: progress payments applied 17,932 17,580 -------- -------- 9,483 9,504 -------- -------- Allowance for doubtful accounts (656) (694) -------- -------- Receivables, net $35,706 $32,467 ======== ======== 4. INVENTORIES Inventories are valued at the lower of cost (principally average cost) or market. The composition of inventories at September 30, 1995 and December 31, 1994 is as follows: In thousands September 30, December 31, 1995 1994 -------- -------- Raw materials $ 3,819 $ 4,195 Work-in-process 15,061 9,819 Finished goods 3,006 3,477 Inventoried costs related to U. S. Government & other long-term contracts 12,494 10,049 -------- -------- Total inventories 34,380 27,540 Less: progress payments applied, principally related to long-term contracts 6,863 2,651 -------- -------- Net inventories $27,517 $24,889 ======== ========
9 5. ENVIRONMENTAL MATTERS The Corporation is subject to federal, state and local laws and regulations concerning the environment, and is currently participating in administrative or court proceedings involving a number of sites under these laws, usually as a participant in an industry group of potentially responsible parties. Many of these proceedings are at a stage where it is impossible to estimate with any certainty the total cost of remediation, the timing and extent of remedial actions which may be required by governmental authorities, and the amount of the liability, if any, of the Corporation alone or in relation to that of any other responsible party. The Corporation also has been seeking to establish insurance coverage with respect to a number of these matters through litigation against certain insurance carriers. When it is possible to make a reasonable estimate of the Corporation's liability with respect to an environmental matter, a provision is recorded as appropriate. Actual costs to be incurred in future periods may vary from these estimates. Based on facts presently known to it and the advice of counsel, the Corporation does not believe that the outcome of any one of these environmental proceedings, in excess of amounts provided, will have a material adverse effect on its results of operations or financial condition. 6. CONSOLIDATED STATEMENTS OF CASH FLOWS Interest payments of $466,000 and $304,000 were made primarily in association with long-term debt in the first nine months of 1995 and 1994, respectively. The Corporation made estimated federal income tax payments of $3,762,000 and $3,400,000 in the first nine months of 1995 and 1994, respectively. 7. EARNINGS PER SHARE Earnings per share were computed by dividing the applicable amount of earnings by the weighted average number of common shares outstanding during each period shown in the accompanying Consolidated Statements of Earnings. The assumed exercise of all outstanding stock options had an immaterial dilutive effect on earnings per share in each respective period.
10 PART I - ITEM 2 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS RESULTS OF OPERATIONS: Curtiss-Wright Corporation (the "Corporation") posted consolidated net earnings for the third quarter of 1995 totaling $5.0 million, or $.98 per share, 19% above net earnings of $4.2 million, or $.82 per share, reported in the third quarter of 1994. Net earnings for the third quarter of 1995 continued to show a small, but steady, increase from the first two quarters of 1995. Net earnings totaled $.79 and $.83 per share for the first and second quarters of 1995, respectively. For the first nine months of 1995, net earnings totaled $13.2 million, or $2.61 per share, slightly below net earnings of $13.6 million, or $2.68 per share, reported for the same period of 1994. Sales for the third quarter and first nine months of 1995 totaled $35.9 million and $110.4 million, respectively, showing declines when compared with sales of $38.8 million and $114.8 million posted in the same respective 1994 periods. New orders received, however, improved substantially for the third quarter of 1995, totaling $41.4 million, compared with orders of $29.0 million received in the third quarter of 1994. New orders for the first nine months of 1995 were $112.7 million, also significantly improved over orders of $87.6 reported for the same period of the prior year. Operating income generated by the Corporation's three business segments totaled $6.1 million for the third quarter of 1995, even with the $6.1 million reported for the third quarter of 1994. The aggregate operating income from our segments for the 1995 quarter reflects a substantial increase in our Industrial segment earnings and improved income from our Flow Control and Marine segment. These improvements were offset by the continued decline in operating income from our Aerospace segment, details of which are discussed below. For the first nine months of 1995, the Corporation's aggregate operating income remained below 1994 levels, totaling $16.4 million in 1995, compared with $18.5 million for the same nine-month period of 1994. Partially offsetting the lower aggregate operating income from our business segments for the nine-month period were higher earnings from our short-term investments and gains on the sales of excess machinery made during the first nine months of 1995.
11 Segment Performance The Corporation's Aerospace segment performance, while down from last year, showed improving results between the second and third quarters of 1995. Sales increased 7% in the third quarter, when compared with sales in the second quarter of 1995 and operating income for the third quarter of 1995 was almost double that of the prior quarter. Both sales and operating income for the Aerospace segment for third quarter of 1995, however, were below the levels reported in the same period of the prior year. Sales for the third quarter of 1995 totaled $18.4 million, compared with sales of $19.3 million in third quarter of 1994. Sales had totaled $17.3 million for the second quarter of 1995. The improvements shown in the third quarter of 1995 primarily reflect the continued growth of our commercial domestic component overhaul services and the addition of sales provided by Curtiss-Wright Flight Systems Europe A/S, which began its operations during the second quarter of 1995. Sales of shot-peening services for the third quarter of 1995 also improved in both domestic and foreign markets, when compared with the same period of 1994. Overshadowing improvements in these programs, when comparing the 1995 third quarter period with the same period in the prior year, was an overall decline in sales from actuation production programs primarily for military customers. Declines in revenue from production programs, the continuation of significant non-reimbursed engineering 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 largely account for the decline in operating income when comparing the third quarter of 1995 with the third quarter of 1994. As indicated in prior reports, the Corporation regards these development costs as important investments for its long-term future, in view of the potential significance of these major military aircraft programs. Aerospace segment sales for the first nine months of 1995 totaled $52.6 million, 17% below sales of $63.2 million posted in the first nine months of 1994. Operating income for the first nine months of 1995 was also substantially below that of the same period of 1994. Sales reductions in the comparable nine-month periods reflect the absence this year of significant shipments on the F-16 program, the retrofit portion of which was completed in the third quarter of 1994. Sales of shot-peening and peen-forming aerospace services also declined, when comparing the first nine months of 1995 with the same prior year period, reflecting the continued general softness in the global aerospace markets during the early portion of 1995. Operating income levels for the first nine months of 1995 were further impaired by significant non-reimbursed engineering costs, referred to above, associated with development work on the F-22, V-22 and F/A-18 E/F aircraft.
12 Sales for the Industrial segment totaled $12.0 million and $40.2 million for the third quarter and first nine months of 1995, respectively, compared with sales of $12.8 million and $32.1 million posted in the same respective periods of 1994. The decline in sales for the third quarter periods reflects the lack of any contribution from the Buffalo Extrusion Facility, which was sold in June 1995. Excluding results generated by the Buffalo Facility, sales of this segment for the third quarter of 1995 were 21% higher than those of the same period of the prior year. Operating income showed substantial improvements for both the third quarter and first nine-month periods of 1995 when compared with the same periods of 1994. The sale of the Buffalo Facility did not have a material impact on operating income for either period. Improvements in the Industrial segment's performance are largely reflective of higher sales of shot-peening and heat-treating services to automotive and other customers. The Corporation's Metal Improvement Company subsidiary, which provides shot-peening services in North America and Europe, has experienced substantial improvements in all sectors of its industrial markets during the first nine months of 1995. Sales for the Flow Control and Marine segment totaled $5.5 million and $17.6 million for the third quarter and first nine-month periods of 1995, respectively, as compared with sales of $6.7 million and $19.5 million reported in the third quarter and first nine month periods of 1994, respectively. Declines for both periods generally reflect lower sales of commercial valve spare parts and lower volume on military production contracts, offset in part by revenue from the settlement of a termination claim relating to a part of a military valve actuation contract. Operating income for both the third quarter and first nine-month periods of 1995 improved over the income recorded in the same respective periods of 1994. Improvements in operating income largely reflect an improved sales mix on current military valve production programs and cost containments. Other Revenues and Costs: Other revenue recorded in the third quarter of 1995 totaled $3.4 million, compared with $3.1 million recorded in the third quarter of 1994, while other revenue for the first nine months of 1995 totaled $10.3 million, compared with $9.2 million recorded in the same period of 1994. The change in other revenue for both 1995 periods is reflective of higher overall investment income and net gains recorded on sales of machinery and equipment. Operating costs for the Corporation as a whole declined for the third quarter and first nine months of 1995, when compared with costs incurred in the same respective periods of 1994, generally reflecting lower sales in the 1995 periods. Administrative expenses for the first nine months of 1995 were slightly higher than those of the same period in the prior year, reflecting a reduction in accrued income generated from the Corporation's over-funded pension plan. Estimated pre-tax pension income for the first nine months of 1995 totaled $2.0 million, compared with $2.6 million for the first nine months of 1994.
13 CHANGES IN FINANCIAL CONDITION: Liquidity and Capital Resources: The Corporation's working capital was $120.8 million at September 30, 1995, a 12% increase from working capital of $108.3 million at December 31, 1994. The ratio of current assets to current liabilities at September 30, 1995 also increased 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 $81.5 million at September 30, 1995, a 7% increase from December 31, 1994. Net receivables at September 30, 1995 increased when compared with net receivables at December 30, 1994 as a result of higher current sales of shot-peening services to industrial customers and a slightly longer collection period for the Corporation overall. Net inventories at September 30, 1995 were also higher when compared with the prior year-end, primarily due to increases in work-in-process inventory associated with long-term development contracts. 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 $3.6 million remains unused at September 30, 1995, encompasses various letters of credit issued primarily in connection with outstanding industrial revenue bonds. There were no cash borrowings made on the short term credit agreement during the first nine months of 1995. During the first nine months of 1995, internally generated funds were more than adequate to meet capital requirements. Projected funds from operating sources are expected to be more than adequate to cover future cash requirements, including anticipated capital expenditures of approximately $3.2 million for the balance of the year and anticipated expenditures connected with environmental remediation programs. On October 1, 1995, the Corporation repaid an outstanding industrial revenue bond amounting to $4.0 million.
14 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 - Financial Data Schedules (b) Reports on Form 8-K The Registrant did not file any reports on Form 8-K during the quarter ended September 30, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. CURTISS-WRIGHT CORPORATION (Registrant) By: s/ Robert A. Bosi Robert A. Bosi, VicePresident-Finance By: S/ Kenneth P. Slezak Kenneth P. Slezak, Controller Dated: November 13, 1995
15 Exhibit Index --------------------- Exhibit No. Description of Exhibit ----------- ---------------------------------------------------------- 27 Financial Data Schedule