Curtiss-Wright Annual Report 2003

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FY2003 Annual Report · Curtiss-Wright

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CURTISS-WRIGHT CORPORATION ANNUAL REPORT 2003

An F/A-22 fighter jet slices
across the sky.

A nuclear submarine
descends far below the
ocean’s surface.

An oil rig commands
the horizon off the coast
of Louisiana.

A rescue helicopter lands
safely at a hospital in Seattle.

Curtiss-Wright is there.

CONTENTS
CONTENTS

2 2 L E T T E R T O S H A R E H O L D E R S
2 2 L E T T E R T O S H A R E H O L D E R S

2 8 2 0 0 3 A C Q U I S I T I O N S
2 8 2 0 0 3 A C Q U I S I T I O N S

2 9 AT A G L A N C E
2 9 AT A G L A N C E

3 0 Q U A RT E R LY R E S U LT S O F O P E R AT I O N S
3 0 Q U A RT E R LY R E S U LT S O F O P E R AT I O N S

3 0 C O N S O L I D AT E D S E L E C T E D F I N A N C I A L D ATA
3 0 C O N S O L I D AT E D S E L E C T E D F I N A N C I A L D ATA

4 2 Q U A N T I TAT I V E A N D Q U A L I TAT I V E
4 2 Q U A N T I TAT I V E A N D Q U A L I TAT I V E

D I S C L O S U R E S A B O U T M A R K E T R I S K
D I S C L O S U R E S A B O U T M A R K E T R I S K

4 3 R E P O RT O F T H E C O R P O R AT I O N
4 3 R E P O RT O F T H E C O R P O R AT I O N

4 4 R E P O RT O F I N D E P E N D E N T A C C O U N TA N T S
4 4 R E P O RT O F I N D E P E N D E N T A C C O U N TA N T S

4 5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
4 5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

3 1 M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S O F F I N A N C I A L
3 1 M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S O F F I N A N C I A L

4 9 N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
4 9 N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S
C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S

7 2 C O R P O R AT E I N F O R M AT I O N
7 2 C O R P O R AT E I N F O R M AT I O N

FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS

(In thousands, except per share data; unaudited)
(In thousands, except per share data; unaudited)

2003
2003

2002
2002

2001
2001

PERFORMANCE:
PERFORMANCE:

Net Sales
Net Sales

Earnings before interest, taxes, depreciation,
Earnings before interest, taxes, depreciation,

amortization and pension income
amortization and pension income

Normalized earnings before interest, taxes,
Normalized earnings before interest, taxes,

depreciation, amortization and pension income
depreciation, amortization and pension income

Net earnings
Net earnings

Normalized net earnings(1)(1)
Normalized net earnings

Free cash flow(4)(4)
Free cash flow

Normalized free cash flow(4)(4)
Normalized free cash flow

Diluted earnings per share(3)(3)
Diluted earnings per share

Normalized diluted earnings per share(3)(3)
Normalized diluted earnings per share

Return on sales(2)(2)
Return on sales

Normalized return on sales(2)(2)
Normalized return on sales

Return on capital(2)(2)
Return on capital

Normalized return on capital(2)(2)
Normalized return on capital

New orders
New orders

Backlog at year-end
Backlog at year-end

YEAR-END FINANCIAL POSITION
YEAR-END FINANCIAL POSITION

Working capital
Working capital

Current ratio
Current ratio

Total assets
Total assets

Stockholders’ equity
Stockholders’ equity

Stockholders’ equity per share(3)(3)
Stockholders’ equity per share

OTHER YEAR-END DATA
OTHER YEAR-END DATA

Depreciation and amortization
Depreciation and amortization

Capital expenditures
Capital expenditures

$
$

746,071
746,071

$
$

513,278
513,278

$
$

343,167
343,167

119,435
119,435

52,268
52,268

50,266
50,266

2.502.50

6.7%6.7%

7.6%7.6%

743,115
743,115

505,519
505,519

85,030
85,030

80,874
80,874

45,136
45,136

41,642
41,642

28,875
28,875

25,381
25,381

2.16
2.16

2.00
2.00

9.1%
9.1%

8.3%
8.3%

7.6%
7.6%

478,197
478,197

478,494
478,494

107,069
107,069

68,470
68,470

62,880
62,880

40,633
40,633

58,260
58,260

36,013
36,013

3.07
3.07

1.99
1.99

19.0%
19.0%

12.3%
12.3%

18.3%
18.3%

11.8%
11.8%

326,475
326,475

242,257
242,257

$
$

238,640
238,640

$
$

137,237
137,237

$
$

149,231
149,231

2.8 to 1
2.8 to 1

973,665
973,665

478,881
478,881

23.04
23.04

1.8 to 1
1.8 to 1

810,102
810,102

411,228
411,228

20.02
20.02

3.0 to 1
3.0 to 1

500,428
500,428

349,954
349,954

17.37
17.37

$
$

31,327
31,327

33,329
33,329

$
$

18,693
18,693

34,954
34,954

$
$

14,734
14,734

19,354
19,354

Shares of stock outstanding at December 31(3)(3)
Shares of stock outstanding at December 31

20,785,856
20,785,856

20,544,586
20,544,586

20,149,450
20,149,450

Number of registered stockholders
Number of registered stockholders

Number of employees
Number of employees

7,768
7,768

4,655
4,655

8,034
8,034

4,244
4,244

9,898
9,898

2,625
2,625

DIVIDENDS PER SHARE
DIVIDENDS PER SHARE

$
$

0.32
0.32

$
$

0.30
0.30

$
$

0.27
0.27

(1) Earnings have been adjusted to exclude the effects of environmental insurance settlements, postretirement benefits and postemployment costs, recapitalization
costs, gains on sale of real property, net nonrecurring benefit gain, facility consolidation costs, a release of indemnification reserve, and a net legal settlement.

(2) The performance ratios for all years have been shown on a pro-forma basis, excluding the results of the acquired companies in those respective years.

(3) Share and per share data for all years have been adjusted to reflect the 2-for-1 stock split paid on December 17, 2003.

(4) Free cash flow is defined as net earnings plus depreciation and amortization, less capital expenditures.

800,000
800,000

600,000
600,000

400,000
400,000

200,000
200,000

NET SALES
NET SALES ($000s)
($000s)
SALES PER EMPLOYEE ($)
SALES PER EMPLOYEE
($)

NET SALES $746,071
SALES PER EMPLOYEE $168,654
SALES PER EMPLOYEE $168,654

OPERATING INCOME ($000s)
OPERATING INCOME
($000s)

REPORTED $89,330
NORMALIZED $89,330
NORMALIZED $89,330

NET EARNINGS ($000s)
NET EARNINGS
($000s)

REPORTED $52,268
NORMALIZED $52,268
NORMALIZED $52,268

180,000
180,000

160,000
160,000

140,000
140,000

120,000
120,000

100,000
100,000

80,000
80,000

60,000
60,000

40,000
40,000

20,000
20,000

80,000
80,000

60,000
60,000

40,000
40,000

20,000
20,000

For 75 years, our products have been a critical
part of the modern world. We provide essential
components to several of the largest, most
vital industries in the world, including defense,
aerospace and energy. Our highly engineered
value-added products are world renowned for their
advanced technology and unsurpassed reliability.

Whenever a jet lands safely on an aircraft carrier…
a bomber door opens with split-second reliability…
a high-speed train smoothly executes a hairpin
turn along the side of a mountain…it’s a safe bet
that Curtiss-Wright is there.

An aircraft carrier

in the Pacific Ocean.

We’re there.
We’re there.

S NAVY, CURTISS-WRIGHT’S PUMPS, VALVES
ON EVERY NUCLEAR-POWERED AIRCRAFT CARRIER COMMISSIONED BY THE US NAVY, CURTISS-WRIGHT’S PUMPS, VALVES
ON EVERY NUCLEAR-POWERED AIRCRAFT CARRIER COMMISSIONED BY THE U
AND GENERATOR SYSTEMS ENSURE THE RELIABILITY AND SAFETY OF THE
PROPULSION SYSTEM. LANDING ON THE RUNWAY
AND GENERATOR SYSTEMS ENSURE THE RELIABILITY AND SAFETY OF THE PROPULSION SYSTEM. LANDING ON THE RUNWAY
OF A 1,000-FOOT AIRCRAFT CARRIER, AN F-14 IS GUIDED TO SAFETY B
Y WING FLAPS CONTROLLED BY CURTISS-WRIGHT’S
OF A 1,000-FOOT AIRCRAFT CARRIER, AN F-14 IS GUIDED TO SAFETY BY WING FLAPS CONTROLLED BY CURTISS-WRIGHT’S
ACTUATION SYSTEM. AS THE AIRCRAFT IS HARNESSED ON THE RUNWAY AND LAUNCHED BACK INTO THE SKY, THE INTEGRITY
ACTUATION SYSTEM. AS THE AIRCRAFT IS HARNESSED ON THE RUNWAY AN
D LAUNCHED BACK INTO THE SKY, THE INTEGRITY
OF THE CATAPULT SYSTEM IS ENSURED BY CURTISS-WRIGHT’S METAL TRE
ATMENT SERVICES. IN MISSION-CRITICAL DEFENSE
OF THE CATAPULT SYSTEM IS ENSURED BY CURTISS-WRIGHT’S METAL TREATMENT SERVICES. IN MISSION-CRITICAL DEFENSE
APPLICATIONS FOR SEA, AIR AND LAND, CURTISS-WRIGHT IS THERE.
APPLICATIONS FOR SEA, AIR AND LAND, CURTISS-WRIGHT IS THERE.

WEAPONS BAY DOOR ACTUATION SYSTEMS

The F/A-22 Raptor is the US Air Force’s premier next-generation air fighter. The F/A-22 was developed to counter the

increased sophistication and threat of hostile air forces and integrated air systems in use around the world. The F/A-22 has

unprecedented fighter and attack capabilities with its balanced design of stealth, supercruise speed and extreme agility,

along with advanced integrated avionics and a pilot-friendly cockpit.

The F/A-22 aircraft gains much of its stealth capability from its smooth, streamlined shape and by storing its weapons

internally rather than on external wing pods. A key component of this aircraft is the weapons bay doors, which must

open in order to deploy a missile. While the doors are opening and closing, the aircraft’s stealth effect is compromised.

Curtiss-Wright’s actuation systems reliably open and close the main and side weapons bay doors in the blink of an eye,

thereby maximizing mission effectiveness and pilot safety. Curtiss-Wright also supplies the entire leading-edge slat actuation

and drive systems for the F/A-22 program.

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Industry Revenue

defense

Market Overview: Defense

Within the defense market, Curtiss-Wright provides the

and aircraft carriers. Curtiss-Wright is extending these

most technologically advanced flow control and motion

motor and generator technologies to other critical

control products, and metal treatment services to naval,

applications, including advanced aircraft arresting gear

aerospace and ground defense programs. Our products

(AAG) and electro-magnetic aircraft launching systems

manage the flow of liquids on a nuclear submarine and

(EMALS) that capture and relaunch aircraft on the

control the lift, flight and landing of aircraft. Our metal

next generation of aircraft carriers.

treatment services enhance the performance of critical
jet engine and aircraft structural components.

In military aerospace, Curtiss-Wright is a leading supplier
of flight controls, position sensors, control electronics,

Our world-class reputation is built on engineering

fire detection and power conversion systems. We also

excellence, as demonstrated by the technical innovations

provide sophisticated aiming, stabilization and suspension

we develop to solve customer needs, and our precision

systems for ground combat vehicles.

manufacturing that ensures the superior performance

of our products. As a result, we are the sole-source

supplier of hermetically sealed valves, coolant pumps,

motors and control systems for the US Navy nuclear

submarine and aircraft carrier programs. We are also

the designer and sole-source supplier of the largest,

quietest and most power-dense generators that

power the Navy’s latest classes of nuclear submarines

The defense market provides significant growth oppor-

tunities for application of Curtiss-Wright technologies,

products and services, including new construction of

submarines and aircraft carriers, retrofits for aircraft

refueling systems, development programs for the

F/A-22 and Joint Strike Fighter, and various ground

combat vehicle programs.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S 5

A tank in the Middle East.

We’re there.
We’re there.

ET ACQUISITION, AIMING AND SITE SELECTION
AS A MILITARY TANK CROSSES THE LANDSCAPE, CURTISS-WRIGHT’S TARGET ACQUISITION, AIMING AND SITE SELECTION
AS A MILITARY TANK CROSSES THE LANDSCAPE, CURTISS-WRIGHT’S TARG
COMPONENTS KEEP ITS WEAPONS ON TARGET AND STABILIZED REGARDLESS OF THE TERRAIN OR SPEED. CURTISS-WRIGHT
COMPONENTS KEEP ITS WEAPONS ON TARGET AND STABILIZED REGARDLESS
OF THE TERRAIN OR SPEED. CURTISS-WRIGHT
ECTRONIC SYSTEMS AND SUBSYSTEMS FOR THE
HAS PROVIDED THOUSANDS OF MISSION-CRITICAL, HIGH-PERFORMANCE EL
HAS PROVIDED THOUSANDS OF MISSION-CRITICAL, HIGH-PERFORMANCE ELECTRONIC SYSTEMS AND SUBSYSTEMS FOR THE
BRADLEY FIGHTING VEHICLE, ABRAMS TANK AND OTHER ARMORED VEHICLES. OPERATING UNDER THE MOST DEMANDING
BRADLEY FIGHTING VEHICLE, ABRAMS TANK AND OTHER ARMORED VEHICLE
S. OPERATING UNDER THE MOST DEMANDING
ZE THE SAFETY AND SUPERIORITY OF COMBAT
CONDITIONS, CURTISS-WRIGHT’S EMBEDDED ELECTRONIC SYSTEMS MAXIMI
CONDITIONS, CURTISS-WRIGHT’S EMBEDDED ELECTRONIC SYSTEMS MAXIMIZE THE SAFETY AND SUPERIORITY OF COMBAT
ER DEVELOPING TECHNOLOGIES FOR TOMORROW’S
AND TACTICAL VEHICLES, BOTH IN THE AIR AND ON THE GROUND. WHETHER DEVELOPING TECHNOLOGIES FOR TOMORROW’S
AND TACTICAL VEHICLES, BOTH IN THE AIR AND ON THE GROUND. WHETH
OGRAMS, CURTISS-WRIGHT IS THERE.
FUTURE COMBAT SYSTEMS OR SUPPORTING OUR ARMED FORCES’ LEGACY PROGRAMS, CURTISS-WRIGHT IS THERE.
FUTURE COMBAT SYSTEMS OR SUPPORTING OUR ARMED FORCES’ LEGACY PR

EMBEDDED COMPUTER SYSTEMS

The US Air Force’s Global Hawk is a high-altitude, long-endurance unmanned aerial reconnaissance aircraft designed to

provide military field commanders with high-resolution photographs of large geographic areas. Advanced technology

sensors, with a range greater than halfway around the world, and extended flight capabilities enable the Global Hawk to

provide the military with essential intelligence without risking lives. Considered the future of air defense, the Global Hawk

is one of a number of next-generation unmanned aerial vehicles (UAVs) expected to significantly increase the effectiveness

and efficiency of combat operations. Its ability to quickly gather and transmit real-time surveillance information dramatically

improves the mission safety of military personnel in the air and on the ground.

The superior performance of the Global Hawk system is achieved through its high-integrity, embedded computer systems.

The Global Hawk’s flight control, sensors, mission operations and navigation are managed by two Curtiss-Wright Integrated

Main Mission Management Computers that act essentially as the brain of the aircraft. The speed, reliability and accuracy

of the computers allow the Global Hawk to fly for over 30 hours at altitudes greater than 50,000 feet and land on the

centerline of its destination runway, all without human intervention. The advanced technological capabilities of the Global

Hawk system will significantly enhance the US military’s ability to succeed in all types of operations, from sensitive peace-

keeping missions to full-scale combat.

8 C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

Industry Revenue

defense electronics

Market Overview: Defense Electronics

As the next generation of military defense equipment is

older platforms to advancing military reconnaissance

developed, electronic systems will enhance the strategic

infrastructure worldwide. Applications include ground

mobility of military operations. Conventional combat

vehicles, surface and subsurface naval platforms, tactical

vehicles are being systematically replaced with lighter,

and strategic aircraft, and space vehicles and platforms.

more maneuverable models through programs such as

the US Army’s Future Combat System (FCS). A highly

integrated structure of manned and unmanned air
and ground vehicles, FCS will provide an interlinked,

wireless network to create a unified combat force. This

will enable rapid communication and decisive action

across the full spectrum of military operations.

Over the next decade, there will be ample opportunities

to participate in the growth of the worldwide defense

electronics market. Projected to be among the fastest-
growing portions of the US defense budget, the

electronics market represents just over 20 percent of

the budget for 2004. Vehicle electronics (Vetronics) is

expected to grow from $318 million in 2002 to over

Curtiss-Wright specializes in the design and manufacture

$1.9 billion over the next five years, with 70 percent

of high-performance, embedded electronic subsystems,

coming from new programs such as FCS.

employing state-of-the-art real-time technology to perform

mission-critical operations and communications functions.

Our products enable advanced processing in all facets

of the military – from upgrading the performance of

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S 9

A commercial jet high above North America.

We’re there.
We’re there.

S DESTINATION, CURTISS-WRIGHT PROVIDES THE
WHENEVER A COMMERCIAL AIRPLANE TAKES OFF AND SAFELY LANDS AT ITS DESTINATION, CURTISS-WRIGHT PROVIDES THE
WHENEVER A COMMERCIAL AIRPLANE TAKES OFF AND SAFELY LANDS AT IT
THAT OPERATE THE AIRCRAFT FLIGHT CONTROL
INNOVATIVE TECHNOLOGIES, HIGH-PERFORMANCE PRODUCTS AND SYSTEMS
INNOVATIVE TECHNOLOGIES, HIGH-PERFORMANCE PRODUCTS AND SYSTEMS THAT OPERATE THE AIRCRAFT FLIGHT CONTROL
AND SURROUNDING THE AIRCRAFT. FROM PASSENGER
SURFACES AND COMMUNICATE VITAL DATA ON FLIGHT CONDITIONS WITHIN
SURFACES AND COMMUNICATE VITAL DATA ON FLIGHT CONDITIONS WITHIN AND SURROUNDING THE AIRCRAFT. FROM PASSENGER
THE FULL SPECTRUM OF AVIATION PLATFORMS.
JETS TO RESCUE HELICOPTERS, CURTISS-WRIGHT IS THERE SUPPORTING THE FULL SPECTRUM OF AVIATION PLATFORMS.
JETS TO RESCUE HELICOPTERS, CURTISS-WRIGHT IS THERE SUPPORTING

LASER PEENING TECHNOLOGY

A laser beam impacts the surface of a metal part with the instantaneous power output of a nuclear power plant. The shock

wave created by the laser beam compresses the metal’s surface, strengthening its resistance to cracking and corrosion.

This is the essence of laser peening technology, which Curtiss-Wright recently commercialized with great success.

Hundreds of commercial aircraft are now flying with critical parts of their jet engines laser peened to improve their

durability and reliability. Laser peening creates a layer of compressive strength in the areas of the part that are most

vulnerable to failure. Estimated maintenance savings for these aircraft are significant. As new aircraft are designed, our

laser peening technology will enable engineers to design parts that are safer, lighter and perform more efficiently

and economically.

In addition to the current applications on jet engine components, future uses for laser peening are projected for

components used in aerospace structures, nuclear power generation, hazardous waste disposal, high-performance race

cars, medical implants, and oil and gas drilling. Curtiss-Wright developed its laser peening technology in partnership with

Lawrence Livermore National Laboratory and retains the exclusive worldwide rights to the intellectual property necessary

for its use on commercial components.

1 2 C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

Industry Revenue

commercial aerospace

Market Overview: Commercial Aerospace

Every day thousands of commercial airliners around

United States, and a greater demand for capacity glob-

the world safely take off and land with the help of

ally are anticipated to positively impact air travel and

Curtiss-Wright. Our flight control actuation devices,

lead to an industry recovery.

which extend and retract a wing’s leading-edge slats

and trailing-edge flaps, allow an airliner to take off

and land at lower speeds, thereby increasing passenger

safety and reducing runway lengths. Our metal treatment
services include precision shaping of a wing’s aero-

dynamic curvature, coatings for protecting structural

fasteners, and shot peening to strengthen critical

components – all of which reduce costs for manufactur-

ing, maintenance and repairs.

Curtiss-Wright continues to value its long-term

commitment to the commercial aerospace market.

Our advanced technologies, precision manufacturing

capabilities, low-cost structure and long-standing
customer relationships have been and will remain a

critical element of our success in this market. During

the past several years, Curtiss-Wright has aggressively

managed its cost base and is well positioned to benefit

from the anticipated upturn in new commercial

The commercial aerospace market has experienced a

aircraft development programs.

severe downturn over the past three years. Geopolitical

conflict, public health epidemics and economic recession

have all negatively impacted the global airline industry.

Improvements in the economy, already witnessed in the

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S 1 3

A nuclear power plant in Europe.

We’re there.
We’re there.

LAMPS AND MANY OTHER APPLIANCES IN MILLIONS
EVERY DAY, THE TELEVISIONS, REFRIGERATORS, COMPUTERS, TOASTERS, LAMPS AND MANY OTHER APPLIANCES IN MILLIONS
EVERY DAY, THE TELEVISIONS, REFRIGERATORS, COMPUTERS, TOASTERS,
AR POWER PLANTS. CURTISS-WRIGHT PROVIDES
OF HOMES ARE POWERED SAFELY USING ELECTRICITY PRODUCED BY NUCLE
OF HOMES ARE POWERED SAFELY USING ELECTRICITY PRODUCED BY NUCLEAR POWER PLANTS. CURTISS-WRIGHT PROVIDES
HIGHLY ENGINEERED VALVES, PUMPS, INSTRUMENTATION AND SOFTWARE S
YSTEMS TO ENSURE THAT NUCLEAR POWER PLANTS
HIGHLY ENGINEERED VALVES, PUMPS, INSTRUMENTATION AND SOFTWARE SYSTEMS TO ENSURE THAT NUCLEAR POWER PLANTS
OPERATE AT THE ULTIMATE LEVEL OF SAFETY, EFFICIENCY AND ENVIRON
MENTAL COMPLIANCE. FROM DAILY PLANT OPERATION
OPERATE AT THE ULTIMATE LEVEL OF SAFETY, EFFICIENCY AND ENVIRONMENTAL COMPLIANCE. FROM DAILY PLANT OPERATION
TO PLANT UPGRADES AND NEW CONSTRUCTION, CURTISS-WRIGHT IS THERE..
TO PLANT UPGRADES AND NEW CONSTRUCTION, CURTISS-WRIGHT IS THERE

ADVANCED PUMP TECHNOLOGY

As demand increases for locally produced, environmentally friendly energy sources, the recognition of nuclear power as

a clean, economic and independent energy source is attracting new development. Curtiss-Wright is at the forefront in

developing advanced products for the nuclear power industry, including pumps, motors, valves, control rod drive

mechanisms, and instrumentation and controls for existing and next-generation commercial nuclear power plants. Our

technologies provide solutions to obsolescence issues, ensuring continued high levels of plant safety and efficiency.

Curtiss-Wright is a leading supplier of reactor coolant pumps and motors for the majority of the commercial nuclear

pressurized water reactors worldwide. Curtiss-Wright first introduced these pumps over 50 years ago and continues to be

a world leader in reactor coolant pump technology, as well as a major supplier of other critical components to the

commercial nuclear power industry.

Curtiss-Wright’s broad range of core competencies in engineering, analysis, manufacturing and testing are being applied in

the commercial nuclear power industry to achieve improvements in operation and maintenance processes, as well as to

address the emerging focus of the industry to extend the life and increase power output of existing plants. Curtiss-Wright

also plays a key role in maintaining the supply of critical components to the industry that are no longer available from

original equipment manufacturers.

1 6 C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

Industry Revenue

nuclear power

Market Overview: Nuclear Power

Today, nuclear power plants – the second largest source

Because of its attractiveness as an energy source,

of electricity in the United States – supply approximately

nuclear power is projected to represent a growing share

20 percent of the nation’s electricity needs. Nuclear

of the developing world’s electricity consumption over

power plants provide the lowest cost energy source.

the next 20 years. License renewal is expected for a

They are environmentally friendly and minimally impact

majority of the 103 US nuclear power plants and new

water, land, habitat, species and air resources. The

plant construction is expected to increase nuclear

safety of people and the environment is the essence
of Curtiss-Wright’s advanced technologies for the

capacity globally. We are committed to providing
advanced technologies and innovative solutions to

meet the unique nuclear regulatory requirements of

operating plants, as well as the construction of new

power plants internationally.

nuclear power industry.

Curtiss-Wright’s valves, pumps and actuators control

the flow of liquids, such as water used in the cooling

systems of nuclear reactors. Curtiss-Wright is the leading

source of hermetically sealed valves that meet the US

Nuclear Regulatory Commission’s technical specifications

for use in nuclear reactors. Curtiss-Wright’s Digital

Process Control Technology is helping nuclear power

plants address growing concerns over obsolete analog

instrumentation.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S 1 7

An offshore drilling platform
in the North Sea.

We’re there.
We’re there.

NS AND DEEPER WATERS, CURTISS-WRIGHT DESIGNS
AS EXPLORATION FOR OIL AND GAS EXPANDS INTO MORE REMOTE LOCATIONS AND DEEPER WATERS, CURTISS-WRIGHT DESIGNS
AS EXPLORATION FOR OIL AND GAS EXPANDS INTO MORE REMOTE LOCATIO
HIGH-PRESSURE, CORROSIVE ENVIRONMENTS. OUR
TECHNOLOGICALLY ADVANCED VALVES TO MEET THE CHALLENGES OF SUCH
TECHNOLOGICALLY ADVANCED VALVES TO MEET THE CHALLENGES OF SUCH HIGH-PRESSURE, CORROSIVE ENVIRONMENTS. OUR
ITH THE TOLERANCE TO PERFORM IN EXTREMELY
ENGINEERING EXPERTISE AND PRECISION PROCESSING PRODUCE VALVES W
ENGINEERING EXPERTISE AND PRECISION PROCESSING PRODUCE VALVES WITH THE TOLERANCE TO PERFORM IN EXTREMELY
HARSH CONDITIONS SUCH AS THE NORTH ATLANTIC, BERING SEA AND THE
EQUATORIAL WATERS OFF THE AFRICAN COAST. IN
HARSH CONDITIONS SUCH AS THE NORTH ATLANTIC, BERING SEA AND THE EQUATORIAL WATERS OFF THE AFRICAN COAST. IN
ES, CURTISS-WRIGHT IS THERE.
EXPLORATION, PRODUCTION AND PROCESSING OF GLOBAL ENERGY RESOURCES, CURTISS-WRIGHT IS THERE.
EXPLORATION, PRODUCTION AND PROCESSING OF GLOBAL ENERGY RESOURC

DELTAGUARD ® COKE-DRUM UNHEADING DEVICE

One primary method of refining crude oil into gasoline, jet fuel and diesel requires a process known as delayed coking.

Delayed coking is a thermal cracking process achieved through heating crude oil to an extremely high temperature and

pumping it into large pressurized drums. This process breaks the heavy oil into lighter, more valuable fluids which are

vaporized and removed, while the solid, unconverted coal-like byproduct called coke remains. Unheading, or opening the

drum to remove the coke, exposes the drum contents to the atmosphere. The coke-drum unheading process has the

potential to be one of the most dangerous refinery operations and has been the cause of severe accidents.

Curtiss-Wright’s advanced technology solution, the DeltaGuard® coke-drum unheading device, provides the first fully

automated, inherently safe system and is quickly becoming the global industry standard. By creating a completely sealed

connection from the bottom of the coke-drum down through the discharge chute, the DeltaGuard® completely isolates

personnel and equipment from exposure to hot coke, water and steam. In addition to safety, the innovative design

provides significant economic advantages by minimizing operation and maintenance costs, as well as enabling refiners to

process less expensive grades of crude oil.

Curtiss-Wright installed the first DeltaGuard® at the Chevron Salt Lake City facility in September 2001 and has since

installed units on all 14 Chevron coke-drums in the United States, including the El Segundo Refinery where the above

photo was taken. Since its recent introduction, the DeltaGuard® has captured in excess of 10% of the total unheading

device market in the United States. Curtiss-Wright is also currently manufacturing unheading devices for numerous inter-

national refineries.

2 0 C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

Industry Revenue

oil + gas

Market Overview: Oil and Gas

World energy consumption is projected to reach the

performance for severe service applications. We

equivalent of nearly 300 million barrels of oil per day by

continuously bring new products to market, such as

2020, an increase of approximately 40 percent. Oil and

our advanced material modulating pilot-operated relief

gas will continue to be the primary resource, accounting

valve and subsea multiphase pump. And our iPRISM™

for 60 percent of the energy supply worldwide. To meet

software is revolutionizing plant management, docu-

increasing demand, the oil and gas industry is developing

mentation and regulatory compliance.

reserves in increasingly harsh environments, such as

deep water, and increasing supply from sources such as

liquid petroleum gas (LPG). Offshore floating platforms,

subsea systems and LPG facilities all operate under

extreme conditions that require highly engineered

products to optimize performance and mitigate failure

from corrosion or pressure.

Capital spending by the process industry is projected

to increase in the next two to five years to meet

increasing demand and environmental regulations.

Primarily, expenditures will be made to retrofit existing

facilities with improved equipment, materials upgrades

and technologies to increase plant flexibility, reliability,

production and profitability. Curtiss-Wright’s extensive

Curtiss-Wright is one of the world’s leading manu-

line of highly engineered, technologically advanced

facturers of pressure-relief valves used to prevent

valves and related products are well positioned to

over-pressurization of vessels, pipelines and other

support these future requirements of the oil and gas

critical industrial equipment. Our gate, ball and triple

and related industries.

offset butterfly valves continue to provide the highest

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S 2 1

To Our Shareholders:

On December 17, 2003, Curtiss-Wright
and the world celebrated the 100 th
Anniversary of the first flight at Kitty
Hawk, North Carolina — a crowning
tribute to two of our founding fathers,
Orville and Wilbur Wright.

2004 marks another major milestone for Curtiss-Wright Corporation
as we proudly celebrate our 75th Anniversary. The pioneering spirit

of three great inventors gave birth to the aviation industry. Aside

from their historic first flight, the Wright brothers and Glenn Curtiss

developed aircraft capable of flying around the world. Their legacy

companies, Wright Aeronautical and The Curtiss Aeroplane and

Motor Company, were merged to form Curtiss-Wright Corporation on

July 5, 1929. On August 22, 1929, Curtiss-Wright Corporation was

listed on the New York Stock Exchange where it still trades today.

Curtiss-Wright’s enduring success is due to an unwavering

commitment to innovation, engineering excellence and technological

leadership. These principles guided the Wright brothers to achieve

the first flight in 1903 and today inspire us to achieve new firsts

in flow control and motion control technologies, and metal treatment

services. As we celebrate our 75th Anniversary, our goals remain

steadfast:

Martin R. Benante

Chairman and Chief Executive Officer

2 2 C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

LETTER TO SHAREHOLDERS

(cid:127) Focus on advanced technology and high-performance platforms;

As a result of our market leadership and strong performance,

(cid:127) Uphold our world-class reputation for engineering excellence and

pioneering products; and

(cid:127) Maintain a solid capital base while executing a disciplined growth

strategy.

Curtiss-Wright continues to receive accolades for industry leadership.

In 2003, Defense News named Curtiss-Wright to its “Fast Track 50”

list of the fastest-growing defense firms in the world, with Curtiss-

Wright in the top 15 for both one-year and three-year annual growth.

Strong Financial Performance

Strategic, Diversified Markets

In 2003, we achieved record sales and profitability through a mix of

organic growth and successful acquisition integration. Our revenues

of $746 million in 2003 increased 45% over 2002, and our operating

income in 2003 totaled $89 million, an increase of 42% before

pension income. Our net earnings of $52 million, or $2.50 per

diluted share, increased 26% over 2002 on a normalized basis.

Our strong performance is due to our acquisitions achieving better-

than-expected results as well as cross-marketing of our products

and new technologies generating growth in each of the markets in

which we compete.

Our backlog at December 31, 2003 was $506 million compared with

$479 million at December 31, 2002. New orders received in 2003

totaled $743 million, which represents a 55% increase over 2002.

In support of our significant growth, we strengthened and expanded

our capital structure in September with a private placement of $200

million of senior notes. This long-term debt facility provided liquidity

and secured attractive long-term fixed interest rates at historically

low levels.

Our leadership across a broad platform of complementary, strategic

niche markets has produced the balance that has allowed us to

continue achieving profitable growth during a weak economic cycle

and a period of geopolitical uncertainty. While the commercial

aerospace market remains soft, the ramp-up of military program

initiatives has resulted in strong growth in our defense businesses,

including aerospace, naval and land-based programs. In addition,

we have built a leading global position in the emerging defense

electronics market. Electronics is expected to represent one of the

fastest-growing sectors of defense spending as integrated combat

systems and unmanned technologies are developed.

We believe strong military spending will continue to fuel our defense

businesses over the next two years, at which time we believe a

stronger US economy will stimulate spending in other sectors in

which we hold strong market positions. Primarily, our long-standing

presence in commercial aerospace is well positioned to benefit from

increases in consumer travel. During the downturn, Curtiss-Wright has

continued to develop innovative technologies, such as laser peening,

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S 2 3

2003 ACQUISITIONS

Collins Technologies
Specializes in the manufacture of Linear Variable
Displacement Transducers (LVDT’s) for aerospace
flight and engine control applications, and
industrialmarkets

Novatronics
Designer and manufacturer of electric motors
and position sensors (linear and rotary) for
the commercial aerospace, military aerospace
andindustrialmarkets

Peritek
Leading manufacturer of video and graphic
display boards for the embedded computing
industry, including the aviation, defense and
medical markets, as well as products for bomb
detectionandindustrialautomation

Systran
Key supplier of high-performance data communi
cations products for real-time computing systems
primarily for the aerospace, defense, industrial
automation and medical imaging markets

E/M Coatings
Premier US applicator of solid film lubricant
coatings for aerospace, automotive and specialty
industrial applications

AMP
Supplier of commercial shot peening services
totheDetroitautomotivemarket

while aggressively managing its cost base. As a result, we will con-

We have successfully increased our position in the defense electronics

tinue to be competitive on new commercial aircraft development pro-

market and are a global market leader in the embedded systems

grams as well as upgrades and repair and overhaul services.

arena. We anticipate that this market will experience extraordinary

In addition, each of our business segments continues to contribute

important technological advances that have driven product expansion

into a multitude of energy and industrial markets. Through our flow

control segment, we have experienced solid growth in energy markets,

such as nuclear power and in oil and gas, by providing valuable new

products in valve technology and software systems. Recent acquisitions

of electronics technology by our motion control segment will provide

new applications for medical imaging and digital equipment. And,

in metal treatment services, our advances in laser peening technology

are enabling us to explore new opportunities in energy, environmental

and medical applications. Achieving this growth in a sluggish economy

reflects our skill in creating customer solutions and developing new

markets for our products.

Continued Success with Acquisitions

Our focus on technology and innovation is greatly enhanced by our

successful acquisition strategy. In 2003, we made six acquisitions

that have provided us with new products and technological

capabilities, primarily within the defense and commercial electronics

sectors, and expanded our global reach and market penetration.

growth over the next few years as the next generation of military

equipment develops. In 2003, we acquired Collins Technologies,

Peritek, Systran, Novatronics and, in early 2004, Dy 4, each of which

enhances our ability to offer our customers greater electronic

subsystem solutions for military aircraft and ground vehicles. These

acquisitions complement our existing technologies in flight and

engine control applications and provide us with a core competence

in defense electronics upon which we expect to generate significant

organic growth. Additionally, we significantly expanded our

technological capabilities and market penetration in metal treatment

services with the acquisitions of E/M Coatings, a leading provider of

specialty coatings to the aerospace, automotive, electronics, industrial,

medical, military and semiconductor markets, and AMP, which sup-

plies commercial shot peening services primarily to the automotive

market. These acquisitions improved our position in metallurgical

technologies in the US and are complementary to our existing portfo-

lio of metal treatment services.

Delivering Shareholder Value

2003 represented another year of successful firsts and growth for

our company. However, we continue to evaluate our performance

2 4 C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

LETTER TO SHAREHOLDERS

primarily on our ability to enhance shareholder value. As we grow, we

past year, we proudly celebrated our heritage in festivities that were

must not only continue to support our current customers and markets,

broadcast around the world. As part of our commitment to preserve the

but also successfully integrate new members into the Curtiss-Wright

legacy of Curtiss-Wright, we contributed financing for the development

family and expand into new markets. In doing so, Curtiss-Wright

of a replica of the original Curtiss-Wright Flyer, as well as numerous

employees continue to set and achieve high standards of productivity,

events culminating with the Centennial Celebration on December

quality and customer service.

Our significant revenue growth is mirrored by solid income and cash

flow generation. Our confidence in our ability to sustain this momentum

enabled us to approve a 20% dividend increase in November 2003,

returning a portion of our strong profitability to our shareholders.

Additionally, our strong share price performance provided the impetus

17, 2003, at Kitty Hawk, NC. We donated a complete inventory of

aeronautical engine blueprints to the Smithsonian’s National Air and

Space Museum in Washington, DC and Wright State University in

Dayton, OH. Additionally, Curtiss-Wright endowed scholarships at

three leading universities for students pursuing careers in aeronautical

engineering in honor of our founding fathers.

for a 2-for-1 stock split which was completed in December 2003.

We also visited the New York Stock Exchange in December to ring the

We believe that with a lower share price resulting from the stock split,

closing bell in honor of Curtiss-Wright’s contributions to aviation. I was

Curtiss-Wright will be a more attractive investment to a wider audience

joined by Curtiss-Wright’s senior management and two US Air Force

of investors. Additionally, as our company continues to successfully

Reserve officers. These officers recently returned from duty in Iraq

grow, we are pleased to provide a greater level of liquidity in the stock

flying C-130 cargo aircraft and are two of the thousands of brave and

to our shareholders.

In June 2003, we elected Carl G. Miller, a veteran of the

aerospace and defense industry, to serve on our Board of Directors

and as a member of our audit and finance committees. Mr. Miller,

proud soldiers, sailors, airmen and marines who depend on the tech-

nology and reliability of Curtiss-Wright products. We are thankful for

the commitment and sacrifice that all military personnel have made for

our country and are privileged to play a part in supporting their efforts.

who recently retired from TRW, brings over 30 years of financial

We are proud to be celebrating our 75th Anniversary at Curtiss-Wright

management and industry leadership, making him an invaluable

Corporation in concert with the Centennial of Flight, and we want to

resource to Curtiss-Wright. We welcome Mr. Miller’s contributions

thank our exceptional employees who made this milestone possible.

As a career employee of 25 years, I have truly enjoyed being a part

of the Curtiss-Wright legacy and eagerly anticipate the next milestone

achievement.

M artin R. Benante
Chairman and Chief Executive Officer

in the years to come.

As we strive to achieve superior shareholder value with new

technologies and in new markets, our core competence remains in

advanced engineering and precision processing. This steadfast focus,

combined with the ingenuity of our employees, enables us to maintain

a reputation for world-class performance in the markets in which we

compete. We are particularly proud to employ many industry veterans

who are committed to efficient and effective responsiveness to

ever-changing customer needs and market trends. Because of the

creativity, energy, discipline and dedication of so many people who

work for Curtiss-Wright, we are privileged to enjoy long-term

relationships with our customers.

Building on a Legacy

Committed, visionary employees and long-term relationships with

customers have been a hallmark of Curtiss-Wright for three-quarters of

a century. It is therefore fitting that our 75th Anniversary coincides with

the 100th Anniversary of the Wright brothers’ first flight. During the

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S 2 5

Board of Directors

1. DAVID LASKY

2. J. M CLAIN STEWART

3. JOHN R. MYERS

4. CARL G. MILLER

5. MARTIN R. BENANTE

6. S. MARCE FULLER

7. WILLIAM B. MITCHELL

8. DR. WILLIAM W. SIHLER

9. ADMIRAL JAMES B. BUSEY IV (RET.)

2 6 C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

Financial Statements C U RT I S S - W R I G H T C O R P O R AT I O N
Financial Statements

C U RT I S S - W R I G H T C O R P O R AT I O N

M etal Treatment
E/M Engineered Coatings Solutions applies over 1,100 different coat-
ings to im part lubrication, corrosion resistance, and certain cosm etic
and dielectric properties to selected com ponents. The Corporation
acquired six E/M Coatings facilities operating in Chicago, IL; Detroit,
M I; M inneapolis, M N ; H artford, CT; and N orth H ollywood and
Chatsworth, CA. Com bined, these facilities are one of the leading
providers of solid ﬁlm lubricant coatings in the U nited States.

Advanced Material Process is a supplier of com m ercial shot-peening
services prim arily to the autom otive m arket and is located in
Detroit,M ichigan.

CURTISS-WRIGHT 2003 ACQUISITIONS

M otion Control
Novatronics designs and m anufactures electric m otors and position
sensors (both linear and rotary) for the com m ercial aerospace, m ili-
taryaerospace, and industrial m arkets. N ovatronics has operating facil-
ities located in Stratford, Ontario, Canada, and Plainview, N ew York.

Systran Corporation is a leading supplier of highly specialized, high
perform ance data com m unications products for real-tim e system s, pri-
m arily for the aerospace, defense, industrial autom ation, and m ed-
ical im aging m arkets. Key applications include sim ulation, process
control, advanced digital signal processing, data acquisition, im age
processing, and test and m easurem ent. Systran’s operations are
located in Dayton, Ohio.

Peritek Corporation is a leading supplier of video and graphic display
boards for the em bedded com puting industry in a variety of m arkets
including aviation, defense, and m edical. Peritek supplies products for
bom b detection, industrial autom ation, and m edical im aging applica-
tions. Peritek’s operations are located in Oakland, California.

Collins Technologies designs and m anufactures Linear Variable Dis-
placem ent Transducers (“LVDTs”), prim arily for aerospace ﬂight and
engine controlapplications. Industrial LVDTs are used m ostly in indus-
trial autom ation and test applications. Collins’ operations are located in
Long Beach,California.

2 8

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

AT A GLANCE

Curtiss-W right operates across three business segm ents that provide diversiﬁcation and balance. W e provide highly engineered products
and services to a num ber of global m arkets and pride ourselves in the strong custom er relationships that have been developed over the
years.

M otion Control

P R O D U C T S A N D S E R V I C E S

Secondary ﬂight control actuation system s and electrom echanical

trim actuators

W eapons bay door actuation system s
Aircraft cargo door and utility actuation system s
Integrated m ission m anagem ent and ﬂight control com puters
Fractional horsepower (H P) specialty m otors
Force transducers
Fire detection and suppression control system s
Digital electrom echanical aim ing and stabilization system s
H ydropneum atic suspension system s
Electrom echanical tilting system s for high-speed trains
Fire control, sight head, and environm ental control processors

for m ilitary ground vehicles

Position sensors
Power conversion products
Control electronics
H igh perform ance data com m unication products
Com ponent overhaul and logistics support services
Perim eter Intrusion Detection Equipm ent

Flow Control

P R O D U C T S A N D S E R V I C E S

M ilitary and com m ercial nuclear/non-nuclear valves
(butterﬂy, globe, gate, control, safety, relief, solenoid)
M ilitary and com m ercial nuclear/non-nuclear pum ps, m otors,

generators, instrum entation and controls

M ilitary aircraft carrier launch and retrieval equipm ent
Steam generator control equipm ent
Reactor plant equipm ent and controls
Advanced hydraulic system s
Air driven ﬂuid pum ps
Engineering, inspection and testing services

M etal Treatment

P R O D U C T S A N D S E R V I C E S

Shot peening
Shot peen form ing
Laser peening
H eat treating
Specialty coatings
Reed valve m anufacturing
W et ﬁnishing

M A J O R M A R K E T S

Com m ercial jet transports
Business/regional jets
M ilitary transport and ﬁghter aircraft
Ground defense vehicles
U nm anned aerial vehicles
Autom ated industrial equipm ent
H igh-speed trains
M arine propulsion
Space program s
Security system s
N aval ships
H om eland security
Air, sea, and ground sim ulation

M A J O R M A R K E T S

N avy program s (nuclear and non-nuclear)
Power generation (nuclear and fossil)
Processing industry
Oil and gas reﬁning
Petrochem ical/chem ical
N atural gas production and transm ission
Pharm aceutical
Pulp and paper
Autom otive/truck

M A J O R M A R K E T S

Com m ercial jet transports
Business/regional jets
Autom otive
M etalworking
Oil and gas exploration
Power generation
Agricultural equipm ent
Construction and m ining equipm ent

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

2 9

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share data)

First

Second

Third

Fourth

2 0 0 3

N et sales
Gross proﬁt
N et earnings
Earnings per share:

Basic earnings per share
Diluted earnings per share

Dividends per share

2 0 0 2

N et sales
Gross proﬁt
N et earnings
Earnings per share:

Basic earnings per share
Diluted earnings per share

Dividends per share

$179,933
59,032
14,122

$ 182,857
56,682
10,873

$ 189,618
57,017
12,519

$ 193,663
68,187
14,754

$
$
$

.69
.68
.075

$
$
$

.53
.52
.075

$
$
$

.61
.60
.075

$
$
$

.71
.70
.09

$ 97,787
36,155
9,316

$121,777
43,699
10,816

$119,641
41,199
11,312

$174,073
55,033
13,692

$
$
$

.46
.45
.075

$
$
$

.53
.52
.075

$
$
$

.55
.54
.075

$
$
$

.67
.65
.075

All per share amounts have been adjusted to reflect the Corporation’s 2-for-1 stock split during 2003.
See notes to consolidated financial statements for additional financial information.

CONSOLIDATED SELECTED FINANCIAL DATA

(In thousands, except per share data)

2003

2002

2001

2000

1999

N et sales
N et earnings
Total assets
Long-term debt
Basic earnings per share
Diluted earnings per share
Cash dividends per share

$746,071
52,268
973,665
224,151
2.53
2.50
0.32

$
$
$

$513,278
45,136
810,102
119,041
2.21
2.16
0.30

$
$
$

$343,167
62,880
500,428
21,361
3.12
3.07
0.27

$
$
$

$329,575
41,074
409,416
24,730
2.05
2.02
0.26

$
$
$

$293,263
39,045
387,126
34,171
1.93
1.91
0.26

$
$
$

Certain prior year information has been reclassified to conform to current presentation.
All per share amounts have been adjusted to reflect the Corporation’s 2-for-1 stock split during 2003.
See notes to consolidated financial statements for additional financial information.

FORWARD-LOOKING STATEMENTS

This Annual Report contains not only historical inform ation but also
forward-looking statem ents regarding expectations for future com pany
perform ance. Forward-looking statem ents involve risk and uncertainty.
Please refer to the Corporation’s 2003 Annual Report on Form 10-K for

a discussion relating to forward-looking statem ents contained in this
Annual Report and risk factors that could cause future results to differ
from current expectations.

3 0

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General
Curtiss-W right Corporation is a m ultinational provider of highly engi-
neered products and services. The m anagem ent strategy is to position
the Corporation as a m arket leader across a diversiﬁed array of niche
m arkets built upon engineering and technological leadership, low-cost
m anufacturing, and strong relationships with our custom ers. The Cor-
poration provides products and services to a num ber of global m arkets,
such as defense, com m ercial aerospace, nuclear power, oil and gas,
autom otive, and general industrial. The Corporation has achieved bal-
anced growth through the successful application of its core com pe-
tencies in engineering and precision m anufacturing, adapting these
com petencies to new m arkets through internal product developm ent
and a disciplined program of strategic acquisitions. Approxim ately
50% of revenues are generated from defense-related m arkets.

Company Organization
The Corporation m anages and evaluates its operations based on the
products and services it offers and the different m arkets it serves.
Based on this approach, the Corporation has three principal operating
segm ents: Flow Control, M otion Control, and M etal Treatm ent. The
Flow Control segm ent prim arily designs, m anufactures, distributes,
and services a broad range of highly engineered ﬂow-control products
for severe-service m ilitary and com m ercial applications. The M otion
Control segm ent prim arily designs, develops, and m anufactures high-
perform ance m echanical system s, drive system s, and electronic con-
trols and sensors for the aerospace and defense industries. M etal
Treatm ent provides approxim ately 50 m etallurgical services, princi-
pally “shot-peening” and “heat treating.” This segm ent provides these
services for a broad spectrum of custom ers in various industries,
including aerospace, autom otive, construction equipm ent, oil and gas,
petrochem ical, and m etal working. For further inform ation on our prod-
ucts and services and the m ajor m arkets served by our three segm ents,
see page 29 of this Annual Report.

The Corporation records sales and related proﬁts on production and
service type contracts as units are shipped or as services are rendered.
This m ethod is used in our M etal Treatm ent segm ent and in som e of
the business units within the M otion Control and Flow Control seg-
m ents, which serve com m ercial m arkets. For certain contracts that
require perform ance over an extended period before deliveries begin,
sales and estim ated proﬁts are recorded by applying the percentage-
of-com pletion m ethod of accounting.

Results of Operations

F I S C A L Y E A R E N D E D D E C E M B E R 3 1 , 2 0 0 3 C O M PA R E D W I T H
F I S C A L Y E A R E N D E D D E C E M B E R 3 1 , 2 0 0 2

Curtiss-W right Corporation recorded consolidated net sales of $746.1
m illion and net earnings of $52.3 m illion, or $2.50 per diluted share,
for the year ended Decem ber 31, 2003. Sales for the current year
increased 45% over 2002 sales of $513.3 m illion. N et earnings for
2003 increased 16% from 2002 net earnings of $45.1 m illion, or
$2.16 per diluted share.

The increase in revenues was m ainly driven by a com plete year of rev-
enues generated from the 2002 acquisitions of EM D, Tapco Interna-
tional, Penny & Giles, and Autronics and contributions from the 2003

acquisitions, prim arily E/M Coatings and Collins Technologies. See
N ote 2 to the Consolidated Financial Statem ents for further inform a-
tion regarding acquisitions. Including the six businesses acquired in
2003, the Corporation has acquired twelvenew businesses since 2001.
The acquisitions m ade during the last two years contributed $221.8
m illion in increm ental sales during 2003. The rem aining business
units experienced organic sales growth of 6% in 2003, led by the Flow
Control segm ent, which grew organically by 13% , due to higher valve
sales to the nuclear and non-nuclear naval program s and higher sales
of new products to the com m ercial nuclear power generation m arket.
H igher sales of shot peening services for the aerospace m arket in
Europe, sales from our new laser peening technology, and higher sales
from our dom estic aerospace and ground defense businesses also con-
tributed to the higher sales in 2003. These increases in our base busi-
nesses were partially offset by sales declines in com m ercial aerospace
com ponent overhaul and repair services and com m ercial aerospace
original equipm ent m anufacturers (“OEM ”) products. Foreign currency
translation had a favorable im pact on sales of $14.1 m illion for the year.

Operating incom e for 2003 totaled $89.3 m illion, an increase of 29%
from operating incom e of $69.0 m illion in 2002. The increase is pri-
m arily attributed to the contributions of acquisitions m entioned above,
which am ounted to $25.1 m illion in increm ental operating incom e. In
2003, we reclassed pension incom e derived from the Curtiss-W right
Pension Plan into operating incom e for all periods presented. The
2003 pension incom e decreased $5.6 m illion from 2002 due to lower
investm ent returns on the Corporation’s pension assets. The am ount
recorded as pension incom e reﬂects the extent to which the return on
plan assets exceeds the cost of providing beneﬁts in the sam e year, as
detailed further in N ote 16 to the Consolidated Financial Statem ents.
Based upon current m arket conditions, the Corporation expects lower
net pension incom e derived from the Curtiss-W right Pension Plan in
2004. In addition to the contribution of the new acquisitions, 2003
operating incom e beneﬁted from higher sales to the com m ercial
nuclear power generation m arkets, higher sales and m ore favorable
sales m ix of products to the m ilitary aerospace, dom estic ground
defense, and naval m arkets. These increases were offsetby lower m ar-
gins as a result of lower volum e in the com m ercial aerospace OEM and
overhaul and repair businesses, and cost overruns and inventory
adjustm ents within our Flow Control segm ent. Overall consolidated
operating m argins have decreased over the past three years, and this
is related to the large num ber of acquisitions m ade since 2001.
Although the new acquisitions continue to have a positive effect on
operating incom e, the operating m argins of the overall Corporation are
lower since the m argins of the acquisitions are below those of our tra-
ditional businesses. W e consider this to be a short-term cost that will
be m ore than offset by the beneﬁts of diversiﬁcation, the im plem enta-
tion of cost control m easures, and increased future proﬁtability. The
integration of our recent acquisitions continues to progress as planned.
In addition to having im proved operating m argins for alm ost all of our
recent acquisitions, we have initiated program s to cross-m arket prod-
ucts and share technologies across our businesses. Foreign currency
translation had a favorable im pact on operating incom e of $2.7 m il-
lion for 2003.

The increase in net earnings for 2003 as com pared to 2002 is m ainly
due to the higher segm ent operating incom e. The im provem ent in oper-
ating incom e was partially offset by lower non-operating other incom e

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

3 1

ating incom e was partially offset by lower non-operating other incom e
and higher interest expense associated with higher debt levels.

Backlog at Decem ber 31, 2003 was $505.5 m illion com pared with
$478.5 m illion atDecem ber 31, 2002 and $242.3 m illion at Decem -
ber 31, 2001. Acquisitions m ade during 2003 represented $15.6 m il-
lion of the backlog at Decem ber 31, 2003. N ew orders received in 2003
totaled $743.1 m illion, which represents a 55% increase over 2002
new orders of $478.2 m illion and a 128% increase over new orders
received in 2001. Acquisitions m ade during 2002 and 2003 con-
tributed $208.0 m illion in increm ental new orders received in 2003.
It should be noted that m etal treatm ent services, repair and overhaul
services, and after-m arket sales, which represent approxim ately 22%
of the Corporation’s total sales for 2003, are sold with very m odest lead
tim es. Accordingly, the backlog for these businesses is less of an indi-
cation of future sales than the backlog of the m ajority of the products
and services of the M otion Control and Flow Control segm ents, in which
a signiﬁcant portion of sales is derived from long-term contracts.

F I S C A L Y E A R E N D E D D E C E M B E R 3 1 , 2 0 0 2 C O M PA R E D W I T H
F I S C A L Y E A R E N D E D D E C E M B E R 3 1 , 2 0 0 1

Curtiss-W right Corporation recorded consolidated net sales of $513.3
m illion and net earnings of $45.1 m illion, or $2.16 per diluted share,
for the year ended Decem ber 31, 2002. Sales for 2002 increased 50%
over 2001 sales of $343.2 m illion. N et earnings for 2002 decreased
28% from 2001 net earnings of $62.9 m illion, or $3.07 per diluted
share. The 2002 sales im provem ent from 2001 largely reﬂected the
contributions of acquisitions m ade by the Corporation. See N ote 2 to
the Consolidated Financial Statem ents for further inform ation regard-
ing acquisitions. Sales and operating incom e in 2002 of the busi-
nesses acquired in 2002 and the fourth quarter of 2001 were
$181.8 m illion and $19.7 m illion, respectively. The Corporation
acquired six new businesses during 2002 and seven new businesses
during 2001. In addition to the contribution of the new acquisitions,
2002 beneﬁted from stronger m ilitary aerospace sales and higher sales
of ﬂow control products to the com m ercial nuclear power generation
m arkets, nuclear naval program s, and the heavy truck OEM m arket.
These increases were offset by signiﬁcant decreases in the sales of
com m ercial aerospace OEM products, aerospace overhaul and repair
services, and shot-peening services.

Operating incom e for 2002 totaled $69.0 m illion, an increase of 19%
from operating incom e of $58.2 m illion in 2001. The increase was pri-
m arily attributed to the contributions of acquisitions m entioned above.
Pension incom e decreased $3.8 m illion m ainly due to lower invest-
m ent returns on the Corporation’s pension assets. In addition to the
contribution of the acquisitions, 2002 operating incom e beneﬁted
from higher sales of Flow Control products to the com m ercial nuclear
power generation and heavy truck m arkets, higher sales and m ore
favorable sales m ix of products to the m ilitary aerospace, international
ground defense, and naval m arkets. These increases were offset by
lower m argins as a result of lower volum e in the com m ercial aerospace
OEM and unfavorable sales m ix, start-up costs at new facilities, and
certain nonrecurring costs associated with the relocation of a shot
peening facility within our M etal Treatm ent segm ent. Despite lower
dem and from com m ercial airlines, the 2002 operating m argins of our
aerospace overhaul and repair services business were ﬂat com pared to
2001 due to the successful execution of cost reduction initiatives.

3 2

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

H owever, net earnings in 2002 and 2001 included several item s the
Corporation’s m anagem ent believes are nonrecurring and im pact a
year-to-year com parison. In 2002, the Corporation recorded net gains
related to the sale of rental properties, a net gain relating to the real-
location of postretirem ent m edical beneﬁts for certain active em ploy-
ees to our pension plan, release of an indem niﬁcation reserve related
to the sale of our W ood-Ridge business com plex that was no longer
required, a net legal settlem ent, a refund due from the Internal Rev-
enue Service relative to a research and developm ent credit, and costs
associated with the relocation of a shot-peening facility. The results for
2001 included a gain associated with the sale of our W ood-Ridge busi-
ness com plex, recapitalization costs and a net nonrecurring beneﬁt
gain. These item s had a net positive im pact on net earnings of $3.5
m illion, or $0.17 per diluted share in 2002, and $22.2 m illion, or $1.09
per diluted share in 2001.

Foreign currency translation had a favorable im pact on sales and oper-
ating incom e in 2002. Com paring 2002 results to those of 2001, the
ﬂuctuation in foreign currency rates positively im pacted sales by $3.2
m illion and operating incom e by $0.7 m illion. In addition, with the
im plem entation of Statem ent of Financial Accounting Standards
(“SFAS”) N o. 142, the Corporation elim inated the am ortization of
goodwill effective January 1, 2002, which totaled $1.8 m illion in 2001.
See N ote 8 to the Consolidated Financial Statem ents for pro form a
results relative to the effect of goodwill am ortization.

Backlog at Decem ber 31, 2002 was $478.5 m illion com pared with
$242.3 m illion at Decem ber 31, 2001. Acquisitions m ade during 2002
represented $246.9 m illion of the backlog at Decem ber 31, 2002. N ew
orders received in 2002 totaled $478.2 m illion, which represents a
46% increase over 2001 new orders of $326.5 m illion. Acquisitions
m ade during 2002 contributed $67.6 m illion to new orders received in
2002. It should be noted that m etal treatm ent services, repair and
overhaul services, and after-m arket sales, which represent approxi-
m ately 27% of the Corporation’s total sales for 2002, are sold with very
m odest lead tim es. Accordingly, the backlog for these businesses is
less of an indication of future sales than the backlog of the m ajority of
the products and services of the M otion Control and Flow Control seg-
m ents, in which a signiﬁcant portion of sales are derived from long-
term contracts.

Economic and Industry-wide Factors
The weak U .S. econom y and the continued slum p in the global com -
m ercial aerospace industry has had an adverse im pact on the Corpo-
ration, however, increased U .S. m ilitary spending and increased
penetration into certain other served m arkets has m ore than offset this
im pact. Looking forward, m any factors, including future defense
spending in the U .S., the continued im provem ent in global gross
dom estic product, the geopolitical situation, and the pace of econom ic
recovery could im pact the Corporation’s future perform ance.

G E N E R A L E C O N O M Y

M any of our industrial businesses are driven in large part by growth of
the U .S. Gross Dom estic Product (GDP). Based upon certain econom ic
reports, the U .S. econom y’s output (real GDP) had grown at a rate of
6.1% in the second half of 2003 and is expected to continue to grow
at a rate of 4.2% through 2004. According to the current econom ic
data, interest rates are expected to rise very slowly through 2005,

which should encourage econom ic growth. U nem ploym ent is also
expected to drop slowly over the next two years, as com panies produce
increased output ﬁrst through productivity gains and next through
addition of labor.

Although it appears that, at least in the U .S., econom ic indicators are
showing a possible recovery, we are only cautiously optim istic that this
recovery, in fact, will occur. H owever, when it does, our businesses that
are largely econom ic driven, such as m etal treatm ent and petrochem ical
processing, are well positioned to take advantage of the recovery.

D E F E N S E

Approxim ately 50% of our business is in the m ilitary sector, predom i-
nantly in the U .S., and is characterized by long-term program s and
contracts and driven prim arily by the U .S. Departm ent of Defense
(“DoD”) budget.

The DoD budget reﬂects in part an initiative to transform and m odern-
ize U .S. forces. H ighlights of ﬁscal 2004 DoD investm ent funding for
key program s supportive of transform ation include m issile defense;
CVN -21 aircraft carrier; new ship classes/technologies, including DDX
destroyer, littoral com bat ship, and CG(X) cruiser; SSGN conversion;
transform ational satellite com m unications; advanced Extrem ely H igh
Frequency (EH F) capability; Space Based Radar (SBR); cryptologic
m odernization; Future Com bat System s (FCS); and U nm anned Aerial
Vehicles (U AV), including the Global H awk U AV, Predator U AV,
U nm anned com bat aerial vehicles (U CAVs), and U nm anned undersea
vehicles (U U Vs).

Other DoD investm ent program s essential to achieving the transform a-
tion and m odernization of U .S. forces include: shipbuilding— procure-
m ent of seven ships, up sharply from ﬁve ships in ﬁscal 2003;
F/A-22— procurem ent of 22 F/A-22s in ﬁscal 2004 to continue the
developm ent of the aircraft and to im prove its ground attack system s;
F/A-18E/F; Joint Strike Fighter (JSF)— continued system developm ent;
V-22; and chem ical-biological defense program s. In addition, we antic-
ipate future DoD spending to produce increased investm ent in elec-
tronics in m ilitary hardware to upgrade existing platform s and facilitate
“network centric warfare” as part of the m ilitary’s transform ation plans.

Curtiss-W right’s Flow Control and M otion Control segm ents are well
positioned on m any of the aforem entioned platform s, including the
next-generation aircraft carrier, nuclear subm arine program , the F/A-22,
the V-22, the JSF and the U AV program s. As a result of our reputation
and past perform ance, we are involved in m any of the future system s
that are currently in various stages of developm ent. H owever, 2004 is
an election year in the U .S., which could have an im pact on U .S. DoD
budget levels going forward, as could m any other uncertainties such as
budget deﬁcit levels. There is the possibility that defense spending
m ay decrease in the future, which could adversely affect the Corpora-
tion’s operations and ﬁnancial condition. W hile DoD funding ﬂuctuates
year-by-year and program -by-program , the biggest risk facing the Cor-
poration would be the term ination of a program . There are no such
m aterial term inations known at this tim e for program s upon which the
Corporation has content. If a m aterial program were to be term inated,
the term ination process takes several years to wind down, which would
provide the Corporation am ple tim e to reallocate resources. In addition
to the above, there are other risks associated with our defense busi-
nesses, such as failure of a prim e contractor to perform on a contract,

pricing and/or design speciﬁcations which m ay not always be ﬁnalized
at the tim e the contract is bid, and the failure and/or inability of cer-
tain sole source suppliers to provide product to the Corporation, could
have an adverse im pact on the Corporation’s ﬁnancial perform ance.
W hile alternatives could be identiﬁed to replace a sole source supplier,
a transition could result in increased costs and m anufacturing delays.
Our outlook for our defense business looks positive for the near to inter-
m ediate term .

C O M M E R C I A L A E R O S PA C E

Approxim ately 20% of our business serves the global com m ercial aero-
space industry. W orld airline trafﬁc is a prim ary driver for long-term
growth in the com m ercial aerospace industry. Growth in airline trafﬁc
will require increased passenger carrying capacity (“seats”) in the sys-
tem , which can be m et by a m ix of large com m ercial aircraft, sm aller
regional jets and business jets. Based on m arket data, we anticipate a
m ove toward the use of larger aircraft. This m ovem ent will be fueled by
airport congestion, as well as by the replacem ent of older aircraft with
generally larger airplanes. W e also expect to see growth in aircraft range.
Extended-range aircraft have the capability of ﬂying long non-stop
ﬂights as well as m ultiple short ﬂights without the need for refueling.

Based upon m arket data, we expect the com m ercial aerospace m arket
to be ﬂat for 2004.

Curtiss-W right’s M otion Control segm ent is a provider of OEM aero-
space com ponents and its M etal Treatm ent segm ent provides services
to aircraft m anufacturers. Based upon current external estim ates, we
anticipate this industry to rem ain ﬂat in the near term . W hile the em er-
gence of low cost airlines has contributed to this industry’s growth, con-
cerns still exist regarding the ﬁnancial weakness of m any airlines and
the threat of another m ajor terrorist attack, which could have an
adverse im pact on this industry and the Corporation’s operating results
and ﬁnancial position.

Over the past several years the Corporation has diversiﬁed itself away
from dependence on com m ercial aerospace and has sized its resources
to current levels in order to protect proﬁtability and will continue to do
so if necessary. The Corporation is well positioned on its com m ercial
aerospace applications and will beneﬁt from the recovery in this indus-
try, which is expected to occur over the next couple of years.

P O W E R G E N E R AT I O N

There are several factors that m ight precipitate an expansion in com -
m ercial nuclear power, prim arily increasing pressure on environm ental
issues. N uclear power has m inim al im pact on the environm ent, is one
of the m ost econom ical form s of generating electricity, and does not
depend upon foreign oil and gas. W ith respect to existing plants, the
U .S. nuclear power industry is expected to grow based on the fact that
m ost of the 103 current plants are or will be applying for plant life
extensions. This, com bined with new plant construction in the U .S.,
Far East, and other parts of the world should drive expansion in this
industry. Curtiss-W right Flow Control is well positioned to take part in
this expansion over the next couple of years. H owever, there is no guar-
antee that the U .S. plants will be granted plant life extensions or that
the N uclear Regulatory Com m ission will authorize the construction
ofnew facilities in the U .S. In addition, the geopolitical clim ate is not
certain and is volatile, which could im pact future nuclear plant
construction levels around the world.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

3 3

P E T R O C H E M I C A L P R O C E S S I N G

Based upon m arket data, capital expenditures in the petroleum indus-
tries are expected to increase in the next few years. The long-term
global forecast for sales of valves to the petroleum m arket currently
anticipates an annual ﬁve percent increase. Due to the fact that capac-
ity utilization of existing U .S. reﬁneries rose from 70% to 91% from
1981 to 2000 and worldwide from 70% to 85% over the sam e tim e
period, the dem and for valves is expected to be prim arily driven by

m aintenance and upgrades. H owever, the proposed and enacted envi-
ronm ental regulations in the U .S. and other developed countries could
drive the dem and for valves by as m uch as 8 – 13% increases over the
next few years. H owever, it is uncertain whether certain econom ic
recoveries can be sustained or whether anticipated future environ-
m ental regulatory changes will actually occur, and whether such regu-
latory changes will have an im pact on this industry.

2003 Segment Performance
Curtiss-W right operates in three principal operating segm ents on the basis of products and services offered: Flow Control, M otion Control, and M etal
Treatm ent. See N ote 18 to the Consolidated Financial Statem ents for further segm ent ﬁnancial inform ation. The following table sets forth revenues,
operating incom e, operating m argin, and the percentage changes on those item s, as com pared with the prior-year periods, by operating segm ent:

(Dollars in thousands)

SALES:

Flow Control
Motion Control
Metal Treatment

Total Curtiss-Wright

OPERATING INCOME:

Flow Control
Motion Control
Metal Treatment

Total Segments
Pension Income
Corporate & Other

Total Curtiss-Wright

OPERATING MARGINS:

Flow Control
Motion Control
Metal Treatment

Total Segments
Total Curtiss-Wright

Year Ended D ecem ber 31,

Percent Changes

2003

2002

2001

2003 vs.
2002

2002 vs.
2001

$341,271
265,905
138,895

$172,455
233,437
107,386

$ 98,257
137,103
107,807

$746,071

$513,278

$343,167

$ 39,991
30,350
19,055

$ 20,693
29,579
14,403

$ 10,703
19,219
19,513

89,396
1,611
(1,677)

64,675
7,208
(2,846)

49,435
11,042
(2,277)

$ 89,330

$ 69,037

$ 58,200

97.9%
13.9%
29.3%

45.4%

93.3%
2.6%
32.3%

38.2%
–77.6%
41.1%

29.4%

75.5%
70.3%
–0.4%

49.6%

93.3%
53.9%
–26.2%

30.8%
–34.7%
25.0%

18.6%

11.7%
11.4%
13.7%

12.0%
12.0%

12.0%
12.7%
13.4%

12.6%
13.5%

10.9%
14.0%
18.1%

14.4%
17.0%

F L O W C O N T R O L

The Corporation’s Flow Control segm ent reported sales of $341.3 m il-
lion for 2003, a 98% increase over 2002 sales of $172.5 m illion. The
higher sales largely reﬂect the full year of revenues from the acquisi-
tions of EM D and TAPCO International, Inc. com pleted in the fourth
quarter of 2002. The 2003 increm ental sales from these acquisitions
am ounted to $170.3 m illion, driven m ainly by strong ﬁnancial perfor-
m ance from EM D. The rem aining business units of this segm ent pro-
duced organic sales growth of 13% , which was driven by higher sales
to the com m ercial nuclear power generation m arket, nuclear and non-
nuclear naval program s, and dom estic and international oil and gas
m arkets. H igher sales to the com m ercial nuclear power generation
m arkets were due to the launch of new product lines and the expedited
outage service requirem ents by the power generation plants. The non-
nuclear naval products sales growth was due to new products, such as

ball valves and JP-5 fuel valve system s, and higher electronic sales
drove the nuclear naval product growth. Sales of the coker valve
products to the petrochem ical and oil and gas m arkets were up due to
new orders while the rem aining product lines in those m arkets were
essentially ﬂat with the prior year. In addition, foreign currency trans-
lation favorably im pacted sales in 2003 from 2002.

Operating incom e for the year increased by 93% over the prior year.
Acquisitions m ade in the fourth quarter of 2002 generated increm en-
tal operating incom e of $21.3 m illion in 2003, while the balance of the
segm ent businesses rose 2% over 2002. The organic growth was m ainly
driven by higher volum e m entioned above, favorable sales m ix, and
im proved productivity gained from the relocation of the electronics unit,
offset by slightly lower m argins related to start-up costs on the new prod-
uct launches and cost overruns on a safety relief valve project. In addi-
tion, unanticipated shipping delays and a delay in launching strategic

3 4

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

plans for im proved operating cost efﬁciencies at our international unit
resulted in an operating loss for the year. H owever, in late 2003, a new
enterprise resource planning system was installed and various process
im provem ents were im plem ented. Foreign currency translation had
a $0.2 m illion positive im pact on 2003 operating incom e.

Flow Control segm ent sales in 2002 were 76% higher than the sales
of $98.3 m illion for 2001. The 2002 sales included $72.9 m illion
related to acquisitions m ade during 2002 and 2001. The base busi-
ness also im proved largely due to stronger sales of nuclear products to
the U .S. N avy and power generation m arkets, higher sales to the heavy
truck OEM m arkets, and solid sales to our European valve m arkets.
Sales of the valve products to the petrochem ical and oil and gas m ar-
kets were essentially ﬂat with 2001. In addition, foreign currency trans-
lation favorably im pacted sales in 2002 from 2001. Operating incom e
for 2002 increased by 93% over 2001, beneﬁting from the acquisitions
and from organic growth. Operating incom e from the rem aining base
business units of this segm ent im proved 21% due to higher sales vol-
um es, im proved m argins on ﬂow control products for nuclear applica-
tions and heavy truck OEM m arkets, and overall cost reduction
initiatives. Foreign currency translation also had a $0.2 m illion nega-
tive im pact on 2002 operating incom e. In addition, the elim ination of
goodwill am ortization, which totaled $1.0 m illion in 2001, also favor-
ably im pacted the 2002 results.

Backlog at Decem ber 31, 2003 is $317.8 m illion com pared with
$304.3 m illion atDecem ber 31, 2002 and $73.5 m illion at Decem ber
31, 2001. N ew orders received in 2003 totaled $353.7 m illion, which
represents a 111% increase over 2002 new orders of $167.9 m illion and
a 257% increase over new orders received in 2001. The 2003 increase
is m ainly due to the full year contributions by the segm ent’s acquisi-
tions of 2002 and a large order in the fourth quarter of 2003 from the
N avy Surface W arfare Center.

M O T I O N C O N T R O L

The Corporation’s M otion Control segm ent reported sales of $265.9
m illion for 2003, a 14% increase over 2002 sales of $233.4 m illion.
The higher sales largely reﬂect the full year contributions of the April
2002 acquisitions of Penny & Giles (“P&G”) and Autronics (“Autron-
ics”) and the contributions of the 2003 acquisitions of Collins Tech-
nologies, Peritek, Systran, and N ovatronics. The 2003 increm ental
sales associated with these acquisitions am ounted to $28.0 m illion.
Sales from the rem aining base businesses were essentially ﬂat. Strong
dom estic ground defense sales, prim arily related to the expedited
deliveries of spare parts for the Bradley Fighting Vehicle to support the
Iraqi war effort, an increase in sales of m ilitary aerospace products, pri-
m arily resulting from new orders for F-16 spare parts and the Joint
Strike Fighter developm ent, and higher sales of m ilitary electronics for
the Global H awk unm anned aerial reconnaissance system were offset
by lower volum e associated with the overhaul and repair services pro-
vided to the global com m ercial airline industry and lower OEM com -
m ercial aircraft production. The softening in the dem and for the
com m ercial aerospace business and related services, which began in
2001, has continued through 2003. In addition, foreign currency trans-
lation favorably im pacted sales in 2003 from 2002.

Operating incom e for 2003 increased 3% over the prior year. Acquisi-
tions m ade in 2002 and 2003 generated increm ental operating
incom e of $2.3 m illion, while the balance of the segm ent businesses

was essentially ﬂat as com pared to 2002. Slightly lower operating
incom e from the base businesses was m ainly due to the lower volum e,
lower overhead absorption, and the write-off of obsolete inventory at
our overhaul and repair services business unit. Operating incom e of our
com m ercial aerospace OEM business also declined due to lower
volum e. This decline was offset by higher operating incom e for our
m ilitary aerospace products, which rose due to volum e and cost
im provem ents. H igher operating incom e for our land-based defense
businesses was due to higher volum e and m ore favorable sales m ix
from the spare parts for the Bradley Fighting Vehicle. Foreign currency
translation favorably im pacted 2003 operating incom e by $0.9 m illion.

M otion Control segm ent sales for 2002 were 70% above 2001 sales
of$137.1 m illion. The higher sales largely reﬂected the contributions
from the acquisitions of P&G and Autronics in April 2002 and the
full year contributions of the N ovem ber 2001 acquisitions of Lau
Defense System s (“LDS”) and Vista Controls (“Vista”). The 2002 sales
associated with these acquisitions am ounted to $110.3 m illion. Also
affecting 2002 sales were lower aerospace repair and overhaul services
com pared to the prior year. The softening in the dem and for these ser-
vices was exacerbated by the im pact of the events of Septem ber 11th.
This decline was offset by higher shipm ents of 737 and F/A-22 OEM
products and strong growth in the global ground defense business as
com pared to the prior year. In addition, foreign currency translation
favorably im pacted sales in 2002 from 2001. Operating incom e for
2002 increased 54% over 2001 m ainly due to the contributions from
the 2002 and 2001 acquisitions. Operating incom e from the rem ain-
ing base businesses increased 2% due to the stronger m argins from
both the aerospace and land-based defense businesses. These
im provem ents were m ostly offset by declines in our com m ercial aero-
space business. The operating m argins of our overhaul and repair busi-
ness were ﬂat com pared to the prior year, despite the lower dem and
from com m ercial airlines. Foreign currency translation favorably
im pacted 2002 operating incom e by $0.3 m illion. In addition, the
elim ination of goodwill am ortization, which totaled $0.6 m illion in
2001, also favorably im pacted the 2002 results.

Backlog at Decem ber 31, 2003 was $186.3 m illion com pared with
$173.2 m illion atDecem ber 31, 2002 and $167.5 m illion at Decem ber
31, 2001. Acquisitions m ade during 2003 represents $15.6 m illion of
the backlog at Decem ber 31, 2003. N ew orders received in 2003
totaled $250.1 m illion, which represents a 23% increase over 2002
new orders of $203.3 m illion and a 109% increase over new orders
received in 2001. The increase is m ainly due to the segm ent’s recent
acquisitions.

M E TA L T R E AT M E N T

The Corporation’s M etal Treatm ent segm ent reported sales of $138.9
m illion in 2003, an increase of 29% over 2002 sales of $107.4 m illion.
The higher sales largely reﬂect the contributions from the acquisition
of the assets of Advanced M aterial Process (“AM P”) in M arch 2003
and E/M Engineered Coatings Solutions (“E/M Coatings”) in April
2003 and the full year contributions of the 2002 acquisitions of the
assets of Brenner Tool & Die, Inc. and Ytstruktur Arboga AB. The 2003
increm ental sales associated with these acquisitions am ounted to
$23.5 m illion. Sales from the rem aining base businesses grew 7%
m ainly due to dom estic and international sales from our new laser
peening technology. Our core shot-peening sales were down slightly in

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

3 5

our N orth Am erican divisions due m ainly to slow downs in the com -
m ercial aerospace and autom otive m arkets. The im provem ent in core
shot-peening sales from our European divisions was m ainly driven by
favorable foreign currency translation. Sales from our heat-treating
services were essentially ﬂat year over year, whereas the sales from
ourreed valve product line declined due to the softness in the auto-
m otive industry.

Operating incom e for 2003 increased 32% from the prior year. Acqui-
sitions m ade in 2002 and 2003 generated increm ental operating
incom e of $1.6 m illion. This increm ental incom e is net of a loss asso-
ciated with our ﬁnishing division, which was negatively im pacted by a
custom er bankruptcy. The balance of the segm ent businesses rose
22% over 2002. The organic operating incom e growth is due to favor-
able sales m ix from our laser peening services, higher volum e, and the
beneﬁt from cost reduction initiatives. In 2002, this segm ent incurred
higher start-up costs at new facilities and nonrecurring costs associ-
ated with the relocation of a shot-peening facility. Foreign currency
translation favorably im pacted 2003 operating incom e by $1.6 m illion.

M etal Treatm ent segm ent sales for 2002 were $107.4 m illion, essen-
tially ﬂat with the 2001 sales. The slight decrease resulted from lower
shot peening sales, especially at the European divisions, which were
im pacted by softness in the aerospace and autom otive m arkets, par-
tially offset by the contribution from the 2002 acquisition in Sweden
and sales from our new laser peening technology. The decline in the
shot peening business was offset by higher heat treating sales result-
ing from the full year contributions from the two acquisitions m ade in
the fourth quarter of 2001. The valve division im proved over 2001 due
to higher sales to autom otive and air conditioner com pressor cus-
tom ers. In addition, foreign currency translation favorably im pacted
sales in 2002 from 2001. In 2002, operating incom e was 26% below
2001 due prim arily to an unfavorable sales m ix, start-up costs at new
facilities, and nonrecurring costs associated with the relocation of a
shot peening facility. Foreign currency translation favorably im pacted
2002 operating incom e by $0.6 m illion. In addition, the elim ination of
goodwill am ortization, which totaled $0.2 m illion in 2001, also favor-
ably im pacted the 2002 results.

Backlog at Decem ber 31, 2003 was $1.4 m illion com pared with $1.0
m illion atDecem ber 31, 2002 and $1.3 m illion at Decem ber 31, 2001.
N ew orders received in 2003 totaled $139.9 m illion, which represents
a 30% increase from 2002 new orders of $107.5 m illion and a 29%
increase over new orders received in 2001. The increase is m ainly due
to the segm ent’s recent acquisitions.

C O R P O R AT E A N D O T H E R E X P E N S E S

The Corporation had non-segm ent operating costs of $1.7 m illion in
2003. The operating costs consisted m ainly of net environm ental
rem ediation and adm inistrative expenses, increm ental com pensation
cost, additional workers com pensation insurance, director fees associ-
ated with additional Board of Directors’ m eetings and a stock award,
debt com m itm ent fee expenses, and other adm inistrative expenses.
These expenses were partially offset by the collection of interest on a
2002 net legal settlem ent.

N on-segm ent operating costs for 2002 were $2.8 m illion, which con-
sisted m ainly of net environm ental rem ediation and adm inistrative
expenses, post-em ploym ent expenses, professional consulting costs

3 6

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

associated with the integration of the recent acquisitions, debt com -
m itm ent fee expenses associated with the Corporation’s prior credit
agreem ents, insurance costs, charitable contributions, and other
adm inistrative expenses. These expenses were partially offset by a net
legal settlem ent.

N on-segm ent operating costs for 2001 were $2.3 m illion, and con-
sisted m ainly of adm inistrative expenses, $1.5 m illion in expenses
associated with the Corporation’s Recapitalization (see “Recapitaliza-
tion” later in this section for m ore inform ation), partially offset by a net
nonrecurring beneﬁt gain of $1.2 m illion, which consisted of an approx-
im ate $3.0 m illion gain resulting from the dem utualization of an insur-
ance com pany in which the Corporation was a policyholder, partially
offset by $1.8 m illion of nonrecurring em ployee beneﬁt related costs
which are included in general and adm inistrative expenses in the state-
m ent of earnings.

N O N - O P E R AT I N G I N C O M E / E X P E N S E S

The Corporation recorded non-operating net revenues (excluding interest
expense) in 2003 of $0.4 m illion com pared with $4.5 m illion in 2002.
In 2002, the Corporation recorded nonrecurring item s, the net effect of
which had a favorable pre-tax im pact in 2002 of $3.6 m illion. Of the
$45.2 m illion generated in 2001, $38.9 m illion relates to the pre-tax
gain from the sale of the W ood-Ridge Business Com plex, which is m ore
fully described in N ote 3 to the Consolidated Financial Statem ents.

N et investm ent incom e of $0.3 m illion in 2003, which is included in
other non-operating incom e, decreased from the prior year’s $0.6 m il-
lion due to a lower cash position resulting from the funding of acquisi-
tions and lower interest rates. Rental incom e in 2002 declined from
2001 due to the sale of our W ood-Ridge rental property in Decem ber
2001. The increase in interest expense for 2003 as com pared to 2002
is due to higher debt levels. The higher debt levels are due to the fund-
ing of our recent acquisitions.

P R O V I S I O N F O R I N C O M E TA X E S

The effective tax rates for 2003, 2002, and 2001 are 37.8% , 37.1% , and
38.5% , respectively. The 2003 effective tax rate included the beneﬁt of
the restructuring of som e of our European operations. The 2002 effec-
tive rate included a one-tim e beneﬁt of 1.3% associated with the recov-
ery of research and developm ent tax credits related to earlier years. The
reduction in the state and local tax rate from 2002 to 2001 is princi-
pally the result of the m ix in earnings derived from particular states.

Liquidity and Capital Resources

S O U R C E S A N D U S E S O F C A S H

The Corporation derives the m ajority of its operating cash inﬂow from
receipts on the sale of goods and services and cash outﬂow for the pro-
curem ent of m aterials and labor, and is therefore subject to m arket ﬂuc-
tuations and conditions. A substantial portion of the Corporation’s
business is in the defense sector, which is characterized by long-term
contracts. M ost of our long-term contracts allow for several billing points
(progress or m ilestones) that provide the Corporation with cash receipts
as costs are incurred throughout the project rather than upon contract
com pletion, thereby reducing working capital requirem ents. In som e
cases, these paym ents can exceed the costs incurred on a project.

Prior to 2003, the Corporation had a portfolio of cash and m arketable
securities, which provided a steady stream of investm ent incom e.
These investm ents have been m onetized and the proceeds used to fund
our strategic acquisition program . Thus, the cash ﬂow beneﬁt from
these sources no longer exists.

O P E R AT I N G A C T I V I T I E S

The Corporation’s working capital was $238.6 m illion at Decem ber 31,
2003, an increase of $101.4 m illion from the working capital at Decem -
ber 31, 2002 of $137.2 m illion. The ratio of current assets to current
liabilities was 2.8 to 1 at Decem ber 31, 2003, com pared with a ratio of
1.8 to 1 at Decem ber 31, 2002. Cash and cash equivalents totaled
$98.7 in the aggregate at Decem ber 31, 2003, up 107% from $47.7
m illion at Decem ber 31, 2002. The increase in cash is prim arily due to
net proceeds from the $200 m illion Senior N ote offerings com pleted
in Septem ber 2003. See below for a further description of the Senior
N otes. These proceeds were used to repay the m ajority of the out-
standing indebtedness under the existing revolving credit facilities and
to fund the acquisitions m ade in Decem ber 2003. Excluding the
im pact on cash, working capital increased by $9.2 m illion due to the
acquisition of six businesses in 2003. In addition to the im pact of these
acquisitions, working capital changes were also highlighted by a
decrease in deferred revenue due to a reduction in those contracts
whose billings were in excess of incurred costs. Accrued expenses
increased m ainly due to higher accrued interest on the Senior N otes.
Short-term debt was $1.0 m illion at Decem ber 31, 2003, a decrease of
$31.8 m illion from the balance at Decem ber 31, 2002. The decrease
in short-term debt is due to repaym ent of the m ajority of outstanding
indebtedness under the existing revolving credit facilities. Days sales
outstanding at Decem ber 31, 2003 increased to 56 days from 51 days
at Decem ber 31, 2002 while inventory turnover increased to 5.5 turns
at Decem ber 31, 2003 as com pared to 4.8 turns at Decem ber 31, 2002.

The Corporation’s balance of cash and short-term investm ents totaled
$48.0 m illion at Decem ber 31, 2002, a decrease of $19.1 m illion from
the balance at Decem ber 31, 2001. Excluding the im pact on cash,
working capital increased $16.9 m illion due to the acquisition of six
businesses in 2002. In addition to the im pact of these acquisitions,
working capital changes were also highlighted by a decrease in incom e
taxes payable of $11.1 m illion due to the large tax paym ent related to
the gain on the sale of the W ood-Ridge business com plex. Days sales
outstanding at Decem ber 31, 2002 decreased to 51 days from 59 days
at Decem ber 31, 2001 while inventory turnover increased to 4.8 turns
at Decem ber 31, 2002 versus 4.4 turns at Decem ber 31, 2001.

I N V E S T I N G A C T I V I T I E S

The Corporation has acquired twenty-ﬁve businesses since 1998 and
expects to continue to seek acquisitions that are consistent with our
long-term growth strategy and accretive to earnings. A com bination of
cash resources, funds available under the Corporation’s Credit Agree-
m ents, and proceeds from the Corporation’s Senior N otes issue were
utilized for the funding of these acquisitions, which totaled $71.4 m il-
lion and $164.7 m illion in 2003 and 2002, respectively. As noted in
N ote 2 to the Consolidated Financial Statem ents, certain acquisition
agreem ents contain contingent purchase price adjustm ents. The Cor-
poration is also com m itted to potential earn-out paym ents on six of its
acquisitions dating back to 2001. The Corporation estim ates these
potential payouts to be approxim ately $2 m illion to $3 m illion per year

from 2004 through 2007. Additional acquisitions will depend, in part,
on the availability of ﬁnancial resources at a cost of capital that m eets
our stringent criteria. As such, future acquisitions, if any, m ay be
funded through the use of the Corporation’s cash and cash equivalents,
or through additional ﬁnancing available under the credit agreem ents,
or through new debt facilities or equity offerings.

Capital expenditures were $33.3 m illion in 2003, $35.0 m illion in
2002, and $19.4 m illion in 2001. Principal expenditures were for addi-
tional facilities and m achinery and equipm ent. Capital expenditures in
2003 included building expansions, a new laser peening facility and
associated laser m achinery, and various other m achinery and equip-
m ent. Capital expenditures in 2002 included the construction of a new
facility, additional m achinery and equipm ent for start-up operations,
and new Enterprise Resource Planning (“ERP”) com puter system s at
two facilities. Capital expenditures in 2001 included the construction
of a new facility and an investm ent in a new ERP com puter system at
one of the Corporation’s facilities.

F I N A N C I N G A C T I V I T I E S

On Septem ber 25, 2003 the Corporation issued $200.0 m illion of
Senior N otes (the “N otes”). The N otes consist of $75.0 m illion of
5.13% Senior N otes that m ature on Septem ber 25, 2010 and $125.0
m illion of 5.74% Senior N otes that m ature on Septem ber 25, 2013. The
Corporation used the net proceeds of the N otes to repay the m ajority
of the outstanding indebtedness under the existing revolving credit
facilities. The N otes are senior unsecured obligations and are equal in
right of paym ent to the Corporation’s existing senior indebtedness. The
Corporation, at its option, can prepay at any tim e, all or from tim e to
tim e any part of, the N otes, subject to a m ake-whole am ount in accor-
dance with the term s of the N ote Purchase Agreem ent. The Corpora-
tion paid custom ary fees that have been deferred and will be am ortized
over the term s of the N otes. The Corporation is required under the N ote
Purchase Agreem ent to m aintain certain ﬁnancial ratios and m eet
certain net worth and indebtedness tests, of which the Corporation is
in com pliance at Decem ber 31, 2003.

On N ovem ber 6, 2003 the Corporation entered into two interest rate
swap agreem ents with notional am ounts of $20 m illion and $60 m il-
lion to effectively convert the ﬁxed interest on the $75 m illion 5.13%
Senior N otes and $125 m illion 5.74% Senior N otes, respectively, to
variable rates based on speciﬁed spreads over six-m onth LIBOR. In the
short-term , the swaps are expected to provide the Corporation with a
lower level of interest expense related to the N otes.

At Decem ber 31, 2003, the Corporation had two credit agreem ents
aggregating $225.0 m illion with a group of eight banks. The Revolving
Credit Agreem ent offers a m axim um of $135.0 m illion over ﬁve years to
the Corporation for cash borrowings and letters of credit. The Revolving
Credit Agreem ent expires M ay 13, 2007, but m ay 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 Agreem ent, which
allows for cash borrowings up to $90.0 m illion. The Short-Term Credit
Agreem ent expires M ay 7, 2004, but m ay be extended, with the consent
of the bank group, for additional periods not to exceed 364 days each.
The Corporation expects to extend the Short-Term Agreem ent in 2004
with the consent of the bank group; however, there can be no assurances
that the bank group will approve the extension. In the event the bank
group does not renew the Short-Term Credit Agreem ent, the Corporation

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

3 7

should have sufﬁcient cash ﬂow to m eet its cash requirem ents. Bor-
rowings under these agreem ents bear interest at a ﬂoating rate based on
m arket conditions. In addition, the Corporation’s rate of interest and
paym ent of facility fees are dependent on certain ﬁnancial ratios of the
Corporation, as deﬁned in the agreem ents. As of Decem ber 31, 2003,
the Corporation pays annual facility fees on the aggregate com m itm ent
of the Revolving Credit Agreem ent and Short-Term Credit Agreem ent.
The Corporation is required under these agreem ents to m aintain certain
ﬁnancial ratios and m eet certain net worth and indebtedness tests as
detailed in the agreem ents, the m ost restrictive of which is a Debt to
EBITDA lim it of 3 to 1. At Decem ber 31, 2003, the Corporation is in
com pliance with these covenants. The Corporation would consider other
ﬁnancing alternatives to m aintain balance of capital structure and
ensure com pliance with all debt covenants. Cash borrowings (excluding
letters of credit) under the two credit agreem ents at Decem ber 31, 2003
were $8.9 m illion com pared with cash borrowings of $137.5 m illion at
Decem ber 31, 2002. The unused credit available under these agree-
m ents at Decem ber 31, 2003 was $197.1 m illion.

Industrial revenue bonds, which are collateralized by real estate, were
$14.3 m illion and $13.4 m illion at Decem ber 31, 2003 and Decem ber
31, 2002, respectively. The loans outstanding under the Senior N otes,
Interest Rate Swaps, Revolving Credit Agreem ent, and Industrial Rev-
enue Bonds had variable interest rates averaging 2.88% for 2003;
2002 loans outstanding under the Revolving Credit Agreem ents and
Industrial Revenue Bonds had variable interest rates averaging 2.32% .

F U T U R E C O M M I T M E N T S

Cash generated from operations are considered adequate to m eet
the Corporation’s operating cash requirem ents for the upcom ing
year,including planned capital expenditures of approxim ately $40 m il-
lion, interest paym ents of approxim ately $8 m illion to $10 m illion, esti-
m ated incom e tax paym ents of approxim ately $27 m illion to $30
m illion, dividends of approxim ately $8 m illion, pension funding
related to the EM D pension and postretirem ent plansof approxim ately
$6 m illion, and additional working capital requirem ents. The Corpora-
tion has approxim ately $3 m illion in short-term environm ental liabili-
ties, which is m anagem ent’s estim ation of cash requirem ents for 2004.
There can be no assurance, however, that the Corporation willcontinue
to generate cash ﬂow at the current level. If cash generated from
operations is not sufﬁcient to support these requirem ents and invest-
ing activities, the Corporation m ay be required to reduce capital expen-
ditures, reﬁnance a portion of its existing debt, or obtain additional
ﬁnancing.

In 2004, capital expenditures are expected to be approxim ately $40
m illion due to the full-year effect of the 2003 acquisitions and the con-
tinued expansion of the segm ents. These expenditures will include
construction of new facilities, expansion of facilities to accom m odate
new product lines, and new m achinery and equipm ent, such as addi-
tional investm ent in our laser peening technology.

3 8

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

The following table quantiﬁes our signiﬁcant future contractual oblig-
ations and com m ercial com m itm ents as of Decem ber 31, 2003:

(In thousands)

2004
2005
2006
2007
2008
Thereafter

Total

D ebt Principal O perating
Leases

Repaym ents(1)

Total

997 $10,430 $ 11,427
9,004
8,925
7,967
7,908
21,074
7,145
5,810
5,748
14,991 224,049

79
59
13,929
62
209,058

$224,184 $55,147 $279,331

(1)Amounts exclude a $1.0 million adjustment to the fair valueof long-
term debt relating to the Corporation’s interest rate swap agreements
that will not be settled in cash

The Corporation does not have m aterial purchase obligations. M ost of
our raw m aterial purchase com m itm ents are m ade directly pursuant to
speciﬁc contract requirem ents.

U ndistributed earnings of $16.7 m illion from the Corporation’s foreign
subsidiaries are considered perm anently reinvested.

On January 31, 2004, the Corporation com pleted the acquisition of
Dy4 System s, Inc. The purchase price of $110.0 m illion was funded
with approxim ately $70 m illion in cash and $40 m illion from the
revolving credit facilities. See Recent Developm ent for m ore inform a-
tion on this acquisition.

R E C A P I TA L I Z AT I O N

On October 26, 2001, the Corporation’s shareholders approved a recap-
italization plan, which enabled U nitrin, Inc. (“U nitrin”) to distribute
its approxim ate 44% equity interest in Curtiss-W right to its sharehold-
ers on a tax-free basis.

U nder the recapitalization plan and in order to m eet certain tax
requirem ents, U nitrin’s 4.4 m illion shares of the Corporation’s com m on
stock were exchanged for an equivalent num ber of com m on shares of
a new Class B Com m on Stock of Curtiss-W right which are entitled to
elect 80% of Curtiss-W right’s Board of Directors. After such exchange,
U nitrin im m ediately distributed the Class B shares to its approxim ately
8,000 registered stockholders in a tax-free distribution. The holders of
the outstanding com m on shares of Curtiss-W right are entitled to elect
up to 20% of the Board of Directors after the distribution. Other than
the right to elect Directors, the two classes of stock vote as a single
class (except as required by law) and are equal in all other respects.
The new Class B Com m on Stock was listed on the N ew York Stock
Exchange, effective N ovem ber 29, 2001.

U nder the term s of the recapitalization agreem ent reached between
U nitrin and Curtiss-W right, U nitrin agreed to reim burse the Corpora-
tion for certain costs associated with the recapitalization up to a m ax-
im um of $1.8 m illion. This am ount was received subsequent to the
recapitalization.

A m ore thorough description of the transaction is set forth in the Cor-
poration’s deﬁnitive proxy m aterial ﬁled with the U .S. Securities and
Exchange Com m ission on Septem ber 5, 2001.

Critical Accounting Policies
Our consolidated ﬁnancial statem ents and accom panying notes are
prepared in accordance with generally accepted accounting principles
in the U nited States of Am erica. Preparing consolidated ﬁnancial
statem ents requires us to m ake estim ates and assum ptions that affect
the reported am ounts of assets, liabilities, revenues, and expenses.
These estim ates and assum ptions are affected by the application of our
accounting policies. Critical accounting policies are those that require
application of m anagem ent’s m ost difﬁcult, subjective, or com plex
judgm ents, often as a result of the need to m ake estim ates about the
effects of m atters that are inherently uncertain and m ay change in sub-
sequent periods. W e believe that the following are som e of the m ore
critical judgm ent areas in the application of our accounting policies
that affect our ﬁnancial condition and results of operations:

R E V E N U E R E C O G N I T I O N

The realization of revenue refers to the tim ing of its recognition in the
accounts of the Corporation and is generally considered realized or
realizable and earned when the earnings process is substantially com -
plete and all of the following criteria are m et: 1) persuasive evidence
of an arrangem ent exists; 2) delivery has occurred or services have
been rendered; 3) the Corporation’s price to its custom er is ﬁxed or
determ inable; and 4) collectibility is reasonably assured.

The Corporation records sales and related proﬁts on production and ser-
vice type contracts as units are shipped and title and risk of loss have
transferred or as services are rendered. This m ethod is used in our M etal
Treatm ent segm ent and in som e of the business units within the M otion
Control and Flow Control segm ents that serve com m ercial m arkets.

For certain contracts in our Flow Control and M otion Control segm ents
that require perform ance over an extended period before deliveries
begin, sales and estim ated proﬁts are recorded by applying the per-
centage-of-com pletion m ethod of accounting. The percentage-of-com -
pletion m ethod of accounting is used prim arily for the Corporation’s
defense contracts and certain long-term com m ercial contracts. This
m ethod recognizes revenue and proﬁt as the contracts progress
towards com pletion. For certain contracts that contain a signiﬁcant
num ber of perform ance m ilestones, as deﬁned by the custom er, sales
are recorded based upon achievem ent of these perform ance m ile-
stones. The perform ance m ilestone m ethod is an output m easure of
progress towards com pletion m ade in term s of results achieved. For
certain ﬁxed price contracts, where none or a lim ited num ber of m ile-
stones exist, the cost-to-cost m ethod is used, which is an input m ea-
sure of progress towards com pletion. U nder the cost-to-cost input
m ethod, sales and proﬁts are recorded based on the ratio of costs
incurred to an estim ate of total costs at com pletion.

Application of percentage-of-com pletion m ethods of revenue recogni-
tion requires the use of reasonable and dependable estim ates of the
future m aterial, labor, and overhead costs that will be incurred. The
percentage-of-com pletion m ethod of accounting for long-term con-
tracts requires a disciplined cost estim ating system in which all func-
tions of the business are integrally involved. These estim ates are
determ ined based upon the industry knowledge and experience of the
Corporation’s engineers, project m anagers, and ﬁnancial staff. These
estim ates are signiﬁcant and reﬂect changes in cost and operating per-
form ance throughout the contract and could have a signiﬁcant im pact

on operating perform ance. Adjustm ents to original estim ates for con-
tract revenue, estim ated costs at com pletion, and the estim ated total
proﬁt are often required as work progresses throughout the contract
and as experience and m ore inform ation is obtained, even though the
scope of work under the contract m ay not change. These changes are
recorded on a cum ulative retroactive basis in the period they are deter-
m ined to be necessary.

U nder the percentage-of-com pletion and com pleted contract m ethods,
provisions for estim ated losses on uncom pleted contracts are recog-
nized in the period in which the likelihood of such losses is determ ined.
Certain contracts contain provisions for the redeterm ination of price
and, as such, m anagem ent defers a portion of the revenue from those
contracts until such tim e as the price has been ﬁnalized.

Som e of the Corporation’s custom ers withhold certain am ounts from
the billings they receive. These retainages are generally not due until
the project has been com pleted and accepted by the custom er.

I N V E N T O R Y

Inventory costs include m aterials, direct labor, and m anufacturing
overhead costs, which are stated at the lower of cost or m arket, where
m arket is lim ited to the net realizable value. The Corporation estim ates
the net realizable value of its inventories and establishes reserves to
reduce the carrying am ount of these inventories to net realizable value,
as necessary. W e continually evaluate the adequacy of the inventory
reserves by reviewing historical scrap rates, on-hand quantities, as
com pared with historical and projected usage levels and other antici-
pated contractual requirem ents. The stated inventory costs are also
reﬂective of the estim ates used in applying the percentage-of-com ple-
tion revenue recognition m ethod.

The Corporation purchases m aterials for the m anufacture of com po-
nents for sale. The decision to purchase a set quantity of a particular
item is inﬂuenced by several factors including: current and projected
price, future estim ated availability, existing and projected contracts to
produce certain item s, and the estim ated needs for its businesses.

For certain of its long-term contracts, the Corporation utilizes progress
billings, which represent am ounts recorded as billed to custom ers prior
to the delivery of goods and services and are recorded as a reduction
to inventory and receivables. Progress billings are generally based on
costs incurred, including direct costs, overhead, and general and
adm inistrative costs.

P E N S I O N A N D O T H E R P O S T R E T I R E M E N T B E N E F I T S

The Corporation, in consultation with its actuaries, determ ines the
appropriate assum ptions for use in determ ining the liability for future
pension and other postretirem ent beneﬁts. The m ost signiﬁcant of
these assum ptions include the num ber of em ployees who will receive
beneﬁts along with the tenure and salary level of those em ployees, the
expected return on plan assets, the discount rates used on plan oblig-
ations, and the trends in health care costs. Changes in these assum p-
tions in future years will have an effect on the Corporation’s pension
and postretirem ent costs and associated pension and postretirem ent
assets and liabilities.

The discount rates and com pensation rates increases used to deter-
m ine the beneﬁt obligations of the plans as of Decem ber 31, 2003 and
the annual periodic costs for 2004 were lowered in 2003 to better

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

3 9

reﬂect current econom ic conditions. The reduction in the discount
rates increased the beneﬁt obligation on the plans. A corresponding
decrease in future com pensation costs, which occurred due to the
im pact of lower inﬂationary effects, had an offsetting decrease to the
beneﬁt obligation. The change in these two assum ptions were based
upon current and future econom ic indicators.

The overall expected return on assets assum ption is based on a com -
bination of historical perform ance of the pension fund and expecta-
tions of future perform ance. The historical returns are determ ined
using the m arket-related value of assets, which is the sam e value used
in the calculation of annual net periodic beneﬁt cost. The m arket-
related value of assets includes the recognition of realized and unreal-
ized gains and losses over a ﬁve-year period, which effectively averages
the volatility associated with the actual perform ance of the plan’s
assets from year to year. Although over the last ten years the m arket-
related value of assets had an average annual yield of 11.6% , the actual
returns averaged 8.5% during the sam e period. The Corporation has
consistently used the 8.5% rate as a long-term overall average return.
Given the uncertainties of the current econom ic and geopolitical land-
scapes, we consider the 8.5% to be a reasonable assum ption of the
future long-term investm ent returns.

The long-term m edical trend assum ptions starts with a current rate that
is in line with expectations for the near future, and then grade the rate
down over tim e until it reaches an ultim ate rate that is close to expec-
tations for growth in GDP. The reasoning is that m edical trends cannot
continue to be higher than the rate of GDP growth in the long term . Any
change in the expectation of these rates to return to a norm al level will
have an im pact on the Corporation.

In 2003, the Corporation recognized non-cash pension incom e from
the Curtiss-W right Pension Plan of $1.6 m illion as the excess of
am ounts funded for the pension plan in prior years yields returns that
exceed the calculated costs associated with the liability in the current
year. As of Decem ber 31, 2003, the Corporation had a prepaid pension
asset of $77.9 m illion relating to the Curtiss-W right Retirem ent Plan
and accrued pension and other postretirem ent costs of $0.8 m illion
related to the Curtiss-W right Restoration Plan. The tim ing and am ount
of future pension incom e or expense to be recognized each year is
dependent on the dem ographics and expected earnings of the plan
participants, the expected interest rates in effect in future years, and
the actual and expected investm ent returns of the assets in the
pension trust.

As a result of the acquisition of EM D in October 2002, the Corporation
assum ed underfunded pension and postretirem ent liabilities of $75.0
m illion. Expenses incurred during 2003 related to the EM D plans were
$5.6 m illion. Additionally, the Corporation has m ade $5.7 m illion in
cash contributions to the EM D Pension Plan during 2003.

See N ote 16 for further inform ation on the Corporation’s pension and
postretirem ent plans, including an estim ate of future cash contributions.

E N V I R O N M E N TA L R E S E R V E S

The Corporation provides for environm ental reserves when, in con-
junction with internal and external legal counsel, it is determ ined that
a liability is both probable and estim able. In m any cases, the liability
is not ﬁxed or capped when the Corporation ﬁrst records a liability for
a particular site. In estim ating the future liability and continually eval-

4 0

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

uating the sufﬁciency of such liabilities, the Corporation weighs cer-
tain factors including the Corporation’s participation percentage due
to a settlem ent by or bankruptcy of other potentially responsible par-
ties, a change in the environm ental laws requiring m ore stringent
requirem ents, a change in the estim ate of future costs that will be
incurred to rem ediate the site, and changes in technology related to
environm ental rem ediation.

P U R C H A S E A C C O U N T I N G

The Corporation applies the purchase m ethod of accounting to its
acquisitions. U nder this m ethod, the purchase price, including any
capitalized acquisition costs, is allocated to the underlying tangible
and intangible assets acquired and liabilities assum ed based on their
respective fair m arket values, with any excess recorded as goodwill.
The Corporation, usually in consultation with third-party valuation
advisors, determ ines the fair values of such assets and liabilities. Dur-
ing 2003, the fair value of assets acquired, net of cash, and liabilities
assum ed through acquisitions were estim ated to be $84.8 m illion and
$13.4 m illion, respectively. The assigned initial fair value to these
acquisitions are tentative and m ay be revised prior to ﬁnalization,
which is to be com pleted within a reasonable period, generally within
one year of acquisition.

G O O D W I L L

The Corporation has $220.1 m illion in goodwill as of Decem ber 31,
2003. The recoverability of goodwill is subject to an annual im pairm ent
test based on the estim ated fair value of the underlying businesses.
Additionally, goodwill is tested for im pairm ent when an event occurs or
if circum stances change that would m ore likely than not reduce the fair
value of a reporting unit below its carrying am ount. These estim ated
fair values are based on estim ates of future cash ﬂows of the busi-
nesses. Factors affecting these future cash ﬂows include the continued
m arket acceptance of the products and services offered by the busi-
nesses, the developm ent of new products and services by the busi-
nesses and the underlying cost of developm ent, the future cost
structure of the businesses, and future technological changes. Esti-
m ates are also used for the Corporation’s cost of capital in discounting
the projected future cash ﬂows. The Corporation utilizes an indepen-
dent third party cost of capital analysis in determ ination of its esti-
m ates. If it has been determ ined that an im pairm ent has occurred, the
Corporation m ay be required to recognize an im pairm ent of its asset,
which would be lim ited to the difference between the book value of the
asset and its fair value. Any such im pairm ent would be recognized in
full in the reporting period in which it has been identiﬁed.

O T H E R I N TA N G I B L E A S S E T S

Other intangible assets are generally the result of acquisitions and con-
sist prim arily of purchased technology, custom er related intangibles,
tradem arks and service m arks, and technology licenses. Intangible
assets are recorded at their fair values as determ ined through purchase
accounting and are am ortized ratably to m atch their cash ﬂow stream s
over their estim ated useful lives, which range from 1 to 20 years. The
Corporation reviews the recoverability of intangible assets, including
the related useful lives, whenever events or changes in circum stances
indicate that the carrying am ount m ight not be recoverable. Any
im pairm ent would be recorded in the reporting period in which it has
been identiﬁed.

R E C E N T LY I S S U E D A C C O U N T I N G S TA N D A R D S

In June 2001, the FASB issued SFAS N o. 143 “Accounting for Asset
Retirem ent Obligations.” This statem ent addresses ﬁnancial account-
ing and reporting obligations associated with the retirem ent of tangi-
ble long-lived assets and the associated asset retirem ent costs. The
statem ent requires the Corporation to recognize the fair value of a lia-
bility for an asset retirem ent obligation in the period in which it is
incurred, if a reasonable estim ate can be m ade. U pon initial recogni-
tion of such a liability, if any, the Corporation would capitalize the asset
retirem ent cost as an asset equal to the fair value of the liability and
allocate such cost to expense system atically over the useful life of the
underlying asset. The estim ated future liability would be subject to
change, with the effects of such change affecting the asset retirem ent
cost and the related expense as appropriate. The provisions of this
statem ent are effective for ﬁscal years beginning after June 15, 2002.
The adoption of this statem ent did not have a m aterial im pact on the
Corporation’s results of operation or ﬁnancial condition.

In June 2002, the FASB issued SFAS N o. 146 “Accounting for Costs
Associated with Exit or Disposal Activities.” This statem ent applies to
costs associated with exit or disposal activities and requires that lia-
bilities for costs associated with these activities be recognized and
m easured initially at its fair value in the period in which the liability is
incurred. The provisions of this statem ent are effective for exit or dis-
posal activities initiated after Decem ber 31, 2002. The adoption of this
statem ent did not have a m aterial im pact on the Corporation’s results
of operation or ﬁnancial condition.

In N ovem ber 2002, the FASB issued Interpretation N o. 45 “Guaran-
tor’s Accounting and Disclosure Requirem ents for Guarantees, Includ-
ing Indirect Guarantees of Indebtedness of Others.” This interpretation
relates to a guarantor’s accounting for, and disclosure of, the issuance
of certain types of guarantees. This interpretation requires the issuer
of a guarantee to recognize a liability at the inception of that guaran-
tee. The Corporation is required to apply the interpretation to all guar-
antees issued or m odiﬁed after Decem ber 31, 2002. The disclosure
requirem ents of this interpretation are effective for ﬁnancial state-
m ents of interim and annual periods ending after Decem ber 15, 2002.
The adoption of this statem ent did not have a m aterial im pact on the
Corporation’s results of operation or ﬁnancial condition.

In Decem ber 2002, the FASB issued SFAS N o. 148 “Accounting for
Stock-Based Com pensation— Transition and Disclosure.” This state-
m ent provides alternate m ethods of transition for a voluntary change
to the fair value based m ethod of accounting for stock-based em ployee
com pensation. In addition, the statem ent requires additional disclo-
sures about the m ethods of accounting for stock-based em ployee com -
pensation and the effect of the m ethod used on reported results. The
provisions of this statem ent are effective for ﬁscal years beginning after
Decem ber 15, 2002. The Corporation has continued to account for its
stock options under Accounting Principles Board Opinion N o. 25,
“Accounting for Stock Issued to Em ployees,” and thus the adoption of
the new standard did not have a m aterial im pact on the Corporation’s
results of operation or ﬁnancial condition.

statem ents the assets and liabilities of unconsolidated VIEs. FIN 46 was
effective for VIEs created or acquired after January 31, 2003. The Cor-
poration is not party to any contractual arrangem ents with VIEs and thus
the adoption of this statem ent did not have a m aterial im pact on the
Corporation’s results of operation or ﬁnancial condition.

In Decem ber 2003, the FASB com pleted deliberations of proposed
m odiﬁcations to FIN 46 (“Revised Interpretations”) resulting in m ul-
tiple effective dates based on the nature as well as the creation date of
the VIE. The Corporation does not anticipate that the adoption of this
statem ent will have a m aterial im pact on the Corporation’s results of
operation or ﬁnancial condition.

In M ay 2003, the FASB issued SFAS N o. 150, “Accounting for Certain
Financial Instrum ents with Characteristics of both Liabilities and
Equity.” This Statem ent establishes standards for how an issuer clas-
siﬁes and m easures certain ﬁnancial instrum ents with characteristics
of both liabilities and equity. It requires that an issuer classify a ﬁnan-
cial instrum ent that is within its scope as a liability (or an asset in som e
circum stances). The Statem ent is effective for ﬁnancial instrum ents
entered into or m odiﬁed after M ay 31, 2003. It applies in the ﬁrst
interim period beginning after June 15, 2003, to entities with ﬁnancial
instrum ents acquired before M ay 31, 2003. The adoption of this state-
m ent did not have a m aterial im pact on the Corporation’s results of
operation or ﬁnancial condition.

In Decem ber 2003, the FASB issued SFAS N o. 132 (revised 2003),
“Em ployers’ Disclosures about Pensions and Other Postretirem ent
Beneﬁts.” This Statem ent retains the disclosure requirem ents con-
tained in the original FASB Statem ent N o. 132, “Em ployers’ Disclosures
about Pensions and Other Postretirem ent Beneﬁts,” which it replaces
and requires additional disclosures about the assets, obligations, cash
ﬂows, and net periodic beneﬁt cost of deﬁned beneﬁt pension plans and
other deﬁned beneﬁt postretirem ent plans. It does not change the m ea-
surem ent of recognition of those plans required by FASB Statem ents
N o. 87, “Em ployers’ Accounting for Pensions,” N o. 88, “Em ployers’
Accounting for Settlem ents and Curtailm ents of Deﬁned Beneﬁt Pen-
sion Plans and for Term ination Beneﬁts,” and N o. 106, “Em ployers’
Accounting for Postretirem ent Beneﬁts Other Than Pensions.” The
Statem ent is effective for annual and interim periods with ﬁscal years
ending after Decem ber 15, 2003. The adoption of this statem ent did not
have a m aterial im pact on the Corporation’s results of operation or ﬁnan-
cial condition.

Recent Development
On January 31, 2004, the Corporation com pleted the acquisition of all
of the outstanding shares of Dy 4 System s, Inc. (“Dy 4”) from Solec-
tron Corporation. The purchase price of the acquisition, subject to cus-
tom ary adjustm ents as provided for in the Stock Purchase Agreem ent,
was $110 m illion in cash. M anagem ent funded the purchase with cash
on hand and from the Corporation’s revolving credit facilities. Rev-
enues of the purchased business were $72 m illion for the year ended
August 29, 2003. Dy 4 is based in Ottawa, Canada, and has additional
operations located in the U nited States and the U nited Kingdom . M an-
agem ent intends to incorporate the operations of Dy 4 into the
Corporation’s M otion Control segm ent.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

4 1

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

The Corporation is exposed to certain m arket risks from changes in
interest rates and foreign currency exchange rates as a result of its
global operating and ﬁnancing activities. Although foreign currency
translation had a favorable im pact on sales and operating incom e in
2003, the Corporation seeks to m inim ize any m aterial risks from for-
eign currency exchange rate ﬂuctuations through its norm al operating
and ﬁnancing activities and, when deem ed appropriate, through the
use of derivative ﬁnancial instrum ents. The Corporation did not use
such instrum ents for trading or other speculative purposes. The Cor-
poration used interest rate swaps to m anage interest rate exposures
during the year ended Decem ber 31, 2003. Inform ation regarding the
Corporation’s accounting policy on ﬁnancial instrum ents is contained
in N ote 1-K to the Consolidated Financial Statem ents.

The Corporation’s m arket risk for a change in interest rates relates pri-
m arily to the debt obligations. As a result of the Septem ber 25, 2003
Senior N otes issue and subsequent two interest rate swap agreem ents
dated N ovem ber 10, 2003, the Corporation shifted its interest rate
exposure from 100% variable to 46% variable as of Decem ber 31,
2003. The net proceeds of the Senior N otes allowed the Corporation to
pay down the m ajority of its outstanding debt under its credit facilities.
This blended rate strategy for debt borrowings reduces the uncertainty
of shifts in future interest rates. The variable rate on both the revolving
credit agreem ents and the interest rate swap agreem ents are based on
m arket rates. If interest rates changed by one percentage point, the
im pact on consolidated interest expense would have been approxi-

m ately $1 m illion. Inform ation regarding the Corporation’s Senior
N otes, Revolving Credit Agreem ent, and Interest Rates Swaps is con-
tained in N ote 12 to the Consolidated Financial Statem ents.

Financial instrum ents expose the Corporation to counter-party credit
risk for non-perform ance and to m arket risk for changes in interest and
foreign currency rates. The Corporation m anages exposure to counter-
party credit risk through speciﬁc m inim um credit standards, diversiﬁ-
cation of counter-parties, and procedures to m onitor concentrations of
credit risk. The Corporation m onitors the im pact of m arket risk on the
fair value and cash ﬂows of its investm ents by investing prim arily in
investm ent grade interest bearing securities, which have short-term
m aturities. The Corporation attem pts to m inim ize possible changes in
interest rates by lim iting the am ount of potential interest and currency
rate exposures to am ounts that are not m aterial to the Corporation’s
consolidated results of operations and cash ﬂows.

Although the m ajority of the Corporation’s sales, expenses, and cash
ﬂows are transacted in U .S. dollars, the Corporation does have som e
m arket risk exposure to changes in foreign currency exchange rates,
prim arily as it relates to the value of the U .S. dollar versus the British
Pound, the Euro, the Canadian Dollar, and the Swiss Franc. If foreign
exchange rates were to collectively weaken or strengthen against the
dollar by 10% , net earnings would have been reduced or increased,
respectively, by approxim ately $2 m illion as it relates exclusively to for-
eign currency exchange rate exposures.

4 2

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

REPORT OF THE CORPORATION

The consolidated ﬁnancial statem ents appearing on pages 45 through
71 of this Annual Report have been prepared by the Corporation in con-
form ity with accounting principles generally accepted in the U nited
States of Am erica. The ﬁnancial statem ents necessarily include som e
am ounts that are based on the best estim ates and judgm ents of the
Corporation. Other ﬁnancial inform ation in the Annual Report is con-
sistent with that in the ﬁnancial statem ents.

The Corporation m aintains accounting system s, procedures, and inter-
nal accounting controls designed to provide reasonable assurance that
assets are safeguarded and that transactions are executed in accor-
dance with the appropriate corporate authorization and are properly
recorded. The accounting system s and internal accounting controls are
augm ented by written policies and procedures; organizational struc-
ture providing for a division ofresponsibilities; selection and training
of qualiﬁed personnel and an internal audit program . The design, m on-
itoring, and revision of internal accounting control system s involve,
am ong other things, m anagem ent’s judgm ent with respect to the rela-
tive cost and expected beneﬁts of speciﬁc control m easures.

Deloitte & Touche LLP, independent auditors, perform ed an audit that
included obtaining an understanding of internal controls the sufﬁcient

to plan the audit and to determ ine the nature, tim ing, and extent of
audit procedures to be perform ed. An audit includes exam ining, on a
test basis, evidence supporting the am ounts and disclosures in the
ﬁnancial statem ents. An audit also includes assessing the accounting
principles used and signiﬁcant estim ates m ade by m anagem ent, as
well as evaluating the overall ﬁnancial statem ent presentation. The
objective of their audit is the expression of an opinion on the fairness
of the presentation of the Corporation’s ﬁnancial statem ents in confor-
m ity with accounting principles generally accepted in the U nited
States of Am erica, in all m aterial respects.

The Audit Com m ittee of the Board of Directors, com posed entirely of
directors who are independent of the Corporation, am ong otherthings,
appoints the independent auditors for ratiﬁcation by stockholders and
considers the scope of the independent auditors’ exam ination, the audit
results and the adequacy of internal accounting controls of the Corpora-
tion. The independent auditorshave direct access to the Audit Com m it-
tee, and they m eet with the com m ittee from tim e to tim e, with and
without m anagem ent present, to discuss accounting, auditing, non-audit
consulting services, internal control, and ﬁnancial reporting m atters.

CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

On M arch 21, 2003, Curtiss-W right Corporation replaced Pricewater-
houseCoopers LLP (“PwC”) as the Corporation’s principal accountants.
The decision to change principal accountants was approved by the
Audit Com m ittee of the Board of Directors.

In connection with the audits of the two ﬁscal years ended Decem ber
31, 2002 and 2001 and to the date of change, there were no dis-
agreem ents with PwC on any m atter of accounting principles or prac-
tices, ﬁnancial statem ent disclosure, or auditing scope or procedure,
which disagreem ent, if not resolved to PwC’s satisfaction, would have
caused PwC to m ake reference to the subject m atter of the disagree-
m ent in connection with its reports.

The audit reports of PwC on the ﬁnancial statem ents of the Corpora-
tion as of and for the years ended Decem ber 31, 2002 and 2001 did
not contain an adverse opinion or disclaim er of opinion, nor were the
reports qualiﬁed or m odiﬁed as to audit scope or accounting principles.

During the two m ost recent ﬁscal years and through the date of change,
there were no reportable events (as deﬁned in Regulation S-K Item
304(a)(1)(v)).

The Corporation requested that PwC furnish it with a letter addressed
to the U nited States Securities and Exchange Com m ission stating
whether or not it agreed with the above statem ents. A copy of such let-
ter, dated M arch 25, 2003 is ﬁled as Exhibit 16.1 to the Corporation’s
Form 8-K ﬁled with the SEC on M arch 26, 2003.

On M arch 21, 2003, the Corporation appointed Deloitte & Touche, LLP
as the Corporation’s new principal accountants for the ﬁscal year 2003
subject to their norm al new client acceptance procedures. Prior to its
appointm ent, the Corporation did not consult with Deloitte & Touche,
LLP regarding any m atters or events set forth in Item s 304 (a)(2)(i) and
(ii) of Regulation S-K of the Securities Exchange Act of 1934.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

4 3

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of
Curtiss-Wright Corporation, Roseland, New Jersey
W e have audited the accom panying consolidated balance sheet of
Curtiss-W right Corporation and subsidiaries as of Decem ber 31, 2003,
and the related consolidated statem ents of earnings, stockholders’
equity, and cash ﬂows for the year then ended. These ﬁnancial state-
m ents are the responsibility of the Com pany’s m anagem ent. Our
responsibility is to express an opinion on these ﬁnancial statem ents
based on our audit.

W e conducted our audit in accordance with auditing standards gener-
ally accepted in the U nited States of Am erica. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the ﬁnancial statem ents are free of m aterial m isstate-
m ent. An audit includes exam ining, on a test basis, evidence support-
ing the am ounts and disclosures in the ﬁnancial statem ents. An audit

also includes assessing the accounting principles used and signiﬁcant
estim ates m ade by m anagem ent, as well as evaluating the overall
ﬁnancial statem ent presentation. W e believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such ﬁnancial statem ents present fairly, in all m aterial
respects, the ﬁnancial position of the Com pany at Decem ber 31, 2003,
and the results of its operations and its cash ﬂows for the year then
ended in conform ity with accounting principles generally accepted in
the U nited States of Am erica.

Deloitte & Touche LLP
Parsippany, N ew Jersey
February 20, 2004

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Curtiss-Wright Corporation
In our opinion, the accom panying consolidated balance sheet as of
Decem ber 31, 2002 and the related consolidated statem ents of earn-
ings, stockholders’ equity and of cash ﬂows for each of the two years in
the period ended Decem ber 31, 2002, present fairly, in all m aterial
respects, the ﬁnancial position, results of operations and cash ﬂows of
Curtiss-W right Corporation and its subsidiaries at Decem ber 31, 2002
and for each of the two years in the period ended Decem ber 31, 2002,
in conform ity with accounting principles generally accepted in the
U nited States of Am erica. These ﬁnancial statem ents are the responsi-
bility of the Com pany’s m anagem ent; our responsibility is to express an
opinion on these ﬁnancial statem ents based on our audits. W e con-
ducted our audits of these statem ents in accordance with auditing stan-
dards generally accepted in the U nited States of Am erica, which require
that weplan and perform the audit to obtain reasonable assurance about
whether the ﬁnancial statem ents are free of m aterial m isstatem ent. An

audit includes exam ining, on a test basis, evidence supporting
the am ounts and disclosures in the ﬁnancial statem ents, assessing
the accounting principles used and signiﬁcant estim ates m ade by m an-
agem ent, and evaluating the overall ﬁnancial statem ent presentation.
W e believe that our audits provide a reasonable basis forour opinion.

As discussed in N otes 1-J and 8 to the Consolidated Financial State-
m ents, effective January 1, 2002, Curtiss-W right Corporation changed
its m ethod of accounting for goodwill and other intangibles.

PricewaterhouseCoopers LLP
Florham Park, N ew Jersey
M arch 12, 2003

4 4

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

CONSOLIDATED STATEMENTS OF EARNINGS

For the years ended December 31, (In thousands, except per share data)

2003

2002

2001

N et sales
Cost of sales

Gross proﬁt
Research and developm ent costs
Selling expenses
General and adm inistrative expenses
Pension incom e, net
Gain from insurance com pany dem utualization
Environm ental rem ediation and adm inistrative expenses, net

Operating incom e
Interest expense
Gain on sale of real property
Rental incom e, net
Other incom e, net

Earnings before incom e taxes
Provision for incom e taxes

N et earnings

N E T E A R N I N G S P E R S H A R E :

Basic earnings per share

Diluted earnings per share

See notes to consolidated financial statements.

$746,071
505,153

$513,278
337,192

$343,167
215,350

240,918
(22,111)
(38,816)
(90,849)
1,611
—
(1,423)

89,330
(5,663)
—
—
389

84,056
(31,788)

176,086
(11,624)
(29,553)
(71,843)
7,208
—
(1,237)

69,037
(1,810)
681
148
3,679

71,735
(26,599)

127,817
(4,383)
(18,325)
(60,764)
11,042
2,980
(167)

58,200
(1,180)
38,882
3,585
2,710

102,197
(39,317)

$ 52,268

$ 45,136

$ 62,880

2.53

2.50

2.21

2.16

3.12

3.07

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

4 5

CONSOLIDATED BALANCE SHEETS

At December 31, (In thousands)

A S S E T S :

Current assets:

Cash and cash equivalents
Receivables, net
Inventories, net
Deferred tax assets, net
Other current assets

Total current assets

Property, plant, and equipm ent, net
Prepaid pension costs
Goodwill
Other intangible assets, net
Other assets

Total assets

L I A B I L I T I E S :

Current liabilities:
Short-term debt
Accounts payable
Accrued expenses
Incom e taxes payable
Other current liabilities

Total current liabilities

Long-term debt
Deferred tax liabilities, net
Accrued pension and other postretirem ent beneﬁt costs
Long-term portion of environm ental reserves
Other liabilities

Total liabilities

C O N T I N G E N C I E S A N D C O M M I T M E N T S (N otes 12, 15, 17 & 19)
S T O C K H O L D E R S ’ E Q U I T Y:

Preferred stock, $1 par value, 650,000 shares authorized, none issued
Com m on stock, $1 par value, 33,750,000 and 11,250,000 shares authorized at Decem ber 31, 2003

and 2002, respectively, 16,611,464 and 10,617,600 shares issued at Decem ber 31, 2003 and 2002,
respectively; outstanding shares were 12,021,610 at Decem ber 31, 2003 and 5,890,177 at
Decem ber 31, 2002

Class B com m on stock, $1 par value, 11,250,000 shares authorized; 8,764,800 and 4,382,400

shares issued at Decem ber 31, 2003 and 2002, respectively; outstanding shares were
8,764,246 at Decem ber 31, 2003 and 4,382,116 at Decem ber 31, 2002

Additional paid-in capital
Retained earnings
U nearned portion of restricted stock
Accum ulated other com prehensive incom e

Less: Com m on treasury stock, at cost (4,590,408 shares at Decem ber 31, 2003 and 4,727,707 shares

at Decem ber 31, 2002)

Total stockholders’ equity

Total liabilities and stockholders’ equity

See notes to consolidated financial statements.

4 6

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

2003

2002

$ 98,672
143,362
97,880
23,630
10,979

374,523

238,139
77,877
220,058
48,268
14,800

$ 47,717
135,734
84,568
21,840
9,005

298,864

219,049
76,072
181,101
21,982
13,034

$973,665

$810,102

997
43,776
44,938
6,748
39,424

135,883

224,151
21,798
75,633
21,083
16,236

494,784

$ 32,837
41,344
32,446
4,528
50,472

161,627

119,041
6,605
77,438
22,585
11,578

398,874

—

16,611

10,618

8,765
52,998
543,670

(55)

22,634

4,382
52,200
508,298

(60)

6,482

644,623

581,920

(165,742)

(170,692)

478,881

411,228

$973,665

$810,102

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, (In thousands)

2003

2002

2001

C A S H F L O W S F R O M O P E R AT I N G A C T I V I T I E S :

N et earnings

Adjustm ents to reconcile net earnings to net cash provided by operating activities:

Depreciation and am ortization
N on-cash pension incom e
N et loss (gain) on sales and disposals of real estate and equipm ent
Deferred incom e taxes
Changes in operating assets and liabilities, net of businesses acquired:

Proceeds from sales of short-term investm ents
Purchases of short-term investm ents
(Increase) decrease in receivables
Decrease (increase) in inventories
Increase in progress paym ents
Increase (decrease) in accounts payable and accrued expenses
Decrease in deferred revenue
Increase (decrease) in incom e taxes payable
Pension contributions
Increase in other current and long-term assets
Increase in other current and long-term liabilities

Other, net

Total adjustm ents

N et cash provided by operating activities

C A S H F L O W S F R O M I N V E S T I N G A C T I V I T I E S :

Proceeds from sales and disposals of real estate and equipm ent
Additions to property, plant, and equipm ent
Acquisition of new businesses, net of cash acquired

N et cash used for investing activities

C A S H F L O W S F R O M F I N A N C I N G A C T I V I T I E S :

Borrowings of debt
Principal paym ents on debt
Reim bursem ent of recapitalization expenses
Proceeds from exercise of stock options
Dividends paid

N et cash provided by (used for) ﬁnancing activities

Effect of foreign currency

N et increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplem ental disclosure of non-cash investing activities:

Fair value of assets acquired
Liabilities assum ed
Less: Cash acquired

N et cash paid

See notes to consolidated financial statements.

$ 52,268

$ 45,136

$ 62,880

31,327
(1,611)
359
6,035

—
—
(5,958)
1,893
1,967
9,343
(10,070)
3,240
(5,729)
(963)
995
428

31,256

83,524

18,693
(7,208)
(681)
4,011

77,050
(35,600)
31
197
3,464
(61)
(2,820)
(11,101)
—
(3,254)
2,156
(228)

44,649

89,785

1,132
(33,329)
(71,368)

2,447
(34,954)
(164,661)

(103,565)

(197,168)

384,712
(314,204)
—
3,868
(6,520)

67,856

3,140

50,955
47,717

220,400
(92,795)
—
6,226
(6,141)

127,690

1,915

22,222
25,495

14,734
(11,042)
(39,018)
4,167

348,911
(327,761)
(7,203)
(3,232)
4,186
(2,831)
(422)
12,694
—

(2,051)
7,185
63

(1,620)

61,620

45,201
(19,354)
(58,982)

(33,135)

—

(8,228)
1,750
1,804
(5,443)

(10,117)

(1,205)

16,803
8,692

$ 98,672

$ 47,717

$ 25,495

$ 85,578
(13,375)
(835)

$321,450
(155,623)
(1,166)

$ 78,979

(14,829)
(5,168)

$ 71,368

$164,661

$ 58,982

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

4 7

Class B
Com m on Com m on
Stock

Stock

Additional
Paid in
Capital

Retained
Earnings

U nearned
Portion of
Restricted
Stock Awards

Accum ulated
O ther
Com prehensive
Incom e (Loss)

Com prehensive
Incom e

Treasury
Stock

$15,000 $ — $51,506 $411,866

$(22)

$(5,626)

$(182,500)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

J A N U A R Y 1 , 2 0 0 1

Com prehensive incom e:

N et earnings
Translation adjustm ents, net

Total com prehensive incom e

Dividends paid
Stock options exercised, net
Restricted stock awards
Am ortization of earned
portion of restricted
stock awards
Recapitalization

D E C E M B E R 3 1 , 2 0 0 1

Com prehensive incom e:

N et earnings
Translation adjustm ents, net

Total com prehensive incom e

Dividends paid
Stock options exercised, net
Am ortization of earned
portion of restricted
stock awards

D E C E M B E R 3 1 , 2 0 0 2

Com prehensive incom e:

N et earnings
Translation adjustm ents, net

Total com prehensive incom e

Dividends paid
Stock options exercised, net
Other
Two-for-one com m on stock split

effected in the form of a 100%
stock dividend

—
—

—
—
—

—
—

—
—
—

—
—

62,880
—

—
(730)
6

(5,443)
—
—

—

—
(4,382) 4,382

—
1,750

—
—

10,618

4,382

52,532

469,303

—
—

—

—
—

—

—
—

45,136
—

—
(332)

(6,141)
—

—

10,618

4,382

52,200

508,298

—
—

—
—
—

—
—

—
—
—

—
—

—
741
57

52,268
—

(6,520)
—
—

5,993

4,383

—

(10,376)

D E C E M B E R 3 1 , 2 0 0 3
See notes to consolidated financial statements.

$16,611

$8,765

$52,998

$543,670

4 8

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

—
—

—
—
(77)

21
—

(78)

—
—

(60)

—
—

—
—
5

—

$(55)

—
(1,205)

$62,880
(1,205)

$61,675

—
—
—

—
—

—
2,456
72

—
—

(6,831)

(179,972)

—
13,313

—
—

—

6,482

—
16,152

—
—
—

—

$22,634

$45,136
13,313

$58,449

$52,268
16,152

$68,420

—

—
9,280

—

(170,692)

—
—

—
4,812
138

—

$(165,742)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies
Curtiss-W right Corporation and its subsidiaries (the “Corporation”) is
a diversiﬁed m ultinational m anufacturing and service com pany that
designs, m anufactures, and overhauls precision com ponents and
system s and provides highly engineered products and services to the
aerospace, defense, autom otive, shipbuilding, processing, oil, petro-
chem ical, agricultural equipm ent, railroad, power generation, security,
and m etalworking industries. Operations are conducted through 24
m anufacturing facilities, 53 m etal treatm ent service facilities, and 2
aerospace com ponent overhaul and repair locations.

A. Principles of Consolidation
The consolidated ﬁnancial statem ents include the accounts of Curtiss-
W right and its m ajority-owned subsidiaries. All m aterial intercom pany
transactions and accounts have been elim inated. Certain prior year
inform ation has been reclassiﬁed to conform to current presentation.

B. Use of Estimates
The ﬁnancial statem ents of the Corporation have been prepared in con-
form ity with accounting principles generally accepted in the U nited
States of Am erica and such preparation requires m anagem ent to m ake
estim ates and judgm ents that affect the reported am ount of assets, lia-
bilities, revenue, and expenses and disclosure of contingent assets and
liabilities in the accom panying ﬁnancial statem ents. The m ost signiﬁ-
cant of these estim ates include the estim ate of costs to com plete long-
term contracts under the percentage-of-com pletion accounting
m ethod, the estim ate of useful lives for property, plant, and equipm ent,
cash ﬂow estim ates used for testing the recoverability of assets, pen-
sion plan and postretirem ent obligation assum ptions, estim ates for
inventory obsolescence, estim ates for the valuation of intangible
assets, warranty reserves, and the estim ate of future environm ental
costs. Actual results m ay differ from these estim ates.

C. Revenue Recognition
The realization of revenue refers to the tim ing of its recognition in the
accounts of the Corporation and is generally considered realized or
realizable and earned when the earnings process is substantially com -
plete and all of the following criteria are m et: 1) persuasive evidence
of an arrangem ent exists; 2) delivery has occurred or services have
been rendered; 3) the Corporation’s price to its custom er is ﬁxed or
determ inable; and 4) collectibility is reasonably assured.

The Corporation records sales and related proﬁts on production and
service type contracts as units are shipped and title and risk of loss
have transferred or as services are rendered, net of estim ated returns
and allowances. Sales and estim ated proﬁts under certain long-term
contracts are recognized under the percentage-of-com pletion m ethods
of accounting, whereby proﬁts are recorded pro rata, based upon cur-
rent estim ates of direct and indirect costs to com plete such contracts.

In addition, the Corporation also records sales under certain long-term
governm ent ﬁxed price contracts upon achievem ent of perform ance
m ilestones as speciﬁed in the related contracts or under the com pleted
contract m ethod. Losses on contracts are provided for in the period in
which the losses becom e determ inable. Revisions in proﬁt estim ates
are reﬂected on a cum ulative basis in the period in which the basis for
such revision becom es known. Deferred revenue represents the excess
of the billings over cost and estim ated earnings on long-term contracts.

D. Cash and Cash Equivalents
Cash equivalents consist of m oney m arket funds and com m ercial paper
that are readily convertible into cash, all with original m aturity dates of
three m onths or less.

E. Inventory
Inventories are stated at lower of production cost (principally average
cost) or m arket. Production costs are com prised of direct m aterial and
labor and applicable m anufacturing overhead.

F. Progress Payments
Certain long-term contracts provide for the interim billings as costs are
incurred on the respective contracts. Pursuant to contract provisions,
agencies of the U .S. governm ent and other custom ers are granted title
or a secured interest in the unbilled costs included in unbilled receiv-
ables, and m aterials and work-in-process included in inventory to the
extent of progress paym ents. Accordingly, these progress paym ents
received have been reported as a reduction of unbilled receivables and
inventories, as presented in N otes 5 and 6.

G. Property, Plant, and Equipment
Property, plant, and equipm ent are carried at cost less accum ulated
depreciation. M ajor renewals and betterm ents are capitalized, while
m aintenance and repairs that do not im prove or extend the life of the
asset are expensed in the period they are incurred. Depreciation is
com puted using the straight-line m ethod based upon the estim ated
useful lives of the respective assets.

Average useful lives for property, plant, and equipm ent are as follows:

Buildings and im provem ents
M achinery, equipm ent, and other

5 to 40 years
3 to 15 years

H. Intangible Assets
Intangible assets are generally the result of acquisitions and consist
prim arily of purchased technology, custom er related intangibles, trade-
m arks and service m arks, and technology licenses. The Corporation
am ortizes such assets ratably, to m atch their cash ﬂow stream s, over
their estim ated useful lives. U seful lives range from 1 to 20 years. See
N ote 9 for further inform ation on other intangible assets.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

4 9

L. Research and Development
The Corporation funds research and developm ent program s for com -
m ercial products and independent research and developm ent and bid
and proposal work related to governm ent contracts. Developm ent costs
include engineering and ﬁeld support for new custom er requirem ents.
Corporation-sponsored research and developm ent costs are expensed
as incurred.

Research and developm ent costs associated with custom er-sponsored
program s are charged to inventory and are recorded in cost of sales
when products are delivered or services perform ed.

M . Environmental Costs
The Corporation establishes a reserve for a potential environm ental
rem ediation liability when it concludes that a determ ination of legal
liability is probable, based upon the advice of counsel. Such am ounts,
if quantiﬁable, reﬂect the Corporation’s estim ate of the am ount of that
liability. If only a range of potential liability can be estim ated, a reserve
will be established at the low end of that range. Such reserves, which
are reviewed quarterly, represent the current value of anticipated rem e-
diation costs, not recognizing any potential recovery from insurance
carriers or third-party legal actions, and are not discounted.

N. Accounting for Stock-Based Compensation
In accordance with SFAS N o. 123, “Accounting for Stock-Based Com -
pensation,” the Corporation elected to account for its stock-based com -
pensation using the intrinsic value m ethod under Accounting
Principles Board Opinion N o. 25, “Accounting for Stock Issued to
Em ployees.” As such, the Corporation does not recognize com pensa-
tion expense on non-qualiﬁed stock options granted to em ployees when
the exercise price of the options is equal to the m arket price of the
underlying stock on the date of the grant.

Pro form a inform ation regarding net earnings and earnings per share is
required by SFAS N o. 123 and has been determ ined as if the Corpora-
tion had accounted for its em ployee stock option grants under the fair
value m ethod prescribed by that Statem ent. Inform ation with regard to
the num ber of options granted, m arket price of the grants, vesting
requirem ents, and the m axim um term of the options granted appears
by plan type in the sections below. The fair value of these options was
estim ated at the date of grant using a Black-Scholes option pricing
m odel with the following weighted average assum ptions:

2003

2002

2001

Risk-free interest rate
Expected volatility
Expected dividend yield
W eighted-average option life
W eighted-average grant-date
fair value of options

3.68%

4.66%
3.61%
31.68% 31.33% 24.18%
1.37%
0.92%
7 years
7 years

0.94%
7 years

$13.97

$11.81 $6.79

I. Impairment of Long-Lived Assets
The Corporation reviews the recoverability of all long-term assets,
including the related useful lives, whenever events or changes in cir-
cum stances indicate that the carrying am ount of a long-lived asset
m ight not be recoverable. If required, the Corporation com pares the
estim ated undiscounted future net cash ﬂows to the related asset’s car-
rying value to determ ine whether there has been an im pairm ent. If an
asset is considered im paired, the asset is written down to fair value,
which is based either on discounted cash ﬂows or appraised values in
the period the im pairm ent becom es known. There were no such write-
downs in 2003, 2002, or 2001.

J. Goodwill
Goodwill results from business acquisitions. The Corporation accounts
for business acquisitions by allocating the purchase price to tangible
and intangible assets and liabilities. Assets acquired and liabilities
assum ed are recorded at their fair values, and the excess of the pur-
chase price over the am ounts allocated is recorded as goodwill.

U pon adoption of Statem ent of Financial Accounting Standards
(“SFAS”) N o. 142, “Goodwill and Other Intangible Assets,” on January
1, 2002, the Corporation no longer am ortizes goodwill. Additionally,
the recoverability of goodwill is subject to an annual im pairm ent test,
or whenever an event occurs or circum stances change that would m ore
likely than not result in an im pairm ent. The im pairm ent test is based
on the estim ated fair value of the underlying businesses. See N ote 8
for further inform ation on goodwill.

K. Fair Value of Financial Instruments
SFAS N o. 107, “Disclosure About Fair Value of Financial Instrum ents,”
requires certain disclosures regarding the fair value of ﬁnancial instru-
m ents. Due to the short m aturities of cash and cash equivalents,
accounts receivable, accounts payable, and accrued expenses, the net
book value of these ﬁnancial instrum ents are deem ed to approxim ate
fair value.

The estim ated fair values of the Corporation’s long-term debt instru-
m ents at Decem ber 31, 2003 aggregated $226.6 m illion com pared
to a carrying value of $225.1 m illion. The carrying am ount of the
variable interest rate long-term debt approxim ates fair value because
the interest rates are reset periodically to reﬂect current m arket condi-
tions. Fair values for the Corporation’s ﬁxed rate debt were estim ated
based on valuations provided by third parties in accordance with their
proprietary m odels.

The carrying am ount of the interest rate swaps reﬂects their fair value
as provided by third parties in accordance with their proprietary m odels.

The fair values described above m ay not be indicative of net realizable
value or reﬂective of future fair values. Furtherm ore, the use of differ-
ent m ethodologies to determ ine the fair value of certain ﬁnancial
instrum ents could result in a different estim ate of fair value at the
reporting date.

5 0

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

The estim ated fair value of the option grants are am ortized to expense
over the options’ vesting period beginning January 1 of the following
year, due to the tim ing of the grants. The Corporation’s pro form a infor-
m ation for the years ended Decem ber 31, 2003, 2002, and 2001 is
as follows:

(In thousands, except per share data)

2003

2002

2001

NET EARNINGS: AS REPORTED
Deduct:

Total stock-based em ployee
com pensation expense
determ ined under fair value
based m ethod for all awards,
net of related tax effects

Pro form a

NET EARNINGS PER SHARE:
As reported:
Basic
Diluted
Pro form a:
Basic
Diluted

$52,268

$45,136

$62,880

(1,261)

(1,197)
(1,524)
$51,007 $43,612 $61,683

$ 2.53 $ 2.21 $ 3.12
$ 2.50 $ 2.16 $ 3.07

$ 2.47 $ 2.14 $ 3.07
$ 2.44 $ 2.09 $ 3.01

The Corporation receives tax deductions related to the exercise of non-
qualiﬁed stock options, the offset of which is recorded in equity. The
tax beneﬁt totaled $1.7 m illion, $2.7 m illion, and $0.5 m illion in 2003,
2002, and 2001, respectively. Further inform ation concerning options
granted under the Corporation’s Long-Term Incentive Plan is provided
in N ote 14.

O. Capital Stock
On M ay 23, 2003, the stockholders approved an increase in the num -
ber of authorized shares of the Corporation’s Com m on Stock from
11,250,000 to 33,750,000. On N ovem ber 18, 2003, the Board of
Directors declared a 2-for-1 stock split in the form of a 100% stock div-
idend. The split, in the form of 1 share of Com m on Stock for each share
of Com m on Stock outstanding and 1 share of Class B Com m on Stock
for each share of Class B Com m on Stock outstanding, was payable on
Decem ber 17, 2003. To effectuate the stock split, the Corporation
issued 5,993,864 original shares of Com m on Stock and 4,382,400
original shares of Class B Com m on Stock, at $1.00 par value from cap-
ital surplus, with a corresponding reduction in retained earnings of
$10.4 m illion. Accordingly, all references throughout this annual report
to num ber of shares, per share am ounts, stock options data and m ar-
ket prices of the Corporation’s two classes of com m on stock have been
adjusted to reﬂect the effect of the stock split for all periods presented,
where applicable.

In February 2001, the Corporation increased the authorized num ber of
shares for repurchase under its existing stock repurchase program
by 600,000 shares. This increase was an addition to the previous
authorization of 300,000 shares. Purchases were authorized to be

m ade from tim e to tim e in the open m arket or privately negotiated
transactions, depending on m arket and other conditions, whenever
m anagem ent believes that the m arket price of the stock does not ade-
quately reﬂect the true value of the Corporation and, therefore, repre-
sented an attractive investm ent opportunity. The shares are held at cost
and reissuance is recorded at the weighted average cost. Through
Decem ber 31, 2003, the Corporation had repurchased 210,930 shares
under this program . There was no stock repurchased during 2003
and 2002.

P. Earnings Per Share
The Corporation is required to report both basic earnings per share
(“EPS”), based on the weighted average num ber of Com m on and Class
B shares outstanding, and diluted earnings per share, based on the
basic EPS adjusted for all potentially dilutive shares issuable. The cal-
culation of EPS is disclosed in N ote 13.

Q. Income Taxes
The Corporation applies SFAS N o. 109, “Accounting for Incom e Taxes.”
U nder the asset and liability m ethod of SFAS N o. 109, deferred tax
assets and liabilities are recognized for future tax consequences attrib-
utable to differences between the ﬁnancial statem ent carrying
am ounts of existing assets and liabilities and their respective tax bases.
The effect on deferred tax assets and liabilities of a change in tax laws
is recognized in the results of operations in the period the new laws are
enacted. A valuation allowance is recorded to reduce the carrying
am ounts of deferred tax assets unless it is m ore likely than not that
such assets will be realized.

R. Foreign Currency Translation
For operations outside the U nited States of Am erica that prepare ﬁnan-
cial statem ents in currencies other than the U .S. dollar, the Corpora-
tion translates assets and liabilities at period-end exchange rates and
incom e statem ent am ounts using weighted average exchange rates for
the period. The cum ulative effect of translation adjustm ents is pre-
sented as a com ponent of accum ulated other com prehensive incom e
within stockholders’ equity. This balance is affected by foreign cur-
rency exchange rate ﬂuctuations and by the acquisition of foreign enti-
ties. Gains and losses from foreign currency transactions are included
in results of operations.

S. Derivatives
The Corporation uses interest rate swaps to m anage its exposure to ﬂuc-
tuations in interest rates on a portion of its ﬁxed rate debt instrum ents.
The interest rate swap agreem ents are accounted for as fair value
hedges. The derivatives have been recorded at fair value on the balance
sheet within other non-current assets with changes in fair value
recorded currently in earnings. Additionally, the carrying am ount of the
associated debt is adjusted through earnings for changes in fair value
due to changes in interest rates. Ineffectiveness is recognized to the
extent that these two adjustm ents do not offset. For the year ended
Decem ber 31, 2003, the derivatives were assum ed to be perfectly
effective under the “short-cut m ethod” of SFAS 133. The differential
to be paid or received based on changes in interest rates is recorded as
an adjustm ent to interest expense in the statem ent of earnings. Addi-
tional inform ation on these swap agreem ents is presented in N ote 12.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

5 1

T. Recently Issued Accounting Standards
In June 2001, the FASB issued SFAS N o. 143 “Accounting for Asset
Retirem ent Obligations.” This statem ent addresses ﬁnancial account-
ing and reporting obligations associated with the retirem ent of tangi-
ble long-lived assets and the associated asset retirem ent costs. The
statem ent requires the Corporation to recognize the fair value of a lia-
bility for an asset retirem ent obligation in the period in which it is
incurred, if a reasonable estim ate can be m ade. U pon initial recogni-
tion of such a liability, if any, the Corporation would capitalize the asset
retirem ent cost as an asset equal to the fair value of the liability and
allocate such cost to expense system atically over the useful life of the
underlying asset. The estim ated future liability would be subject to
change, with the effects of such change affecting the asset retirem ent
cost and the related expense as appropriate. The provisions of this
statem ent are effective for ﬁscal years beginning after June 15, 2002.
The adoption of this statem ent did not have a m aterial im pact on the
Corporation’s results of operation or ﬁnancial condition.

In Decem ber 2002, the FASB issued SFAS N o. 148 “Accounting for
Stock-Based Com pensation— Transition and Disclosure.” This state-
m ent provides alternate m ethods of transition for a voluntary change
to the fair value based m ethod of accounting for stock-based em ployee
com pensation. In addition, the statem ent requires additional disclo-
sures about the m ethods of accounting for stock-based em ployee com -
pensation and the effect of the m ethod used on reported results. The
provisions of this statem ent are effective for ﬁscal years beginning after
Decem ber 15, 2002. The Corporation intends on continuing to account
for its stock options under Accounting Principles Board Opinion N o.
25, “Accounting for Stock Issued to Em ployees,” and thus the adoption
of the new standard did not have a m aterial im pact on the Corporation’s
results of operation or ﬁnancial condition.

5 2

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

In January 2003, the FASB issued Interpretation N o. 46, “Consolida-
tion of Variable Interest Entities (“VIE”s)” (“FIN 46”). This interpreta-
tion of Accounting Research Bulletin N o. 51, “Consolidated Financial
Statem ents,” addresses when a com pany should include in its ﬁnan-
cial statem ents the assets and liabilities of unconsolidated VIEs. FIN
46 was effective for VIEs created or acquired after January 31, 2003.
The Corporation is not party to any contractual arrangem ents with VIEs
and thus the adoption of this statem ent did not have a m aterial im pact
on the Corporation’s results of operation or ﬁnancial condition.

In Decem ber 2003, the FASB issued SFAS N o. 132 (revised 2003),
“Em ployers’ Disclosures about Pensions and Other Postretirem ent
Beneﬁts.” This Statem ent retains the disclosure requirem ents con-
tained in the original FASB Statem ent N o. 132, “Em ployers’ Disclo-
sures about Pensions and Other Postretirem ent Beneﬁts,” which it
replaces and requires additional disclosures about the assets, obliga-
tions, cash ﬂows, and net periodic beneﬁt cost of deﬁned beneﬁt pen-
sion plans and other deﬁned beneﬁt postretirem ent plans. It does not
change the m easurem ent of recognition of those plans required by
FASB Statem ents N o. 87, “Em ployers’ Accounting for Pensions,” N o.
88, “Em ployers’ Accounting for Settlem ents and Curtailm ents of
Deﬁned Beneﬁt Pension Plans and for Term ination Beneﬁts,” and N o.
106, “Em ployers’ Accounting for Postretirem ent Beneﬁts Other Than
Pensions.” The Statem ent is effective for annual and interim periods
with ﬁscal years ending after Decem ber 15, 2003. The adoption of this
statem ent did not have a m aterial im pact on the Corporation’s results
of operation or ﬁnancial condition.

2. Acquisitions
The Corporation acquired six businesses in 2003, six businesses in
2002, and seven businesses in 2001 as described below. All acquisi-
tions have been accounted for as purchases with the excess of the pur-
chase price over the estim ated fair value of the net tangible and
intangible assets acquired recorded as goodwill. The Corporation
m akes prelim inary estim ates of the value of identiﬁable intangibles
with a ﬁnite life and records am ortization based upon the estim ated
useful life of those intangible assets identiﬁed. W ithin one year of
acquisition, the Corporation will adjust these estim ates based upon

P E R I T E K C O R P O R AT I O N

On August 1, 2003, the Corporation acquired the assets and certain
liabilities of Peritek Corporation (“Peritek”). The purchase price of the
acquisition was $3.2 m illion in cash and the assum ption of certain lia-
bilities. The Corporation paid $1.5 m illion at closing, which was funded
from cash available from operations, and will pay the rem aining pur-
chase price subject to a prom issory note of $1.2 m illion and settlem ent
of a holdback provision of $0.3 m illion. The holdback am ount is held
as security for potential indem niﬁcation claim s. Any am ount of hold-
back rem aining after claim s for indem niﬁcation have been settled will
be paid nineteen m onths after the acquisition date. The purchase price
of the acquisition approxim ates the fair value of the net assets acquired
as of Decem ber 31, 2003, which includes developed technology of
approxim ately $2.6 m illion. Revenues of the purchased business for
the ﬁscal year ending M arch 31, 2003 were $2.7 m illion.

Peritek is a leading supplier of video and graphic display boards for the
em bedded com puting industry and supplies a variety of industries
including aviation, defense, and m edical. In addition, Peritek supplies
products for bom b detection, industrial autom ation, and m edical im ag-
ing applications. Peritek’s operations are located in Oakland, California.

C O L L I N S T E C H N O L O G I E S

On February 28, 2003, the Corporation acquired the assets of Collins
Technologies (“Collins”) from G.L. Collins Corporation. The purchase
price of the acquisition was $11.8 m illion in cash and the assum ption
of certain liabilities. Included in the purchase price is $0.5 m illion held
as security for potential indem niﬁcation claim s. Any am ount of hold-
back rem aining after claim s for indem niﬁcation have been settled will
be paid one year after the acquisition date. M anagem ent funded the
purchase price from credit available under the Corporation’s Short-
Term Credit Agreem ent. The excess of the purchase price, excluding
the holdback, over the fair value of the net assets acquired as of
Decem ber 31, 2003 is $6.8 m illion. The fair value of the net assets
acquired was based on current estim ates. The Corporation m ay adjust
these estim ates based upon analysis of third party appraisals and the
ﬁnal determ ination of fair value. Revenues of the purchased business
were $8.3 m illion for the year ended M arch 31, 2002.

Collins designs and m anufactures Linear Variable Displacem ent
Transducers (“LVDTs”), prim arily for aerospace ﬂight and engine con-
trol applications. Industrial LVDTs are used m ostly in industrial
autom ation and test applications. Collins’ operations are located in
Long Beach, California.

analysis of third party appraisals and the determ ination of fair value
when ﬁnalized. The Corporation does not consider the 2003 acquisi-
tions to be m aterial, individually or in the aggregate, to its ﬁnancial
position, liquidity, or results of operations, and therefore no pro form a
ﬁnancial statem ents are provided. The results of each acquired busi-
ness have been included in the consolidated ﬁnancial results of the
Corporation from the date of acquisition in the segm ent indicated
as follows:

M otion Control

N O VAT R O N I C S / P I C K E R I N G

On Decem ber 4, 2003, the Corporation acquired all of the outstanding
shares of N ovatronics Inc. (“N ovatronics”) and Pickering Controls Inc.
(“Pickering”) in a single transaction. The purchase price of the acqui-
sition, subject to a working capital adjustm ent and other custom ary
adjustm ents as provided in the Stock Purchase Agreem ent, was $13.6
m illion in cash and the assum ption of certain liabilities. There are pro-
visions in the agreem ent for an additional paym ent in 2006 upon the
achievem ent of certain ﬁnancial perform ance criteria up to a m axim um
of $2.3 m illion. M anagem ent funded the purchase price with proceeds
from the Senior N otes issued in Septem ber 2003. The excess of the
purchase price over the fair value of the net assets acquired as of
Decem ber 31, 2003 is $5.3 m illion. The fair value of the net assets
acquired was based on current estim ates. The Corporation m ay adjust
these estim ates based upon analysis of third party appraisals and the
ﬁnal determ ination of fair value. Revenues of the purchased business
were $12.0 m illion for the year ended Decem ber 31, 2002.

N ovatronics and Pickering design and m anufacture electric m otors and
position sensors (both linear and rotary) for the com m ercial aerospace,
m ilitary aerospace, and industrial m arkets. N ovatronics has operating
facilities located in Stratford, Ontario, Canada, while Pickering is
located in Plainview, N ew York.

S Y S T R A N C O R P O R AT I O N

On Decem ber 1, 2003, the Corporation acquired all of the outstanding
shares of Systran Corporation (“Systran”). The purchase price of the
acquisition, subject to a working capital adjustm ent and other custom -
ary adjustm ents as provided for in the Stock Purchase Agreem ent, was
$18.0 m illion in cash and the assum ption of certain liabilities. M anage-
m ent funded the purchase price with proceeds from the Senior N otes
issued in Septem ber 2003. The excess of the purchase price over the fair
value of the net assets acquired as of Decem ber 31, 2003 is $9.3 m il-
lion. The fair value of the net assets acquired was based on current esti-
m ates. The Corporation m ay adjust these estim ates based upon analysis
of third party appraisals and the ﬁnal determ ination of fair value.
Revenues of the purchased business were $15.1 m illion for the year
ended Septem ber 30, 2003.

Systran is a leading supplier of highly specialized, high perform ance
data com m unications products for real-tim e system s, prim arily for the
aerospace and defense, industrial autom ation, and m edical im aging
m arkets. Key applications include sim ulation, process control,
advanced digital signal processing, data acquisition, im age process-
ing, and test and m easurem ent. Systran’s operations are located in
Dayton, Ohio.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

5 3

TAPCO designs, engineers, and m anufactures high-perform ance m etal
seated industrial gate valves, butterﬂy valves, ﬂapper valves, actuators,
and internal com ponents used in high-tem perature, highly abrasive,
and highly corrosive environm ents in the petrochem ical reﬁning indus-
try. Operations are located in H ouston, Texas with a m inor operation in
the U K to serve the European m arket.

E L E C T R O - M E C H A N I C A L D I V I S I O N

On October 28, 2002, the Corporation acquired the net assets of the
Electro M echanical Division (“EM D”) of W estinghouse Governm ent
Services Com pany LLC, a wholly-owned subsidiary of W ashington
Group International. The purchase price of the acquisition, which
includes capitalized acquisition costs, was $79.9 m illion in cash and
the assum ption of certain liabilities and is subject to a working capital
adjustm ent and other custom ary adjustm ents as provided for in the
Asset Purchase Agreem ent. The acquisition was accounted for as a pur-
chase in the fourth quarter of 2002 and was funded from the Corpora-
tion’s revolving credit facilities. The purchase price has been allocated
to the net tangible and intangible assets acquired as of Decem ber
31,2003, with the rem ainder recorded as goodwill, on the basis of
estim ated fair values, as follows:

(In thousands)

N et working capital
Property, plant and equipm ent
Other assets
Postretirem ent beneﬁt obligation
Pension beneﬁt obligation
Other noncurrent liabilities
Intangible assets

N et tangible and intangible assets
Purchase price

Goodwill

455
70,474
40,423
(36,344)
(38,626)
(13,881)
6,970

$ 29,471
79,858

$ 50,387

EM D is a designer and m anufacturer of highly engineered critical func-
tion electro-m echanical solutions for the U .S. N avy, com m ercial nuclear
power utilities, petrochem ical, and hazardous waste industries. Opera-
tions are located in Cheswick, Pennsylvania.

P E N N Y & G I L E S / A U T R O N I C S

On April 1, 2002, the Corporation acquired all of the outstanding
shares of Penny and Giles Controls Ltd., Penny and Giles Controls Inc.,
Penny and Giles Aerospace Ltd., the assets of Penny & Giles Interna-
tional Plc. devoted to its aerospace com ponent business (collectively
“Penny and Giles”), and substantially all of the assets of Autronics Cor-
poration (“Autronics”) from Spirent Plc. The purchase price of the
acquisition was $59.5 m illion in cash and the assum ption of certain
liabilities. Approxim ately $40 m illion of the purchase price was funded
from the Corporation’s Revolving Credit facility. The excess of the pur-
chase price over the fair value of the net assets acquired as of Decem -
ber 31, 2003 is $32.5 m illion, including foreign currency translation
adjustm ent gains of $4.8 m illion.

Penny and Giles is a designer and m anufacturer of proprietary position
sensors and control hardware for both m ilitary and com m ercial aero-
space applications and industrial m arkets. Autronics is a leading
provider of aerospace ﬁre detection and suppression control system s,
power conversion products, and control electronics. The acquired busi-
ness units are located in W ales, England, Germ any, and the U nited
States of Am erica.

L A U D E F E N S E S Y S T E M S / V I S TA C O N T R O L S

On N ovem ber 1, 2001 the Corporation acquired the assets of Lau
Defense System s (“LDS”) and the stock of Vista Controls, Inc.
(“Vista”). LDS and Vista design and m anufacture “m ission-critical”
electronic control system s prim arily for the defense m arket. In addi-
tion, an agreem ent was reached for the negotiation of licenses for facial
recognition products for certain U .S. Governm ent and industrial m ar-
kets. The businesses acquired have operating facilities located in Lit-
tleton, M assachusetts and Santa Clarita, California.

The purchase price of the acquisition was $44.8 m illion in cash and the
assum ption of certain liabilities. There are provisions in the agreem ent
for additional paym ents upon the achievem ent of certain ﬁnancial per-
form ance criteria through 2006 up to a m axim um additional paym ent
of $22.0 m illion. During 2003, the Corporation had paid $1.8 m illion
in cash and accrued an additional $1.2 m illion related to these provi-
sions, which have been reﬂected in the purchase price above. This
acquisition was accounted for as a purchase in the fourth quarter of
2001. The excess of the purchase price over the fair value of the net
assets acquired as of Decem ber 31, 2003 is $35.8 m illion.

Flow Control

TA P C O I N T E R N AT I O N A L

On Decem ber 3, 2002, the Corporation acquired the assets of TAPCO
International, Inc., (“TAPCO”) for $12.0 m illion in cash and the
assum ption of certain liabilities. The acquisition was accounted for as
a purchase in the fourth quarter of 2002 and was funded from the Cor-
poration’s revolving credit facilities. The excess of the purchase price
over the fair value of the net assets acquired as of Decem ber 31, 2003
is $6.4 m illion.

5 4

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

D E LTAVA LV E

On Decem ber 12, 2001, the Corporation acquired the operating assets
of Deltavalve U SA, LLC (“Deltavalve”). Deltavalve designs, engineers,
and m anufactures industrial valves used in high pressure, extrem e
tem perature, and corrosive plant environm ents. Deltavalve is located
in Salt Lake City, U tah with an assem bly and test facility in Calgary,
Alberta, Canada.

The Corporation acquired the net assets of Deltavalve for $6.5 m illion
in cash, plus the assum ption of certain liabilities. There are provisions
in the agreem ent for additional paym ents upon the achievem ent of cer-
tain ﬁnancial perform ance criteria through 2006. This acquisition was
accounted for as a purchase in the fourth quarter of 2001. The excess
of the purchase price over the fair value of the net assets acquired as
of Decem ber 31, 2003 is $3.9 m illion.

P E E R L E S S I N S T R U M E N T C O M PA N Y

On N ovem ber 8, 2001, the Corporation acquired the stock of Peerless
Instrum ent Co., Inc. (“Peerless”). Peerless is an engineering and m an-
ufacturing com pany that designs and produces custom control com -
ponents and system s for ﬂow control applications prim arily for the U .S.
N uclear N aval program . The purchased business was located in
Elm hurst, N ew York, but has subsequently been relocated to the Cor-
poration’s facility in East Farm ingdale, N ew York. The purchase price
of the acquisition was $7.0 m illion in cash plus the assum ption of
certain liabilities. This acquisition was accounted for as a purchase in
the fourth quarter of 2001. The excess of the purchase price over
the fair value of the net assets acquired as of Decem ber 31, 2003 is
$2.0 m illion.

S O L E N T & P R AT T

On M arch 23, 2001, the Corporation acquired the operating assets of
Solent & Pratt Ltd. (“Solent & Pratt”). Solent & Pratt is a m anufacturer
of high perform ance butterﬂy valves and is a global supplier to the
petroleum , petrochem ical, chem ical, and process industries. The oper-
ations are located in Bridport, England.

The Corporation purchased the assets of Solent & Pratt for $2.4 m il-
lion in cash and the assum ption of certain liabilities. There are provi-
sions in the agreem ent for additional paym ents upon the achievem ent
of certain perform ance criteria through 2006. During 2003, the Cor-
poration had paid $0.9 m illion related to these provisions, which have
been reﬂected in the purchase price above. The acquisition was
accounted for as a purchase in the ﬁrst quarter of 2001. The excess
ofthe purchase price over the fair value of the net assets acquired as
of Decem ber 31, 2003 is $3.8 m illion, including foreign currency
translation gains of $0.8 m illion.

M etal Treatment

E / M E N G I N E E R E D C O AT I N G S S O L U T I O N S

On April 2, 2003, the Corporation purchased selected assets of E/M
Engineered Coatings Solutions (“E/M Coatings”). The purchase price of
the acquisition was $16.8 m illion in cash and the assum ption of certain
liabilities. The purchase price was funded from credit available under
the Corporation’s Short-Term Credit Agreem ent. The excess of the pur-
chase price over the fair value of the net assets acquired as of Decem -
ber 31, 2003 is $5.8 m illion. The fair value of the net assets acquired
was based on current estim ates. The Corporation m ay adjust these esti-
m ates based upon analysis of third party appraisals and the ﬁnal deter-
m ination of fair value. Revenues of the purchased business were
approxim ately $26 m illion for the year ended Decem ber 31, 2002.

The Corporation acquired six E/M Coatings facilities operating in
Chicago, IL; Detroit, M I; M inneapolis, M N ; H artford, CT; and N orth
H ollywood and Chatsworth, CA. Com bined, these facilities are one of
the leading providers of solid ﬁlm lubricant coatings in the U nited
States. The E/M Coatings facilities have the capability of applying over
1,100 different coatings to im part lubrication, corrosion resistance,
and certain cosm etic and dielectric properties to selected com ponents.

A D VA N C E D M AT E R I A L P R O C E S S

On M arch 11, 2003, the Corporation acquired selected net assets of
Advanced M aterial Process Corp. (“AM P”), a private com pany with
operations located in W ayne, M ichigan. The purchase price of the
acquisition was $5.9 m illion in cash and the assum ption of certain lia-
bilities. Included in the purchase price is $0.2 m illion held as security
for potential indem niﬁcation claim s. Any am ount of holdback rem ain-
ing after claim s for indem niﬁcation have been settled will be paid one
year after the acquisition date. There are provisions in the agreem ent
for additional paym ents upon the achievem ent of certain ﬁnancial per-
form ance criteria through 2008 up to a m axim um additional paym ent
of $1.0 m illion. M anagem ent funded the purchase from credit avail-
able under the Corporation’s Short-Term Credit Agreem ent. The excess
of the purchase price over the fair value of the net assets acquired as
of Decem ber 31, 2003 is $2.8 m illion. The fair value of the net assets
acquired was based on current estim ates. The Corporation m ay adjust
these estim ates based upon analysis of third party appraisals and the
ﬁnal determ ination of fair value. Revenues of the purchased business
were $5.1 m illion for the year ended Decem ber 31, 2002.

AM P is a supplier of com m ercial shot peening services prim arily to the
autom otive m arket in the Detroit area.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

5 5

B R E N N E R T O O L & D I E

On N ovem ber 14, 2002, the Corporation acquired selected assets and
liabilities of Brenner Tool and Die, Inc. (“Brenner”) relating to Bren-
ner’s m etal ﬁnishing operations in Bensalem , Pennsylvania. Brenner
provides non-destructive testing, chem ical m illing, chrom ic and phos-
phoric anodizing, and painting services.

The purchase price of the acquisition was $10.0 m illion in cash, which
approxim ated the fair value of the net assets acquired as of Decem ber
31, 2003. There are provisions in the agreem ent for additional pay-
m ents upon the achievem ent of certain ﬁnancial perform ance criteria
through 2007 up to a m axim um additional paym ent of $10.0 m illion.

Y T S T R U K T U R A R B O G A A B

On April 11, 2002, the Corporation acquired 100% of the stock of
Ytstruktur Arboga AB, a m etal treatm ent business located in Arboga,
Sweden. This business, specializing in controlled shot peening, non-
destructive testing, and other m etal ﬁnishing processes, services the
Scandinavian m arket.

The purchase price of the acquisition was $1.2 m illion. The excess of
the purchase price over the fair value of the net assets acquired as of
Decem ber 31, 2003 is $1.5 m illion, including $0.5 m illion of foreign
currency translation gains.

B O D Y C O T E T H E R M A L P R O C E S S I N G

On Decem ber 19, 2001, the Corporation acquired the W ichita, Kansas
heat treating operation of Bodycote Therm al Processing. This opera-
tion provides heat treating services to a num ber of industries includ-
ing aerospace and agriculture.

The purchase price of the acquisition was $3.6 m illion. This acquisi-
tion has been accounted for as a purchase in the fourth quarter of
2001. The excess of the purchase price over the fair value of the net
assets acquired was $2.0 m illion.

I R O N B O U N D H E AT T R E AT I N G C O M PA N Y

On N ovem ber 6, 2001, the Corporation acquired the com m ercial heat
treating assets of Ironbound H eat Treating Com pany (“Ironbound”).
Ironbound provides heat treating services to m arkets that include tool
and die, autom otive, aerospace, and m edical com ponents. The busi-
ness is located in Roselle, N ew Jersey.

The purchase price of the acquisition was $4.5 m illion in cash and
the assum ption of certain liabilities. This acquisition has been
accounted for as a purchase in the fourth quarter of 2001. The excess
of the purchase price over the fair value of the net assets acquired was
$0.8 m illion.

3. Divestitures
On Decem ber 20, 2001, the Corporation sold its W ood-Ridge, N ew Jer-
sey Business Com plex for $51.0 m illion. The business com plex com -
prised 2.3 m illion square feet of rental space situated on 138 acres of
land. As a result of the sale, the Corporation recognized a net after-tax
gain of $23.0 m illion during 2001.

U nder the sale agreem ent, the Corporation will retain the responsibil-
ity to continue the ongoing environm ental rem ediation on the property
until such tim e that a “no further action” letter and covenant not to
sue is obtained from the N ew Jersey Departm ent of Environm ental Pro-
tection. The cost of the rem ediation has been previously accrued.
Please refer to N ote 15 for additional inform ation regarding environ-
m ental m atters.

4. Recapitalization
On October 26, 2001, the Corporation’s shareholders approved a recap-
italization plan, which enabled U nitrin Inc. (“U nitrin”) to distribute its
approxim ate 44% equity interest in Curtiss-W right to its shareholders
on a tax-free basis.

U nder the recapitalization plan, and in order to m eet certain tax
requirem ents, U nitrin’s 4.4 m illion shares of the Corporation’s com m on
stock were exchanged for an equivalent num ber of shares of a new
Class B Com m on Stock of Curtiss-W right, which are entitled to
elect80% of Curtiss-W right’s Board of Directors. After such exchange,
U nitrin im m ediately distributed the Class B shares to itsapproxim ately
8,000 registered stockholders in a tax-free distribution. The holders of
the outstanding Com m on shares of Curtiss-W right are entitled to elect
up to 20% of the Board of Directors after the distribution. Other than
the right to elect Directors, the two classes of stock vote as a single
class (except as required by law) and are equal in all other respects.
The new Class B Com m on Stock was listed on the N ew York Stock
Exchange, effective N ovem ber 29, 2001.

In N ovem ber 2000, Curtiss-W right’s Board of Directors had approved
an agreem ent with U nitrin related to the recapitalization plan. U nder
this agreem ent, U nitrin agreed to reim burse the Corporation for certain
costs incurred in connection with the recapitalization up to a m axim um
of $1.75 m illion. The m axim um am ount was received subsequent to
the recapitalization and is reﬂected in the ﬁnancial statem ents as Addi-
tional Paid-In Capital. Recapitalization costs of $1.5 m illion and
$0.9 m illion were incurred in 2001 and 2000, respectively, and are
included in general and adm inistrative costs in the statem ent of earnings.

5 6

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

5. Receivables
Receivables include current notes, am ounts billed to custom ers,
claim s and other receivables, and unbilled revenue on long-term con-
tracts, consisting of am ounts recognized as sales but not billed. Sub-
stantially all am ounts of unbilled receivables are expected to be billed
and collected in the subsequent year.

6. Inventories
In accordance with industry practice, inventoried costs contain
am ounts relating to long-term contracts and program s with long pro-
duction cycles, a portion of which will not be realized within one year.
Inventories are valued at the lower of cost (principally average cost) or
m arket. The com position of inventories is as follows:

Credit risk is generally diversiﬁed due to the large num ber of entities
com prising the Corporation’s custom er base and their geographic dis-
persion. The Corporation is either a prim e contractor or subcontractor
of various agencies of the U .S. Governm ent. Revenues derived directly
and indirectly from governm ent sources (prim arily the U .S. Govern-
m ent) were 46% , 41% and 25% of consolidated revenues in 2003,
2002, and 2001, respectively. As of Decem ber 31, 2003 and 2002,
accounts receivable due directly or indirectly from these governm ent
sources represented 34% and 36% of net receivables, respectively.
Sales to one custom er through which the Corporation is a subcontrac-
tor to the U .S. Governm ent were 16% of consolidated revenues in
2003, 10% in 2002, and 6% in 2001. Accounts receivables due from
this sam e custom er were 14% of net receivables at Decem ber 31, 2003
and 15% as of Decem ber 31, 2002. Due to the increased diversiﬁca-
tion of the Corporation’s custom er base resulting from our recent
acquisitions, no one com m ercial custom er represents a signiﬁcant
concentration of credit risk at Decem ber 31, 2003 and 2002.

The Corporation perform s ongoing credit evaluations of its custom ers
and establishes appropriate allowances for doubtful accounts based
upon factors surrounding the credit risk of speciﬁc custom ers, histori-
cal trends, and other inform ation.

The com position of receivables is as follows:

(In thousands) December 31,

2003

2002

BILLED RECEIVABLES:
Trade and other receivables
Less: Allowance for

doubtful accounts

N et billed receivables

UNBILLED RECEIVABLES:
Recoverable costs and estim ated

earnings not billed
Less: Progress paym ents applied

N et unbilled receivables

$111,068 $106,946

(3,449)

(3,244)

107,619 103,702

56,070
(20,327)

45,997
(13,965)

35,743

32,032

Receivables, net

$143,362 $135,734

The net receivable balance at Decem ber 31, 2003 included $10.5 m il-
lion related to the Corporation’s 2003 acquisitions.

(In thousands) December 31,

Raw m aterial
W ork-in-process
Finished goods and com ponent parts
Inventoried costs related to

U .S. Governm ent and other
long-term contracts

Gross inventories

Less: Inventory reserves
Progress paym ents applied,
principally related to
long-term contracts

Inventories, net

2003

2002

$ 40,624 $ 34,365
26,069
45,682

26,409
46,575

20,544

22,743

134,152 128,859

(22,278)

(23,548)

(13,994)

(20,743)

$ 97,880 $ 84,568

The net inventory balance at Decem ber 31, 2003 included $9.0 m il-
lion related to the Corporation’s 2003 acquisitions.

7. Property, Plant, and Equipment
The com position of property, plant, and equipm ent is as follows:

(In thousands) December 31,

2003

2002

Land
Buildings and im provem ents
M achinery, equipm ent, and other

$ 12,206 $ 11,677
80,652
262,661

93,058
294,744

Property, plant, and equipm ent, at cost
Less: Accum ulated depreciation

400,008
(161,869)

354,990
(135,941)

Property, plant, and equipm ent, net

$ 238,139 $ 219,049

Depreciation expense for the years ended Decem ber 31, 2003, 2002, and
2001 was $27.7 m illion, $16.7 m illion, and $12.4 m illion, respectively.
The net property, plant, and equipm ent balance at Decem ber 31, 2003
included $3.1 m illion related to the Corporation’s 2003 acquisitions.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

5 7

(In thousands) December 31,

2003

2002

2001

NET EARNINGS:
As reported
Goodwill am ortization,

net of tax

As adjusted

DILUTED EARNINGS PER SHARE:
As reported
Goodwill am ortization,

net of tax

As adjusted

$52,268 $45,136 $62,880

—

1,136

$52,268 $45,136 $64,016

$ 2.50 $ 2.16 $ 3.07

—

0.06

$ 2.50 $ 2.16 $ 3.13

9. Other Intangible Assets, net
Intangible assets are generally the result of acquisitions and consist
prim arily of purchased technology, custom er related intangibles, trade-
m arks and service m arks, and technology licenses. Intangible assets
are am ortized over useful lives that range between 1 and 20 years.

The following table sum m arizes the intangible assets acquired (includ-
ing their weighted average useful lives) by the Corporation during 2003
and 2002. The 2002 am ounts have been adjusted to reﬂect the change
in estim ates of fair values m ade in 2003 and exclude $1.0 m illion of
indeﬁnite lived intangible assets included in Other intangible assets.

(In thousands, except years data)

2003

2002

Developed technology
Custom er related
intangibles

Other intangible assets

Am ount

Years

Am ount

Years

$12,453

8.0

$11,012 14.3

7,426
2,519

11.6
10.5

8,035 13.4
244 14.4

Total

$22,398

9.5

$19,291 13.9

8. Goodwill
Goodwill consists prim arily of the excess purchase price of acquisitions
over the fair value of the net assets acquired.

The changes in the carrying am ount of goodwill for 2003 and 2002 are
as follows:

(In thousands)

Decem ber 31, 2001
Goodwill from 2002

M otion
Control

Flow

M etal
Control Treatm ent Consolidated

$ 46,453 $33,075 $ 4,057 $ 83,585

acquisitions

22,263

62,122

1,077

85,462

Change in estim ate to
fair value of net
assets acquired
in 2001

Foreign currency
translation
adjustm ent

5,417

(183) 1,666

6,900

4,594

395

165

5,154

Decem ber 31, 2002

78,727

95,409

6,965

181,101

Goodwill from 2003

acquisitions

21,369

— 8,581

29,950

Change in estim ate to
fair value of net
assets acquired
in 2002

Foreign currency
translation
adjustm ent

6,081

(3,977)

2,117

4,673

1,986

231

6,890

Decem ber 31, 2003

$110,850 $ 93,418 $15,790 $220,058

During 2003, the Corporation ﬁnalized the allocation of the purchase
price for the six businesses acquired in 2002. The purchase price allo-
cations relating to businesses acquired in 2003 are based on estim ates
and have not yet been ﬁnalized. Approxim ately $15 m illion and
$18 m illion of the goodwill acquired during 2003 and 2002, respec-
tively, is deductible for tax purposes.

In accordance with SFAS N o. 142, the Corporation com pleted its
annual im pairm ent test of goodwill during the third quarter of 2003
and concluded there was no im pairm ent of goodwill.

The following table reﬂects the pro form a consolidated results adjusted
as if SFAS N o. 142 were adopted as of January 1, 2001:

5 8

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

The following tables present the cum ulative com position of the Corpo-
ration’s acquired intangible assets as of Decem ber 31:

(In thousands)
2003

G ross

Accum ulated
Am ortization

N et

Developed technology
Custom er related intangibles
Other intangible assets

$32,892
14,469
5,902

$(2,966)
(863)
(1,166)

$29,926
13,606
4,736

Total

2002
2002

$53,263

$(4,995)

$48,268

G ross

Accum ulated
Am ortization

N et

Developed technology
Custom er related intangibles
Other intangible assets

$21,371
1,268
2,143

$(1,452) $19,919
667
1,396

(601)
(747)

Total

$24,782

$(2,800) $21,982

The following table presents the changes in the net balance of other
intangibles assets during 2003:

D eveloped
Technology

$19,919
12,453
(1,408)

Custom er

O ther
Related Intangible
Assets

Intangibles

Total

667
7,426
(1,744)

$1,396 $21,982
22,398
(3,575)

2,519
(423)

(In thousands)

Decem ber 31, 2002
Acquired during 2003
Am ortization expense
Change in estim ate of
fair value related
to purchase price
allocations

N et foreign currency

translation
adjustm ent

Decem ber 31, 2003
Total

733

—

760

$29,926

$13,606

$4,736 $48,268

During 2003, the Corporation rem oved $1.5 m illion of fully am ortized
intangible assets from the gross and accum ulated am ortization of cus-
tom er related intangibles, respectively.

Am ortization expense for the years ended Decem ber 31, 2002 and
2001 was $1.9 m illion and $0.4 m illion, respectively. The estim ated
future am ortization expense of purchased intangible assets is as fol-
lows:

(In thousands)

2004
2005
2006
2007
2008
2009 and thereafter

Total am ortization expense

$ 4,641
4,581
4,581
4,581
4,391
25,493

$48,268

10. Accrued Expenses and Other Current Liabilities
Accrued expenses consist of the following:

(In thousands) December 31,

Accrued com pensation
Accrued interest
Accrued insurance
Accrued taxes other than incom e taxes
Accrued com m issions
Other

Total accrued expenses

2003

2002

$26,331 $19,667
216
3,253
2,044
1,137
6,129

3,264
3,957
3,050
1,593
6,743

$44,938 $32,446

(In thousands) December 31,

Deferred revenue
W arranty reserves
Current portion of environm ental reserves
Additional am ounts due to sellers

on acquisitions

Other

2003

2002

$21,726 $31,796
9,504
2,177

10,011
2,178

2,154
3,355

2,120
4,875

Total other current liabilities

$39,424 $50,472

The accrued expenses and other current liabilities at Decem ber 31,
2003 included $2.2 m illion and $1.5 m illion, respectively, related to
the Corporation’s 2003 acquisitions.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

5 9

(1,771)

7,230

1,244

6,703

Other current liabilities consist of the following:

The Corporation provides its custom ers with warranties on certain
com m ercial and governm ental products. Estim ated warranty costs are
charged to expense in the period the related revenue is recognized
based on quantitative historical experience. These estim ates are
adjusted in the period in which actual results are ﬁnalized or better
inform ation is obtained. The following table presents the changes in
the Corporation’s warranty reserves:

(In thousands)

W arranty reserves at January 1,
Increase due to acquisitions
Provision for current year sales
Change in estim ates to

pre-existing warranties

Current year claim s
Foreign currency translation adjustm ent

2003

2002

$ 9,504
612
1,650

$ 3,162
4,249
1,648

(389)
(1,930)
564

1,227
(1,424)
642

All other, net

Effective tax rate

The effective tax rate varies from the U .S. federal statutory tax rate for
the years ended Decem ber 31, principally due to the following:

U .S. Federal statutory tax rate
Add (deduct):

State and local taxes
Recovery of research &
developm ent credits
from prior years

Dividends received

deduction and tax
exem pt incom e

2003

2002

2001

35.0%

3.5

3.6

4.2

—

(1.3)

—

—
(0.7)

(0.1)
(0.1)

(0.5)
(0.2)

37.8%

37.1%

38.5%

W arranty reserves at Decem ber 31,

$10,011

$ 9,504

11. Income Taxes
Earnings before incom e taxes for the years ended Decem ber 31
consistof:

(In thousands)

Dom estic
Foreign

Total

2003

2002

2001

$67,429 $55,314 $ 84,018
18,179
16,421

16,627

$84,056 $71,735 $102,197

The com ponents of the Corporation’s deferred tax assets and liabilities
at Decem ber 31 are as follows:

(In thousands)

Deferred tax assets:

Environm ental reserves
Inventories
Postretirem ent/postem ploym ent

beneﬁts

Incentive com pensation
Accrued vacation pay
W arranty reserve
Other

2003

2002

$ 9,318 $10,127
9,974

8,992

15,601
5,383
3,806
1,686
4,446

15,002
3,406
3,535
2,014
4,076

The provision for incom e taxes for the years ended Decem ber 31
consistof:

Total deferred tax assets

49,232

48,134

Deferred tax liabilities:
Retirem ent plans
Depreciation
Goodwill am ortization
Other intangible am ortization
Other

Total deferred tax liabilities

N et deferred tax assets

13,692
16,416
4,936
9,285
3,071

12,785
13,875
2,841
1,773
1,625

47,400

32,899

$ 1,832 $15,235

(In thousands)

Current:

Federal
State
Foreign

Deferred:

Federal
State
Foreign

2003

2002

2001

$17,018 $13,582 $22,656
6,048
3,648
5,829
5,255

4,103
5,050

26,171

22,485

34,533

5,032
426
159

5,617

3,664
296
154

3,763
505
516

4,114

4,784

Provision for incom e taxes

$31,788 $26,599 $39,317

6 0

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

Deferred tax assets and liabilities are reﬂected on the Corporation’s
consolidated balance sheet at Decem ber 31 as follows:

The carrying am ount of the interest rate swaps reﬂects their fair value
as provided by third parties in accordance with their proprietary m odels.

(In thousands)

Current deferred tax assets
N oncurrent deferred tax liabilities

N et deferred tax assets

2003

2002

$ 23,630 $21,840
(6,605)

(21,798)

$ 1,832 $15,235

Aggregate m aturities of debt are as follows:

Incom e tax paym ents of $22.8 m illion were m ade in 2003, $34.6 m il-
lion in 2002, and $18.9 m illion in 2001.

N o provision has been m ade for U .S. federal or foreign taxes on that
portion of certain foreign subsidiaries’ undistributed earnings $16.7
m illion at Decem ber 31, 2003 considered to be perm anently rein-
vested. It is not practicable to estim ate the am ount of tax that would
be payable if these am ounts were repatriated to the U .S.; however, it is
expected that there would be m inim al or no additional tax because of
the availability of foreign tax credits.

(In thousands)

2004
2005
2006
2007
2008
Thereafter

Total

997
79
59
13,929
62
209,058

$224,184

12. Debt
Debt at Decem ber 31 consists of the following:

Amounts exclude a $1.0 million adjustment to the fair value of long-term
debt relating to the Corporation’s interest rate swap agreements that will not
be settled in cash.

(In thousands)

2003

2002

Industrial Revenue Bonds, due from
2007 to 2028. W eighted average
interest rate is 1.24% and 1.51%
for 2003 and 2002, respectively
Revolving Credit Agreem ent Borrowing,
due 2007. W eighted average interest
rate is 1.97% for 2003 and 2.55%
for 2002

Short-Term Credit Agreem ent Borrowing,
due 2004. W eighted average interest
rate is 2.27% for 2003
5.13% Senior N otes due 2010
5.74% Senior N otes due 2013
Other debt

Total debt

Less: Short-term debt
Total Long-term debt

$ 14,296 $ 13,400

8,868 105,463

— 32,000
—
—
1,015

75,217
125,747
1,020

225,148 151,878

997

32,837
$224,151 $119,041

The debt under the Corporation’s revolving credit agreem ent includes
am ounts denom inated in Swiss francs, which were 11.0 m illion Swiss
francs at Decem ber 31, 2003 and Decem ber 31, 2002.

The estim ated fair values of the Corporation’s long-term debt instrum ents
at Decem ber 31, 2003 aggregated $226.6 m illion com pared to a carry-
ing value of $225.1 m illion. The carrying am ount of the variable interest
rate long-term debt approxim ates fair value because the interest rates are
reset periodically to reﬂect current m arket conditions. Fair values for the
Corporation’s ﬁxed rate debt were estim ated based on valuations
provided by third parties in accordance with their proprietary m odels.

Interest paym ents of $2.3 m illion, $1.6 m illion, and $0.8 m illion were
m ade in 2003, 2002, and 2001, respectively.

On Septem ber 25, 2003 the Corporation issued $200.0 m illion of
Senior N otes (the “N otes”). The N otes consist of $75.0 m illion of
5.13% Senior N otes that m ature on Septem ber 25, 2010 and
$125.0 m illion of 5.74% Senior N otes that m ature on Septem ber 25,
2013. The Corporation used the net proceeds of the N otes to repay the
m ajority of the outstanding indebtedness under the existing revolving
credit facilities. The N otes are senior unsecured obligations and are
equal in right of paym ent to the Corporation’s existing senior indebt-
edness. The Corporation, at its option, can prepay at any tim e, all or
from tim e to tim e any part of, the N otes, subject to a m ake-whole
am ount in accordance with the N ote Purchase Agreem ent. The Corpo-
ration paid custom ary fees that have been deferred and will be am or-
tized over the term s of the N otes. The Corporation is required under the
N ote Purchase Agreem ent to m aintain certain ﬁnancial ratios and m eet
certain net worth and indebtedness tests, of which the Corporation is
in com pliance.

The Corporation attem pts to lim it its exposure to interest rate risk by
m anaging the m ix of its long-term ﬁxed rate borrowings and short-term
borrowings under its bank credit facilities. As noted below, the Corpo-
ration entered into interest rate swap agreem ents designated as
fairvalue hedges on a portion of its $75 m illion of ﬁxed rate debt due
in 2010 and its $125 m illion of ﬁxed rate debt due in 2013. Giving
effect to these agreem ents, the Corporation’s ﬁxed rate borrowings
represented 54% of total borrowings at Decem ber 31, 2003.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

6 1

The Corporation has two credit agreem ents aggregating $225.0 m illion
with a group of eight banks. The Revolving Credit Agreem ent allows for
cash borrowings up to a m axim um of $135.0 m illion with a lim it of
$50.0 m illion for letters of credit. The Revolving Credit Agreem ent
expires M ay 13, 2007, but m ay be extended annually for successive
one-year periods with the consent of the bank group. The Short-Term
Credit Agreem ent allows for cash borrowings up to a m axim um of
$90.0 m illion. The Short-Term Credit Agreem ent expires M ay 7, 2004,
but m ay be extended annually with the consent of the bank group for
additional periods not to exceed 364 days each. The Corporation
expects to extend the Short-Term Agreem ent in 2004; however, there
can be no assurances that the bank group will approve the extension.
In the event the bank group does not renew the Short-Term Credit
Agreem ent, the Corporation should have sufﬁcient cash ﬂow to m eet
its cash requirem ents. Borrowings under these credit agreem ents bear
interest at a ﬂoating rate based on m arket conditions. Additionally, the
Corporation’s rate of interest and paym ent of facility fees are depen-
dent on certain ﬁnancial ratios of the Corporation, as deﬁned in the
agreem ents. As of Decem ber 31, 2003, the Corporation pays quarterly
facility fees on the entire com m itm ent of the Revolving Credit Agree-
m ent and the Short-Term Credit Agreem ent. The Corporation is
required under these agreem ents to m aintain certain ﬁnancial ratios
and m eet certain net worth and indebtedness tests, of which the Cor-
poration is in com pliance. The unused credit available under the
Revolving Credit Agreem ent and the Short-Term Credit Agreem ent at
Decem ber 31, 2003 was $107.1 m illion and $90.0 m illion, respectively.

In the fourth quarter of 2003, the Corporation entered into two interest
rate swap agreem ents, designated as fair value hedges, which effec-
tively convert $80 m illion of the Corporation’s $200 m illion Senior N ote
ﬁxed rate debt to ﬂoating rate debt. U nder the term s of these agree-
m ents, the Corporation m akes paym ents based on speciﬁed spreads
over six-m onth LIBOR and receives paym ents equal to the interest pay-
m ents due on the ﬁxed rate debt. The differential between the paym ents
is recognized as interest expense. The interest rate swap agreem ents
qualify for the “shortcut m ethod” under SFAS N o. 133, which allows for
an assum ption of no ineffectiveness in the hedging relationship. As
such, there is no incom e statem ent im pact from changes in the fair
value of the hedging instrum ents. Instead, the fair value of the instru-
m ents is recorded as an asset or liability on the Corporation’s balance
sheet, with an offsetting adjustm ent to the carrying value of the related
debt. Other long-term assets in the accom panying Decem ber 31, 2003
consolidated balance sheet includes $1.0 m illion representing the fair
value of the interest rate swap agreem ents at that date, with a corre-
sponding aggregate increase in the carrying value of the Corporation’s
long-term debt.

At Decem ber 31, 2003, substantially all of the industrial revenue
bond issues are collateralized by real estate, m achinery, and equip-
m ent. Certain of these issues are supported by letters of credit, which
total $13.7 m illion. The Corporation has various other letters of credit
totaling $5.8 m illion, m ost of which are included under the Revolving
Credit Agreem ent.

13. Earnings Per Share
The Corporation is required to report both basic earnings per share
(“EPS”), based on the weighted average num ber of Com m on and Class
B com m on shares outstanding, and diluted earnings per share, based
on the basic EPS adjusted for all potentially dilutive shares issuable.
Share and per share am ounts presented below have been adjusted on
a pro form a basis for the stock split. See N ote 1-O for further inform a-
tion regarding the stock split.

At Decem ber 31, 2003, the Corporation had stock options outstanding
for 148,052 shares that could potentially dilute basic EPS in the
future. The effect of these options was not included in the com puta-
tion of diluted EPS for 2003 because to do so would have been antidi-
lutive. The Corporation had antidilutive options outstanding of
162,530 at Decem ber 31, 2002 and 238,000 at Decem ber 31, 2001.
Earnings per share calculations for the years ended Decem ber 31,
2003, 2002, and 2001 are as follows:

(In thousands, except per share data)

2003:
Basic earnings per share
Effect of dilutive securities:

Stock options
Deferred stock

com pensation

W eighted-
Average
Shares

N et

Incom e O utstanding(1)

Earnings
Per Share

$ 52,268

20,640

$ 2.53

222

Diluted earnings per share

$ 52,268

20,887

$ 2.50

2002:
Basic earnings per share
Effect of dilutive securities:

Stock options
Deferred stock

com pensation

$45,136

20,398

$2.21

446

Diluted earnings per share

$45,136

20,868

$2.16

2001:
Basic earnings per share
Effect of dilutive securities:

Stock options
Deferred stock

com pensation

$62,880

20,122

$3.12

344

Diluted earnings per share

$62,880

20,472

$3.07

(1)Shares in 2003, 2002, and 2001 include the Corporation’s Common

and Class B common shares.

6 2

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

14. Stock Compensation Plans
1985 Stock Option Plan: The Corporation’s 1985 Stock Option Plan,
which was approved by stockholders and as am ended N ovem ber 16,
1993, expired on February 13, 1995. U nder this plan, 350,000 shares
of com m on stock had been reserved in treasury for issuance to key
em ployees. During the life of the plan, 190,050 options had been
issued. W ith the expiration of the plan, the rem aining 159,950 shares
of com m on stock are no longer reserved for issuance. As of Decem ber
31, 2003 there were options representing a total of 33,156 shares out-
standing under the 1985 Stock Option Plan.

1995 Long-Term Incentive Plan: U nder a Long-Term Incentive Plan
(“LTI Plan”) approved by stockholders in 1995 and as am ended in
2002, an aggregate total of 3,000,000 shares of com m on stock were
reserved for issuance under the LTI Plan. N o m ore than 50,000 shares
of com m on stock m ay be awarded in any year to any one participant in
the LTI Plan. The LTI Plan currently has two com ponents— perfor-
m ance units (cash) and non-qualiﬁed stock options.

U nder the LTI Plan, the Corporation awarded perform ance units of
4,805,783 in 2003, 4,519,906 in 2002, and 2,339,812 in 2001 to cer-
tain key em ployees. The perform ance units are denom inated in dollars
and are contingent upon the satisfaction of perform ance objectives
keyed to achieving proﬁtable growth over a period of three ﬁscal years
com m encing with the ﬁscal year following such awards. The antici-
pated cost of such awards is expensed over the three-year perform ance
period, which am ounted to $3.3 m illion, $1.8 m illion, and $1.2 m illion
in 2003, 2002, and 2001, respectively. The actual cost of the perfor-
m ance units m ay vary from the total value of the awards depending
upon the degree to which the key perform ance objectives are m et.

U nder the LTI Plan, the Corporation has granted non-qualiﬁed stock
options in 2003, 2002, and 2001 to key em ployees. Stock options
granted under this LTI Plan expire ten years after the date of the grant
and are usually exercisable as follows: up to one-third of the grant after
one full year, up to two-thirds of the grant after two full years, and in
full three years from the date of grant.

The rem aining allowable shares for issuance under the 1995 LTI Plan
as of Decem ber 31, 2003 is 2,445,114.

Stock option activity during the periods for both plans is indicated
as follows:

W eighted-
Average
Exercise
Price

O ptions
Exercisable

W eighted-
Average
Exercise
Price

Outstanding at
January 1,
2001
Granted
Exercised
Forfeited

Outstanding at

Decem ber 31,
2001
Granted
Exercised
Forfeited

Outstanding at

Decem ber 31,
2002
Granted
Exercised
Forfeited

Outstanding at

Decem ber 31,
2003

792,098

$14.44

936,148

16.41

837,024

18.48

1,305,428
413,524
(107,664)
(21,374)

$17.10
21.86
11.01
21.98

1,589,914
162,530
(392,160)
(19,980)

18.83
32.56
15.79
21.95

1,340,304
148,052
(233,708)
(16,926)

21.16
38.16
16.57
24.39

1,237,722

$24.01

855,676

$20.83

The following table sum m arizes inform ation about stock options outstanding at Decem ber 31, 2003:

Range of Exercise Prices

$ 7.63 – $11.45
$11.46 – $15.26
$15.27 – $19.08
$19.09 – $22.90
$22.91 – $26.71
$26.72 – $34.34
$34.35 – $38.16

O ptions O utstanding

O ptions Exercisable

W eighted-Average
Rem aining
Contractual
Life in Years

W eighted-
Average
Exercise Price

0.9
2.6
5.2
7.9
6.9
8.9
9.9

7.0

$ 9.00
12.40
18.91
21.85
23.86
32.56
38.16

$24.01

29,024
59,252
297,088
231,858
186,248
52,206
—

855,676

$ 9.00
12.40
18.91
21.85
23.86
32.56
—

$20.83

29,024
59,252
297,088
359,592
186,248
158,466
148,052

1,237,722

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

6 3

In October 2002 the Corporation acquired the Electro-M echanical
Division (“EM D”) facility from W estinghouse Governm ent Services LLC
(“Seller”). Included in the purchase was the assum ption of several
N uclear Regulatory Com m ission (“N RC”) licenses, necessary for the
continued operation of the business. In connection with these licenses,
the N RC required ﬁnancial assurance from the Corporation (in the form
of a parent com pany guarantee), representing estim ated environm en-
tal decom m issioning and rem ediation costs associated with the com -
m ercial operations covered by the licenses. In addition, the
Corporation has assum ed obligations for additional environm ental
rem ediation costs. Rem ediation and investigation of the EM D facility
are ongoing. As of Decem ber 31, 2003 the balance in this reserve is
$13.1 m illion. The Corporation obtained partial environm ental insur-
ance coverage speciﬁcally for the EM D facility. The policy provides cov-
erage for losses due to on or off-site pollution conditions, which are
pre-existing and unknown.

The environm ental obligation at Decem ber 31, 2003 was $23.3 m il-
lion com pared to $24.8 m illion at Decem ber 31, 2002.

16. Pension and Other Postretirement Benefit Plans
The Corporation m aintains six separate and distinct pension and other
postretirem ent beneﬁt plans, as described in further detail below. Prior
to the acquisition of EM D in October 2002, the Corporation m aintained
a qualiﬁed pension plan, a non-qualiﬁed pension plan, and a post-
retirem ent health beneﬁts plan (the “Curtiss-W right Plans”). As a result
of the acquisition, the Corporation obtained three unfunded pension
and postretirem ent beneﬁt plans (the “EM D Plans”), sim ilar in nature
to those listed above. The unfunded status of the acquired EM D Plans
was recorded as a liability at the date of acquisition. During 2003, the
funds associated with the qualiﬁed pension plans of both the Curtiss-
W right Plans and EM D Plans were com m ingled into one fund.

The Curtiss-Wright Plans
The Corporation m aintains a non-contributory deﬁned beneﬁt pension
plan covering substantially all em ployees other than those em ployees
covered by the EM D Pension Plan described below. The Curtiss-W right
Retirem ent Plan (the “CW Pension Plan”) form ula for non-union
em ployees is based on years of credited service and the ﬁve highest
consecutive years’ com pensation during the last ten years of service
and a “cash balance” beneﬁt. U nion em ployees who have negotiated
a beneﬁt under the CW Pension Plan are entitled to a beneﬁt based on
years of service m ultiplied by a m onthly pension rate. Em ployees are
eligible to participate in the CW Pension Plan after one year of service
and are vested after ﬁve years of service. At Decem ber 31, 2003 and
Decem ber 31, 2002, the Corporation had prepaid pension costs of
$77.9 m illion and $76.1 m illion, respectively, under the CW Pension
Plan. Due to the funded status, the Corporation does not expect to con-
tribute funds to the CW Pension Plan during the next ﬁscal year.

Stock Plan for Non-Employee Directors: The Stock Plan for N on-
Em ployee Directors (“Stock Plan”), approved by the stockholders in
1996, authorized the grant of restricted stock awards and, at the option
of the Directors, the deferred paym ent of regular stipulated com pen-
sation and m eeting fees in equivalent shares. Pursuant to the term s of
the Stock Plan, the non-em ployee directors received an initial grant of
3,612 shares in 1996, which becam e unrestricted in 2001. Addition-
ally, on the ﬁfth anniversary of the initial grant, those non-em ployee
directors who rem ained a non-em ployee director, received an addi-
tional grant equal to the product of increasing $13,300 at an annual
rate of 2.96% , com pounded m onthly from the effective date of the
Stock Plan. In 2001, the am ount per director was calculated to be
$15,419, representing a total additional grant of 1,555 restricted
shares. The cost of the restricted stock awards is being am ortized over
the ﬁve-year restriction period from the date of grant. N ewly elected
non-em ployee directors receive sim ilar com pensation under the term s
of the Stock Plan upon their election to the Board.

Pursuant to election by non-em ployee directors to receive shares in lieu
of paym ent for earned and deferred com pensation under the Stock
Plan, the Corporation had provided for an aggregate additional 25,261
shares, at an average price of $22.97 as of Decem ber 31, 2003. Dur-
ing 2003, the Corporation issued 1,657 shares in deferred com pensa-
tion pursuant to such elections, prior to the recent stock split.

Depending on the extent to which the non-em ployee directors elect to
receive future com pensation in shares, total awards issued under this
Stock Plan could exceed the 32,000 registered shares by April 12,
2006, the term ination date of the Stock Plan.

15. Environmental Costs
The Corporation has continued the operation of the ground water and
soil rem ediation activities at the W ood-Ridge, N ew Jersey site through
2003. The cost of constructing and operating this site was provided for
in 1990 when the Corporation established a reserve to rem ediate the
property. Costs for operating and m aintaining this site totaled $0.6 m il-
lion in 2003, and $0.5 m illion in 2002 and 2001, all of which have been
charged against the previously established reserve. In 2002, the Corpo-
ration increased the rem ediation reserve by $1.0 m illion based upon
revised operating projections. The reserve balance as of Decem ber 31,
2003 was $8.4 m illion. Even though this property was sold in Decem ber
2001 (see N ote 3), the Corporation retained the responsibility for this
rem ediation in accordance with the sale agreem ent.

The Corporation has been nam ed as a potentially responsible party, as
have m any other corporations and m unicipalities, in a num ber of envi-
ronm ental clean-up sites. The Corporation continues to m ake progress
in resolving these claim s through settlem ent discussions and paym ents
from established reserves. Signiﬁcant sites rem aining open at the end
of the year are: Caldwell Trucking landﬁll superfund site, Fairﬁeld, N ew
Jersey; Sharkey landﬁll superfund site, Parsippany, N ew Jersey; Am e-
nia landﬁll site, Am enia, N ew York; and Chem sol, Inc. superfund site,
Piscataway, N ew Jersey. The Corporation believes that the outcom e for
any of these rem aining sites will not have a m aterially adverse effect
on the Corporation’s results of operations or ﬁnancial condition.

6 4

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

The Corporation also m aintains a non-qualiﬁed restoration plan (the
“CW Restoration Plan”) covering those em ployees whose com pensa-
tion or beneﬁts exceed the IRS lim itation for pension beneﬁts. Bene-
ﬁts under the CW Restoration Plan are not funded, and, as such, the
Corporation had an accrued pension liability of $0.8 m illion and
$1.1 m illion at Decem ber 31, 2003 and 2002, respectively.

The Corporation provides postretirem ent health beneﬁts to certain
em ployees (the “CW Retirem ent Plan”). In 2002, the Corporation

restructured the postretirem ent m edical beneﬁts for certain active
em ployees, effectively freezing the plan. The obligation associated
with these active em ployees was transferred to the CW Pension Plan.
The plan continues to be m aintained for retired em ployees. As of
Decem ber 31, 2003 and 2002, the Corporation had an accrued postre-
tirem ent beneﬁt liability of $1.3 m illion and $1.4 m illion, respectively,
as beneﬁts under the plan are not funded.

(In thousands)

C H A N G E I N B E N E F I T O B L I G AT I O N :

Beneﬁt obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Am endm ents
Actuarial loss (gain)
Beneﬁts paid
Curtailm ent of beneﬁts

Beneﬁt obligation at end of year

C H A N G E I N P L A N A S S E T S :

Fair value of plan assets at beginning of year
Actual return on plan assets
Em ployer contribution
Plan participants’ contribution
Beneﬁts paid

Fair value of plan assets at end of year

Funded status
U nrecognized net actuarial gain
U nrecognized transition obligation
U nrecognized prior service costs

Prepaid (accrued) beneﬁt costs

A C C U M U L AT E D B E N E F I T O B L I G AT I O N

In determ ination of beneﬁt obligation:

Discount rate
Rate of com pensation increase

M easurem ent date

H E A LT H C A R E C O S T T R E N D S

Rate assum ed for subsequent year
U ltim ate rate reached in 2007

The Curtiss-W right Plans

Pension Benefits

Postretirem ent Benefits

2003

2002

2003

2002

$111,827
8,899
7,982
—
328
16,652
(19,165)
—

126,523

187,969
29,834
375
—
(19,165)

199,013

72,490
3,184
(11)
1,426

$103,344
6,015
7,650
—
829
7,376
(15,298)
1,911

111,827

216,944
(13,761)
84
—
(15,298)

187,969

76,141
(2,179)
(14)
1,092

512
—
39
19
—
144
(86)
—

628

—
—
67
19
(86)

—

(628)
(662)
—
—

$ 1,990
129
148
20
—
159
(90)
(1,844)

512

—
—
70
20
(90)

—

(512)
(879)
—
—

$ 77,089

$114,740

$ 75,040

$101,635

$(1,290)

$(1,391)

N/A

6.00%
3.50%
September 30

6.75%
4.25%
Septem ber30

5.30%
—
October 31

6.75%
—
October31

—
—

9.40%
5.50%

11.70%
5.50%

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

6 5

The following table details the com ponents of net periodic pension
incom e for the CW Pension Plan and CW Restoration Plan:

The effect on the CW Retirem ent Plan of a 1% change in the health
care cost trend is as follows:

(In thousands)

Total service and interest

cost com ponents

Postretirem ent

beneﬁt obligation

1%
Increase

1%
D ecrease

$ 2

$ (2)

$42

$(38)

The EM D Plans
The Corporation m aintains the Curtiss-W right Electro-M echanical Divi-
sion Pension Plan (the “EM D Pension Plan”), a qualiﬁed contributory
deﬁned beneﬁt pension plan, which covers all of the EM D em ployees.
The EM D Pension Plan covers both union and non-union em ployees
and is designed to satisfy the requirem ents of relevant collective bar-
gaining agreem ents. Em ployee contributions are withheld sem i-
m onthly equal to 1.5% of salary. The beneﬁts under the EM D Pension
Plan are based on years of service and com pensation. At Decem ber 31,
2003 and 2002, the Corporation had an accrued pension liability of
$33.5 m illion and $35.6 m illion, respectively, related to the EM D Pen-
sion Plan. The Corporation expects to contribute $2.5 m illion, the esti-
m ated m inim um required am ount, to the EM D Pension Plan during the
next ﬁscal year.

The Corporation m aintains the Curtiss-W right Electro-M echanical Divi-
sion N on-Qualiﬁed Plan (the “EM D Supplem ental Plan”), a non-qual-
iﬁed non-contributory unfunded supplem ental retirem ent plan for
eligible EM D key executives. The EM D Supplem ental Plan provides for
periodic paym ents upon retirem ent that are based on total com pensa-
tion (including am ounts in excess of qualiﬁed plan lim its) and years of
service, and are reduced by beneﬁts earned from certain other pension
plans in which the executives participate. At Decem ber 31, 2003 and
2002, the Corporation had an accrued pension liability of $2.4 m illion,
respectively, related to the EM D Supplem ental Plan.

The Corporation, through an adm inistration agreem ent with W esting-
house, m aintains the W estinghouse Governm ent Services Group W el-
fare Beneﬁts Plan (the “EM D Retirem ent Plan”), a retiree health and
life insurance plan for substantially all of the EM D em ployees. The
EM D Retirem ent Plan provides basic coverage on a non-contributory
basis. Beneﬁts are based on years of service. The Corporation had an
accrued postretirem ent beneﬁt liability of $37.5 m illion and $36.3 m il-
lion related to the EM D Retirem ent Plan at Decem ber 31, 2003 and
2002, respectively. Pursuant to the Asset Purchase Agreem ent, the
Corporation has a discounted receivable from W ashington Group
International to reim burse the Corporation for a portion of these
postretirem ent beneﬁt costs. At Decem ber 31, 2003 and 2002, the
discounted receivable included in other assets was $5.9 m illion and
$6.5 m illion, respectively.

Com ponents of N et Periodic
Benefit Incom e:
(In thousands)

2003

2002

2001

Service cost
Interest cost
Expected return on plan assets
Am ortization of prior service cost
Am ortization of transition

$ 8,899 $ 6,015 $ 4,740
7,113
(18,089)
(40)

7,650
(18,705)
26

7,982
(18,081)
58

obligation

(3)

(4)

(2,188)

Recognized net actuarial

(gain) loss
Cost of settlem ent

(587)
121

(2,191)
1,911

(2,578)

—

N et periodic beneﬁt incom e

$ (1,611) $ (5,298) $(11,042)

W eighted-average assum ptions
in determ ination of net
periodic beneﬁt cost:
Discount rate
Expected return on

6.75%

7.00%

plan assets

8.50%

Rate of com pensation

increase

4.25%

The following table details the com ponents of net periodic pension
incom e for the CW Retirem ent Plan:

Com ponents of N et Periodic
Benefit Incom e:
(In thousands)

Service cost
Interest cost
Am ortization of prior service cost
Recognized net actuarial

(gain) loss
Cost of settlem ent

2003

2002

2001

$ — $

39
—

129
148
(123)

$ 112
126
(123)

(73)
—

(179)
(3,849)

(200)
—

N et periodic beneﬁt incom e

$(34) $(3,874)

$ (85)

W eighted-average assum ptions
in determ ination of net
periodic beneﬁt cost:
Discount rate

6.75%

7.00%

6 6

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

(In thousands)

C H A N G E I N B E N E F I T O B L I G AT I O N :

Beneﬁt obligation at beginning of year
Effect of EM D acquisition
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss (gain)
Beneﬁts paid

B E N E F I T O B L I G AT I O N AT E N D O F Y E A R

C H A N G E I N P L A N A S S E T S :

Fair value of plan assets at beginning of year
Effect of EM D acquisition
Actual return on plan assets
Em ployer contribution
Plan participants’ contribution
Beneﬁts paid

FA I R VA L U E O F P L A N A S S E T S AT E N D O F Y E A R

Funded status
U nrecognized net actuarial gain
U nrecognized transition obligation
U nrecognized prior service costs

P R E PA I D ( A C C R U E D ) B E N E F I T C O S T S

A C C U M U L AT E D B E N E F I T O B L I G AT I O N

C O M P O N E N T S O F N E T P E R I O D I C B E N E F I T C O S T:

Service cost
Interest cost
Expected return on plan assets
Recognized net actuarial (gain) loss

N E T P E R I O D I C B E N E F I T C O S T

The EM D Plans

Pension Benefits

Postretirem ent Benefits

2003

2002

2003

2002

$112,442
—
2,032
5,890
597
11,137
(3,811)

128,287

74,335
—
8,009
4,607
597
(3,811)

83,737

(44,550)
8,635
—
—

—
111,642
424
1,278
—
—
(902)

112,442

—
74,245
992
—
—
(902)

74,335

(38,107)
100
—
—

$ 36,344
—
705
2,388
—
3,593
(1,924)

41,106

—
—
—
1,924
—
(1,924)

—

(41,107)
3,593
—
—

—
36,344
—
—
—
—
—

36,344

—
—
—
—
—
—

—

(36,344)

—
—
—

$ (35,915)

$ (38,007)

$(37,514)

$(36,344)

$115,527

$100,141

N/A

$ 2,709
7,854
(7,618)
(394)

$ 2,551

424
1,278
(1,092)

—

610

705
2,388
—
—

$ 3,093

—
—
—
—

—

W E I G H T E D - AV E R A G E A S S U M P T I O N S A S O F D E C E M B E R 3 1 :

In determ ination of net periodic beneﬁt cost:

Discount rate
Expected return on plan assets
Rate of com pensation increase
In determ ination of beneﬁt obligation:

Discount rate
Rate of com pensation increase

M easurem ent date

H E A LT H C A R E C O S T T R E N D S

Rate assum ed for subsequent year
U ltim ate rate reached in 2007

7.00%
8.50%
4.00%

7.00%
8.88%
4.00%

6.75%
—
4.00%

7.00%
—
4.00%

6.25%
3.25%
September 30

7.00%
4.00%
Septem ber30

6.25%
4.00%
October 31

6.75%
4.00%
October31

—
—

9.70%
5.50%

11.10%
5.50%

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

6 7

last ten years the m arket-related value of assets had an average annual
yield of 11.6% , the actual returns averaged 8.5% during the sam e
period. Given the uncertainties of the current econom ic and geopoliti-
cal landscape, the Corporation considers 8.5% to be a reasonable
assum ption offuture long-term investm ent returns. W hile the Corpo-
ration takes into account historical perform ance, its assum ptions also
consider the forward-looking long-term outlook for the capital m arkets.

Other Pension and Postretirement Plans
The Corporation offers all of its dom estic em ployees the opportunity to
participate in a deﬁned contribution plan. Costs incurred by the Cor-
poration in the adm inistration of the deﬁned contribution plan are
notm aterial.

In addition, the Corporation had foreign pension costs under various
retirem ent plans of $1.9 m illion, $1.6 m illion, and $1.0 m illion in 2003,
2002, and 2001, respectively.

17. Leases
Buildings and Improvements Leased to Others. The Corporation previ-
ously leased certain of its buildings and related im provem ents to out-
side parties under non-cancelable operating leases. The Corporation
sold one of its two rem aining rental properties in 2002, and vacated
the other in preparation for sale. Cost and accum ulated depreciation
of the buildings and im provem ents were $7.3 m illion and $4.9 m illion,
respectively, at Decem ber 31, 2003 and 2002. On Decem ber 20, 2001,
the Corporation sold its W ood-Ridge Business Com plex. As a result of
the above, the Corporation will no longer report net rental incom e.

Facilities and Equipment Leased from Others. The Corporation con-
ducts a portion of its operations from leased facilities, which include
m anufacturing and service facilities, adm inistrative ofﬁces, and ware-
houses. In addition, the Corporation leases autom obiles, m achinery,
and ofﬁce equipm ent under operating leases. Rental expenses for all
operating leases am ounted to $10.5 m illion in 2003, $8.2 m illion in
2002, and $4.9 m illion in 2001.

At Decem ber 31, 2003, the approxim ate future m inim um rental com -
m itm ents under operating leases that have initial or rem aining non-
cancelable lease term s in excess of one year are as follows:

(In thousands)

2004
2005
2006
2007
2008
Thereafter

Total

Rental
Com m itm ent

$10,430
8,925
7,908
7,145
5,748
14,991

$55,147

The effect on the EM D Retirem ent Plan of a 1% change in the health
care cost trend is as follows:

(In thousands)

Total service and interest

cost com ponents

Postretirem ent

beneﬁt obligation

1%
Increase

1%
D ecrease

$ 241

$ (252)

$2,977

$(3,108)

Pension Plan Assets
The Corporation m aintains the Funds of the CW Pension Plan and the
EM D Pension Plan under one m aster trust. The Corporation’s Retire-
m ent Plans are diversiﬁed across investm ent classes and am ong
investm ent m anagers in order to achieve an optim al balance between
risk and return. In accordance with this policy, the Corporation has
established target allocations for each asset class and ranges of
expected exposure. The Corporation’s retirem ent assets are invested
within this allocation structure in three m ajor categories; these include
dom estic equity securities, international equity securities and debt
securities. Below are the Corporation’s actual and established target
allocations:

Asset Class

As of
D ecem ber 31, 2003

Target
Exposure

Expected Range

Dom estic Equities
International Equities

Total Equity
Fixed Incom e
Cash

51%
15%
66%
34%
0%

50% 40% – 60%
15% 10% – 20%
65% 55% – 75%
35% 25% – 45%
0% – 10%

The Corporation m ay from tim e to tim e require the reallocation of
assets in order to bring the retirem ent plans into conform ity with these
ranges. The Corporation m ay also authorize alterations or deviations
from these ranges where appropriate for achieving the objectives of the
retirem ent plans.

The long-term investm ent objective of the Retirem ent Plans is to
achieve a total rate of return, net of fees, which exceeds the actuarial
overall expected return on assets assum ption of 8.50% used for fund-
ing purposes and which provides an appropriate prem ium over inﬂation.

The interm ediate-term objective of the Retirem ent Plans, deﬁned as
three to ﬁve years, is to outperform each of the capital m arkets in which
assets are invested, net of fees. During periods of extrem e m arket
volatility, preservation of capital takes a higher precedence than out
perform ing the capital m arkets.

The overall expected return on assets assum ption used in the calcula-
tion of annual net periodic beneﬁt cost is based on a com bination of
the historical perform ance of the pension fund and expectations of
future perform ance. The historical returns are determ ined using the
m arket-related value of assets, includes the recognition of realized and
unrealized gains and losses over a ﬁve-year period. Although over the

6 8

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

18. Industry Segments
The Corporation m anages and evaluates its operations based on the
products and services it offers and the different m arkets it serves.
Based on this approach, the Corporation has three reportable seg-
m ents: Flow Control, M otion Control, and M etal Treatm ent. The Flow
Control segm ent prim arily designs, m anufactures, distributes, and ser-
vices a broad range of highly engineered ﬂow control products for
severe service m ilitary and com m ercial applications. The M otion Con-
trol segm ent prim arily designs, develops, and m anufactures m echani-
cal system s, drive system s, and electronic controls and sensors for the
aerospace and defense industries. M etal Treatm ent provides approxi-
m ately 50 m etallurgical services, principally “shot peening” and
“heat treating.” The segm ent provides these services to a broad spec-
trum of custom ers in various industries, including aerospace, autom o-
tive, construction equipm ent, oil and gas, petrochem ical, and m etal working.

Consolidated Industry Segment Information:

The accounting policies of the operating segm ents are the sam e as
those described in the sum m ary of signiﬁcant accounting policies.
Interest expense and incom e taxes are not reported on an operating
segm ent basis because they are not considered in the perform ance
evaluation by the Corporation’s chief operating decision-m aker, its
Chairm an and CEO.

Sales to one custom er through which the Corporation is a subcontrac-
tor to the U .S. Governm ent were 16% of consolidated revenues in
2003, 10% in 2002, and 6% in 2001. During 2003 and 2002, the Cor-
poration had no com m ercial custom er representing m ore than 10% of
consolidated revenue. The Corporation had one com m ercial custom er
in the M otion Control segm ent that accounted for 13% of its consoli-
dated revenue in 2001.

(In thousands)

Y E A R E N D E D D E C E M B E R 3 1 , 2 0 0 3 :

Revenue from external custom ers
Intersegm ent revenues
Operating incom e (costs)
Depreciation and am ortization expense
Segm ent assets
Capital expenditures

Y E A R E N D E D D E C E M B E R 3 1 , 2 0 0 2 :

Revenue from external custom ers
Intersegm ent revenues
Operating incom e (costs)
Depreciation and am ortization expense
Segm ent assets
Capital expenditures

Y E A R E N D E D D E C E M B E R 3 1 , 2 0 0 1 :

Flow
Control

M otion
Control

M etal

Treatm ent(1)

Segm ent
Total

Corporate

& O ther(2)

Consolidated
Total

$ 341,271

$ 265,905

$ 138,895

$ 746,071

— $ 746,071

—

39,991

14,458
323,689
12,417

—

30,350

7,983
317,631
4,791

544

19,055

8,685
170,547
15,727

544

89,396

31,126
811,867
32,935

—

(66)

201
161,798
394

544

89,330

31,327
973,665
33,329

$172,455
—
20,693
5,059
328,221
10,787

$233,437
—
29,579
7,394
267,244
8,243

$107,386
491
14,403
6,063
127,125
15,873

$513,278
491
64,675
18,516
722,590
34,903

— $513,278
491
—
69,037
4,362
18,693
177
810,102
87,512
34,954
51

Revenue from external custom ers
Intersegm ent revenues
Operating incom e (costs)
Depreciation and am ortization expense
Segm ent assets
Capital expenditures
(1) Operating income for the M etal Treatment segment includes nonrecurring costs of $0.5 million associated with the relocation of a shot peening facility

— $343,167
446
—
58,200
8,765
14,734
666
500,428
135,033
19,354
249

$137,103
—
19,219
4,270
157,094
6,306

$ 98,257
—
10,703
4,279
111,084
1,943

$107,807
446
19,513
5,519
97,217
10,856

$343,167
446
49,435
14,068
365,395
19,105

in2002.

(2) Operating income (costs) for Corporate and Other includes pension income, net environmental remediation and administrative expenses, and other expenses.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

6 9

Reconciliations:
For the years ended December 31, (In thousands)

R E V E N U E S :

Total segm ent revenue
Intersegm ent revenue
Elim ination of intersegm ent revenue

Total consolidated revenues

E A R N I N G S B E F O R E TA X E S :

Total segm ent operating incom e
Corporate and adm inistrative
Investm ent incom e, net
Rental incom e, net
Pension incom e, net
Other incom e, net
Interest expense

Total consolidated earnings before tax

A S S E T S :

Total assets for reportable segm ents
N on-segm ent short-term investm ents
Pension assets
N on-segm ent cash
Other assets
Elim ination of intersegm ent receivables

Total consolidated assets

2003

2002

2001

$746,071
544
(544)

$513,278
491
(491)

$343,167
446
(446)

$746,071

$513,278

$343,167

$ 89,396
(1,677)
281
—
1,611
108
(5,663)

$ 64,675
(2,846)
591
148
7,208
3,769
(1,810)

$ 49,435

(2,277)
2,599
3,585
11,042
38,993
(1,180)

$ 84,056

$ 71,735

$102,197

$811,867
—
77,877
72,582
11,384
(45)

$722,590
154
76,072
4,875
6,455
(44)

$365,395
41,658
70,796
12,939
9,680

(40)

$973,665

$810,102

$500,428

December 31, (In thousands)

2003

2002

2001

Geographic Inform ation:
N orth Am erica
U nited Kingdom
Other foreign countries

Revenues(1)

Long-Lived
Assets

Revenues(1)

Long-Lived
Assets

Revenues(1)

Long-Lived
Assets

$591,479
66,210
88,382

$183,263
40,614
14,262

$401,466
49,519
62,293

$165,208
38,235
15,606

$257,208
31,340
54,619

$ 71,501
22,961
10,689

Consolidated total
(1) Revenues are attributed to countries based on the location of the customer.

$746,071

$238,139

$513,278

$219,049

$343,167

$105,151

7 0

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

20. Subsequent Event
On January 31, 2004, the Corporation com pleted the acquisition of all
of the outstanding shares of Dy 4 System s, Inc. (“Dy 4”) from Solec-
tron Corporation. The purchase price of the acquisition, subject to cus-
tom ary adjustm ents as provided for in the Stock Purchase Agreem ent,
was $110 m illion in cash. M anagem ent funded the purchase with cash
on hand and from the Corporation’s revolving credit facilities. Rev-
enues of the purchased business were $72 m illion for the year ended
August 29, 2003. Dy 4 is based in Ottawa, Canada, and has additional
operations located in the U nited States and the U nited Kingdom . M an-
agem ent intends to incorporate the operations of Dy 4 into the Corpo-
ration’s M otion Control segm ent.

19. Contingencies and Commitments
The Corporation, through its subsidiary located in Switzerland, entered
into a credit agreem ent with U BS AG (“U BS”) for a credit facility in the
am ount of 6.0 m illion Swiss francs ($4.8 m illion) for the issue of per-
form ance guarantees related to long-term contracts. The Corporation
received prepaym ents on these contracts, which are being used as col-
lateral against the credit facility. The custom ers can draw down on the
line of credit for nonperform ance up to the am ount of pledged collat-
eral, which is released from restriction over tim e as the Corporation
m eets its obligations under the long-term contracts. U nder the term s
of this credit facility agreem ent, the Corporation is not perm itted to bor-
row against the line of credit. The Corporation is charged a com m it-
m ent fee on the outstanding balance of the collateralized cash. As of
Decem ber 31, 2003, the am ount of restricted cash under this facility
was $1.8 m illion, all of which is expected to be released from restric-
tion within one year.

In October 2002, the Corporation acquired EM D. Included in the pur-
chase was the assum ption of several N RC licenses, necessary for the
continued operation of the business. In connection with these licenses,
the N RC required ﬁnancial assurance from the Corporation (in the form
of a parent com pany guarantee) representing estim ated environm ental
decom m issioning and rem ediation costs associated with the com m er-
cial operations covered by the licenses. The guarantee for the decom -
m issioning costs of the refurbishm ent facility, which is estim ated for
2017, is $2.8 m illion. See N ote 15 for further inform ation.

Consistent with other entities its size, the Corporation is party to
several legal actions and claim s, none of which individually or in the
aggregate, in the opinion of m anagem ent, are expected to have a
m aterial adverse effect on the Corporation’s results of operations
orﬁnancial position.

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

7 1

CORPORATE INFORMATION

C O R P O R AT E H E A D Q U A R T E R S

4 Becker Farm Road, 3rd Floor
Roseland, N J 07068
(973) 597-4700

www.curtisswright.com

A N N U A L M E E T I N G

The 2004 annual m eeting of stockholders will be held on April 23,
2004, at 2:00 pm at the Sheraton Parsippany H otel, 199 Sm ith Road,
Parsippany, N ew Jersey.

S T O C K E X C H A N G E L I S T I N G

The Corporation’s Com m on and Class B com m on stock are listed
and traded on the N ew York Stock Exchange under the sym bols CW
and CW .B.

C O M M O N S H A R E H O L D E R S

As of Decem ber 31, 2003, the approxim ate num ber of holders of record
of Com m on stock, par value of $1.00 per share, and Class B com m on
stock, par value $1.00 per share of the Corporation was 2,952 and
4,803, respectively.

S T O C K T R A N S F E R A G E N T A N D R E G I S T R A R

For services such as changes of address, replacem ent of lost certiﬁ-
cates or dividend checks, and changes in registered ownership, or for
inquiries as to account status, write to Am erican Stock Transfer & Trust
Com pany at 59 M aiden Lane, N ew York, N ew York 10038.

Please include your nam e, address, and telephone num ber with all cor-
respondence. Telephone inquiries m ay be m ade to (800) 937-5449.
Foreign (212) 936-5100. Internet inquiries should be addressed to
http://www.am stock.com . H earing-im paired shareholders are invited to
log on to the website and select the Live Chat option.

D I R E C T S T O C K P U R C H A S E P L A N / D I V I D E N D

R E I N V E S T M E N T P L A N

A plan is available to purchase or sell shares of Curtiss-W right Com m on
stock and Class B com m on stock. The plan provides a low cost alter-
native to the traditional m ethods of buying, holding and selling stock.
The plan also provides for the autom atic reinvestm ent of Curtiss-W right
dividends. For m ore inform ation, contact our transfer agent, Am erican
Stock Transfer & Trust Com pany toll-free at (877) 854-0844.

I N V E S T O R I N F O R M AT I O N

Investors, stockbrokers, security analysts, and others seeking inform a-
tion about Curtiss-W right Corporation should contact Alexandra
M agnuson, Director of Investor Relations, at the Corporate H eadquar-
ters listed above.

S T O C K H O L D E R C O M M U N I C AT I O N S

Any stockholder wishing to com m unicate directly with our Board of
Directors should write to Dr. W illiam W . Sihler at Southeastern Consul-
tants Group, LTD, P.O. Box 5645, Charlottesville, VA 22905.

F I N A N C I A L R E P O R T S

This Annual Report includes m ost of the periodic ﬁnancial inform ation
required to be on ﬁle with the Securities and Exchange Com m ission.
The Corporation also ﬁles an Annual Report on Form 10-K, a copy of
which m ay be obtained free of charge. These reports, as well as addi-
tional ﬁnancial docum ents such as quarterly shareholder reports, proxy
statem ents, and quarterly reports on Form 10-Q, m ay be obtained by
written request to Alexandra M agnuson, Director of Investor Relations,
at the Corporate H eadquarters.

S T O C K P R I C E R A N G E

2003

2002

Com m on

H igh

Low

H igh

Low

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

$33.54
33.13
35.94
47.25

$26.04
26.97
30.42
35.03

$33.85
40.00
40.10
35.37

$22.55
33.13
26.75
26.09

2003

2002

Class B

H igh

Low

H igh

Low

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

$32.50
32.68
35.90
46.71

$25.20
26.00
30.56
34.88

$33.13
39.20
38.00
34.37

$21.88
32.38
26.18
25.60

Note: All prices adjusted for the 2-for-1 stock split on December 17, 2003.

D I V I D E N D S

C om m on

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

C lass B

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

2003

2002

$0.08
0.08
0.08
0.09

$0.08
0.08
0.08
0.08

2003

2002

$0.08
0.08
0.08
0.09

$0.08
0.08
0.08
0.08

Note: All dividends adjusted for the 2-for-1 stock split on December 17, 2003.

7 2

C U RT I S S - W R I G H T A N D S U B S I D I A R I E S

DIRECTORS
DIRECTORS

OFFICERS
OFFICERS

M A RT I N R . B E N A N T E
M A RT I N R . B E N A N T E
Chairman of the Board of Directors
Chairman of the Board of Directors

M A RT I N R . B E N A N T E
M A RT I N R . B E N A N T E
Chairman and Chief Executive Officer
Chairman and Chief Executive Officer

G E O R G E J . Y O H R L I N G
G E O R G E J . Y O H R L I N G
Executive Vice President
Executive Vice President

E D WA R D B L O O M
E D WA R D B L O O M
Vice President
Vice President

G L E N N E . T Y N A N
G L E N N E . T Y N A N
Vice President – Finance, Treasurer and
Vice President – Finance, Treasurer and
Chief Financial Officer
Chief Financial Officer

M I C H A E L J . D E N T O N
M I C H A E L J . D E N T O N
Vice President, Corporate Secretary
Vice President, Corporate Secretary
and General Counsel
and General Counsel

K E V I N M . M c C L U R G
K E V I N M . M c C L U R G
Corporate Controller
Corporate Controller

A D M I R A L J A M E S B . B U S E Y I V
A D M I R A L J A M E S B . B U S E Y I V
Admiral, U.S. Navy (Ret.)
Admiral, U.S. Navy (Ret.)
Director, Mitre Corporation
Director, Mitre Corporation
Director, Texas Instruments, Inc.
Director, Texas Instruments, Inc.
Former President and Chief Executive Officer of AFCEA
Former President and Chief Executive Officer of AFCEA
International Aviation Safety and Security Consultant
International Aviation Safety and Security Consultant

S . M A R C E F U L L E R
S . M A R C E F U L L E R
President and Chief Executive Officer of Mirant Corporation, In
President and Chief Executive Officer of Mirant Corporation, Inc.c.
(formerly known as Southern Energy, Inc.)
(formerly known as Southern Energy, Inc.)
Director, Earthlink, Inc.
Director, Earthlink, Inc.

D AV I D L A S K Y
D AV I D L A S K Y
orporation
Former Chairman and Chief Executive Officer of Curtiss-Wright Corporation
Former Chairman and Chief Executive Officer of Curtiss-Wright C

C A R L G . M I L L E R
C A R L G . M I L L E R
Former Chief Financial Officer of TRW, Inc.
Former Chief Financial Officer of TRW, Inc.

W I L L I A M B . M I T C H E L L
W I L L I A M B . M I T C H E L L
Director, Mitre Corporation
Director, Mitre Corporation
Former Vice-Chairman of Texas Instruments Inc.
Former Vice-Chairman of Texas Instruments Inc.

J O H N R . M Y E R S
J O H N R . M Y E R S
Former Chairman and Chief Executive Officer of Tru-Circle Corpo
ration
Former Chairman and Chief Executive Officer of Tru-Circle Corporation
Management Consultant
Management Consultant
Former Chairman of the Board of Garrett Aviation Services
Former Chairman of the Board of Garrett Aviation Services

D R . W I L L I A M W. S I H L E R
D R . W I L L I A M W. S I H L E R
Ronald E. Trzcinski Professor of Business Administration
Ronald E. Trzcinski Professor of Business Administration
Darden Graduate School of Business Administration
Darden Graduate School of Business Administration
University of Virginia
University of Virginia

J . M c L A I N S T E WA RT
J . M c L A I N S T E WA RT
Director, McKinsey & Co. Management Consultants
Director, McKinsey & Co. Management Consultants

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CURTISS-WRIGHT CORPORATION
CURTISS-WRIGHT CORPORATION
4 BECKER FARM ROAD
4 BECKER FARM ROAD
ROSELAND, NEW JERSEY 07068
ROSELAND, NEW JERSEY 07068