Page 1 of __
Exhibit Index - Page__
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period
from _______ to _______
Commission File Number 1-134
CURTISS-WRIGHT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-0612970
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
1200 Wall Street West, Lyndhurst, N.J. 07071
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 896-8400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------ ------------------------
Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates* of the
Registrant is $160,290,059 (based on the closing price of the Registrant's
Common Stock on the New York Stock Exchange on March 24, 1999 of $32.1875).
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practicable date.
Number of Shares
Class Outstanding at March 24 , 1999
----- -------------------------------
Common Stock, par value $1 per share 10,186,420
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report of the Registrant to stockholders for the year
ended December 31, 1998 are incorporated by reference into Parts I, II and IV.
Portions of the Proxy Statement of the Registrant with respect to the 1999
Annual Meeting of Stockholders are incorporated by reference into Part III.
- --------
* Shares held by Unitrin, Inc. and Argonaut Group, Inc. have been excluded from
the amount shown solely because of the definition of the term "affiliate" in the
regulations promulgated pursuant to the Securities Exchange Act of 1934. Also,
for purposes of this computation, all directors and executive officers of
Registrant have been deemed to be affiliates, but the Registrant disclaims that
any of such directors or officers is an affiliate. See material referred to
under Item 12, below.
<PAGE>
FORWARD-LOOKING INFORMATION
Except for historical information, this Annual Report on Form 10-K may be deemed
to contain "forward looking" information. Examples of forward looking
information include, but are not limited to, (a) projections of or statements
regarding return on investment, future earnings, interest income, other income,
earnings or loss per share, investment mix and quality, growth prospects,
capital structure and other financial terms, (b) statements of plans and
objectives of management, (c) statements of future economic performance, and (d)
statements of assumptions, such as economic conditions underlying other
statements. Such forward looking information can be identified by the use of
forward looking terminology such as "believes," "expects," "may," "will,"
"should," "anticipates," or the negative of any of the foregoing or other
variations thereon or comparable terminology, or by discussion of strategy. No
assurance can be given that the future results described by the forward looking
information will be achieved. Such statements are subject to risks,
uncertainties, and other factors which could cause actual results to differ
materially from future results expressed or implied by such forward looking
information. Such statements in this Report include, without limitation, those
contained in (a) Item 1. Business, (b) Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and (c) the Notes to
the Consolidated Financial Statements including, without limitation, the
Environmental Matters Note. Important factors that could cause the actual
results to differ materially from those in these forward-looking statements
include, among other items, (i) a reduction in anticipated orders; (ii) an
economic downturn; (iii) unanticipated environmental remediation expenses or
claims; (iv) changes in the need for additional machinery and equipment and/or
in the cost for the expansion of the Corporation's operations; (v) changes in
the competitive marketplace and/or customer requirements; (vi) an inability to
perform customer contracts at anticipated cost levels and (vii) other factors
that generally affect the business of companies operating in the Corporation's
Segments.
Introduction
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Pursuant to the Securities Exchange Act of 1934, the Registrant,
Curtiss-Wright Corporation hereby files its Form 10-K Annual Report for the
fiscal year ended December 31, 1998. References in the text to the
"Corporation," "Company," "Curtiss-Wright" or the "Registrant" include
Curtiss-Wright Corporation and its consolidated subsidiaries unless the context
indicates otherwise. References to the Company's "Annual Report" are to its 1998
Annual Report to Stockholders, which is attached hereto as Exhibit 13.
PART I
Item 1. Business.
- -----------------
Curtiss-Wright Corporation was incorporated in 1929 under the laws of the
State of Delaware. During 1998, the Company adopted the Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." (SFAS No. 131). Consistent with the requirements of SFAS
No. 131, the Company now reports its operations in three segments: Precision
Manufacturing Products & Services, Actuation and Control Products & Services,
and Flow Control Products & Services.
Precision Manufacturing Products & Services
-------------------------------------------
Curtiss-Wright provides approximately 50 metal-treating services in this
Segment which are described on page 8 in the Company's Annual Report, such
description being incorporated by reference in this Form 10-K. These processes
are used principally to improve the strength and durability of metal parts. They
are also used to form curvatures in metal panels which are assembled as
wingskins of commercial and military planes, and to manufacture valve reeds used
in compressors. The Corporation provides these services for a broad spectrum of
customers in various industries, including aerospace, automotive, construction
equipment, oil, petrochemical, metal working, and other industries. Operations
are conducted from 36 facilities located in the United States, Canada, England,
France, Germany, and Belgium.
The services and products of this Segment are marketed directly by
employees of the Company. Although numerous companies compete with the Company
in this field, and many customers for the services provided have the resources
to perform such services themselves, Curtiss-Wright believes that its greater
technical know-how and superior quality provide it with a competitive advantage.
The Corporation also competes on the basis of quality, service and price.
The backlog of this Segment as of January 31, 1999 was $1.4 million, as
compared with $.3 million as of January 31, 1998. All of such backlog is
expected to be shipped in the first quarter of 1999. The business of this
Segment is not seasonal. Raw materials are generally available in adequate
quantities from a number of suppliers, and the Segment is not materially
dependent upon any single source of supply. No single customer accounted for 10%
or more of total sales in 1998, 1997 and 1996 and the active customer base
numbers in excess 5,000.
Actuation and Control Products & Services
-----------------------------------------
The Corporation designs, develops and manufactures flight control actuation
systems and components for the aerospace industry. Manufactured products offered
consist of electro-mechanical and hydro-mechanical actuation components and
systems which are designed to position aircraft control surfaces, or to operate
canopies, cargo doors, weapons bay doors or other devices used on aircraft. They
include actuators and control systems for the Boeing 737, 747, 757, 767 and 777
jet airliners, the Lockheed Martin F-16 Falcon fighter, the Boeing F/A-18
fighter, the F-22 Raptor fighter jointly developed by Lockheed Martin and
Boeing, the Bell Boeing V-22 Osprey, and the Sikorsky Black Hawk and Seahawk
helicopters. The Corporation also is designing wing flap actuators for business
jet aircraft.
With the acquisition on December 31, 1998 of SIG Antriebstechnik AG*, the
Company also offers electro-mechanical and electro-hydraulic actuation
components and systems including electronic controls to the military tracked and
wheeled vehicle, high speed railroad train, and commercial marine propulsion
markets. These products primarily involve the design and manufacture of drives
and suspension systems for armored military vehicles sold to defense equipment
manufacturers and tilting systems for high speed railway car applications, in
each case to overseas markets.
- ---------------
* Merged into Curtiss-Wright Antriebstechnik GmbH (Curtiss-Wright Drive
Technology) effective March 19, 1999.
<PAGE>
The actuation and control products and services of this Segment are
marketed directly to customers by employees of the Corporation. These products
are sold in competition with a number of other system suppliers, most of which
have broader product lines and financial, technical, and human resources greater
than those of the Company. Competition is primarily on the basis of engineering
capability, quality and price and is directed to the placement of systems to
perform control and actuation functions on the limited number of new production
programs.
As a related service within this Segment, Curtiss-Wright also provides
commercial airlines, the military and general aviation customers with component
overhaul and repair services. The Corporation overhauls a variety of hydraulic,
pneumatic, mechanical, electro-mechanical, electrical and electronic components
found on Boeing, Lockheed Martin, Airbus and other aircraft. The Corporation
provides these services from facilities in Shelby, North Carolina, Miami,
Florida, Karup, Denmark, and a marketing and distribution facility in Singapore.
This Segment's overhaul services are sold in competition with a number of
other overhaul and repair providers. Competition in the overhaul business is
based upon quality, delivery and price. Marketing is accomplished through sales
representatives and by direct sales.
The Company sells a commercial rescue tool using its Power Hinge"(TM)
aerospace technology under the trademark Power Hawk(R). Various accessories and
related equipment are also offered. The primary use for this tool is the
extrication of automobile accident victims.
Sales by this Segment to the Boeing Company in 1998, 1997, and 1996 were
$39.3, $32.0 and $17.4 million, respectively. This Segment would be adversely
<PAGE>
affected by the loss of this customer. U.S. Government direct and end use sales
of this Segment in 1998, 1997 and 1996 were $19.7, $20.1 and $19.3 million,
respectively. This Segment would be adversely affected by the loss of this
business.
The backlog of this Segment as of January 31, 1999 was $143.0 million as
compared with $120.7 million as of January 31, 1998. Of the January 31, 1999
amount, approximately 75% is expected to be shipped during 1999. None of the
business of this Segment is seasonal. Raw materials are generally available in
adequate quantities from a number of suppliers.
Flow Control Products & Services
--------------------------------
The Corporation designs, manufactures, refurbishes and tests highly
engineered valves of various types and sizes, such as motor operated and
solenoid operated globe, gate, control and safety relief valves. These valves
are used to control the flow of liquids and gases and to provide safety relief
in high pressure applications. It also supplies actuators and controllers for
its own valves as well as for valves manufactured by others. The primary
customers for the Corporation's valves are the U.S. Navy, which uses them in
nuclear propulsion systems, and owners and operators of commercial power
utilities who use them in new and existing nuclear and fossil fuel power plants.
All of the new nuclear plants are outside the U.S. and recent sales for such
plants have been to Korea and Taiwan. Sales are made by responding directly to
requests for proposals from customers. The production of valves for the U.S.
Navy and for new power plants is characterized by long lead times from order
placement to delivery.
As a result of the acquisition of Enertech, LLC in July 1998 the Company
also designs, manufactures and distributes additional flow control products for
sale into commercial nuclear power plants, both domestically and
internationally, and it also distributes flow control products made by other
manufacturers. Enertech's product lines include: snubbers, advanced valves,
valve actuators, test and diagnostic equipment, as well as related diagnostic
<PAGE>
services. In addition, the Company now provides training, on-site services,
staff augmentation and engineering programs relating to nuclear power plants.
The Company also provides hydraulic power units and components primarily for the
automotive and entertainment industries.
Strong competition in flow control products and services is encountered
primarily from a large number of domestic and foreign sources in the commercial
market. Sales to commercial users are accomplished through independent marketing
representatives and by direct sales. These products and services are sold to
customers who are sophisticated and demanding. Performance, quality, technology,
delivery and price are the principal areas of competition.
The backlog of this Segment as of January 31, 1999 was $55.2 million as
compared with $42.5 million as of January 31, 1998. Of the January 31, 1999
amount, approximately 54% is expected to be shipped during 1999. Approximately
60% of this Segment's backlog is composed of orders with the U.S. Navy through
its prime contractor, the Plant Apparatus Division of Westinghouse Electric
Company, a division of CBS. Inc. The loss of this customer would have a
significant adverse impact on the business of this Segment.
None of the business of this Segment is seasonal. Raw materials are
generally available in adequate quantities from a number of suppliers.
Other Information
------------------
Government Sales
- ----------------
In 1998, 1997 and 1996, direct sales to the United States Government and
sales for United States Government end use aggregated 17%, 20% and 23%
respectively, of total sales for all Segments. United States Government sales,
both direct and subcontract, are generally made under one of the standard types
of government contracts, including fixed price and fixed price-redeterminable.
<PAGE>
In accordance with normal practice in the case of United States Government
business, contracts and orders are subject to partial or complete termination at
any time, at the option of the customer. In the event of a termination for
convenience by the Government, there generally are provisions for recovery by
the Corporation of its allowable incurred costs and a proportionate share of the
profit or fee on the work done, consistent with regulations of the United States
Government. Subcontracts for Navy nuclear valves usually provide that
Curtiss-Wright must absorb most of any overrun of "target" costs. In the event
that there is a cost underrun, however, the customer is to recoup a portion of
the underrun based upon a formula in which the customer's portion increases as
the underrun exceeds certain established levels.
It is the policy of the Corporation to seek customary progress payments on
certain of its contracts. Where such payments are obtained by the Corporation
under United States Government prime contracts or subcontracts, they are secured
by a lien in favor of the Government on the materials and work in process
allocable or chargeable to the respective contracts. (See Notes 1.C, 4 and 5 to
the Consolidated Financial Statements, on pages 25 and 28 of the Annual Report,
which notes are incorporated by reference in this Form 10-K Annual Report.) In
the case of most valve products for United States Government end use, the
subcontracts typically provide for the retention by the customer of stipulated
percentages of the contract price, pending completion of contract closeout
conditions.
Research and Development
- ------------------------
Research and development expenditures sponsored by the Corporation amounted
to $1,346,000 in 1998 as compared with $1,877,000 in 1997 and $997,000 in 1996.
During 1998, Curtiss-Wright spent an additional $7,615,000 for
customer-sponsored development work as compared with $12,403,000 in 1997 and
$15,248,000 in 1996. The Corporation owns and is licensed under a number of
<PAGE>
United States and foreign patents and patent applications which have been
obtained or filed over a period of years. Curtiss-Wright does not consider that
the successful conduct of its business is materially dependent upon the
protection of any one or more of these patents, patent applications or patent
license agreements under which it now operates. Environmental Protection
The effect of compliance upon the Corporation with present legal
requirements concerning protection of the environment is described in the
material in Notes 1.H and 11 to the Consolidated Financial Statements which
appears on pages 25 and 32 of the Registrant's Annual Report and is incorporated
by reference in this Form 10-K Annual Report.
Employees
- ---------
At the end of 1998, the Corporation had 2,050 employees, 305 of which were
represented by labor unions and are covered by collective bargaining agreements.
Certain Financial Information
- -----------------------------
The industry segment information is described in the material in Note 14 to
the Consolidated Financial Statements, which appears on pages 34 to 36 of the
Registrant's Annual Report, and is incorporated by reference in this Form 10-K
Annual Report. It should be noted that in recent years a significant percentage
of the pre-tax earnings from operations of the Corporation has been derived from
foreign operations of the Precision Manufacturing and Services Segment. The
Company does not regard the risks attendant to these foreign operations to be
materially greater than those applicable to its business in the U.S.
<PAGE>
Item 2. Properties.
- --------------------
The principal physical properties of the Corporation and its subsidiaries
are described below:
<TABLE>
<CAPTION>
Owned/
Location Description(1) Leased Principal Use
<S> <C> <C> <C>
Fairfield, 450,000 Owned(2) Actuation and Control
New Jersey sq. ft. on 26.7 acres Products & Services segment
Brampton, Ontario, Canada 87,000 sq. ft. on 8 acres Owned Precision Manufacturing
Products & Services segment
East Farmingdale, New York 215,000 sq. ft. on 11 acres Owned(3) Flow Control Products &
Services segment
Shelby, North Carolina 121,000 sq. ft. on 29 acres Owned Actuation and Control
Products & Services segment
Miami, Florida 65,000 sq. ft. on 2.6 acres Leased Actuation and Control
Products & Services segment
Columbus, Ohio 75,000 sq. ft. on 9 acres Owned Precision Manufacturing
Products & Service segment
Deeside, Wales United 81,000 sq. ft. on 2.2 acres Owned Precision Manufacturing
Kingdom Products & Services segment
Brea, California 30,550 sq. ft. on 1.76 acres Leased Flow Control Products &
Services segment
Neuhausen am Rheinfall, 40,100 sq. ft. within a Leased Actuation and Control
Switzerland business complex Products & Services segment
<FN>
(1) Sizes are approximate. Unless otherwise indicated, all properties are
owned in fee, are not subject to any major encumbrance and are occupied
primarily by factory and/or warehouse buildings.
(2) Approximately 50,000 square feet are leased to other parties. 197,000
square feet are vacant and available for lease and 101,000 square feet
are being made available for lease.
(3) Title to approximately six acres of land and the building located
thereon is held by the Suffolk County Industrial Development Agency in
connection with the issuance of an industrial revenue bond.
</FN>
</TABLE>
<PAGE>
In addition to the properties listed above, the Corporation leases an
aggregate of approximately 375,000 square feet of space at twenty-three
different locations in the United States and England and owns buildings
encompassing about 294,100 square feet in fourteen different locations in the
United States, France, Germany, Belgium and England. None of these properties
individually is material to the Company's business. It also leases a 25,000
square foot building in Lattimore, North Carolina, for warehouse purposes; 8,000
square feet of space in Karup, Denmark, for the Actuation and Control Products &
Services Segment; 2,000 square feet of space in Suwanee, Georgia, for the Flow
Control Products & Services Segment; and 1,150 square feet of space in Singapore
for the Actuation and Control Products & Services Segment.
The Corporation also owns a multi-tenant industrial rental facility located
in Wood-Ridge, New Jersey encompassing 2,322,000 square feet on 144 acres. The
former manufacturing facility has approximately 2,260,000 square feet leased to
other parties with the remaining 62,000 square feet vacant and available for
lease. Additionally, Curtiss-Wright leases approximately 14,000 square feet of
office space in Lyndhurst, New Jersey, for its corporate office.
It is the Corporation's opinion that the buildings on the properties
referred to in this Item generally are well maintained, in good condition, and
are suitable and adequate for the uses presently being made of them.
The following undeveloped tracts, owned by the Registrant, are not
attributable to a particular Segment and are being held for sale: Hardwick
Township, New Jersey, 23 acres; Fairfield, New Jersey, 12.3 acres subdivided
from the Fairfield, New Jersey facility's property; and Perico Island, Florida,
112 acres, the bulk of which is below water. The Corporation owns approximately
7.4 acres of land in Lyndhurst, New Jersey, which is leased, on a long-term
basis, to the owner of the commercial building located on the land. Item 3.
Legal Proceedings.
In the ordinary course of business, the Corporation and its subsidiaries
are subject to various pending claims, lawsuits and contingent liabilities. The
Corporation does not believe that disposition of any of these matters will have
a material adverse effect on the Corporation's consolidated financial position
or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
- -----------------------------------------------------------
Not applicable.
PART II
Item 5. Market for Registrant's Common Stock
And Related Stockholder Matters.
- --------------------------------------------
See the information contained in the Registrant's Annual Report on the
inside back cover under the captions "Common Stock Price Range," "Dividends,"
and "Stock Exchange Listing" which information is incorporated herein by
reference. The approximate number of record holders of the Common Stock, $1.00
par value, of Registrant was 3,973 as of March 24, 1999.
Item 6. Selected Financial Data.
- --------------------------------
See the information contained in the Registrant's Annual Report on page 16
under the caption "Consolidated Selected Financial Data," which information is
incorporated herein by reference.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
- ----------------------------------------------
See the information contained in the Registrant's Annual Report at pages 17
through 20, under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which information is incorporated herein
by reference. The information included therein under the subheading "Year 2000"
shall be considered "Year 2000 Readiness Disclosure" for purposes of the Year
2000 Information and Readiness Disclosure Act.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- --------------------------------------------------------------------
The Corporation is exposed to certain market risk from changes in interest
rates and foreign currency exchange rates as a result of its global operating
and financing activities. However, the Corporation seeks to minimize the risks
from these interest rate and foreign currency exchange rate fluctuations through
its normal operating and financing activities and, when deemed appropriate,
through the use of derivative financial instruments. The Corporation did not use
such instruments for trading or other speculative purposes and did not use
leverage derivative financial instruments during the year ended December 31,
1998. Information regarding the Corporation's accounting policy on financial
instruments is contained in Note 1.G to the Consolidated Financial Statements on
page 26 of the Annual Report, which is incorporated by reference in this Form
10-K Annual Report.
The Corporation's market risk for a change in interest rates relates
primarily to the debt obligations. Approximately 46% of the Corporation's debt
at December 31, 1998 and 100% of the December 31, 1997 debt is comprised of
Industrial Revenue Bond financing. As described in Note 8 to the Consolidated
Financial Statements, which is incorporated by reference in this Form
10-K Annual Report, the Corporation borrowed variable rate debt under its
short-term credit agreement and revolving credit agreement aggregating
31,000,000 Swiss Francs arising out of the December 31, 1998 purchase of SIG
Antriebstechnik AG to mitigate its currency exposure.
Financial instruments expose the Corporation to counterparty credit risk
for nonperformance and to market risk for changes in interest and currency
rates. The Corporation manages exposure to counterparty credit risk through
specific minimum credit standards, diversification of counterparties and
procedures to monitor concentrations of credit risk. The Corporation
monitors the impact of market risk on the fair value and cash flows of its
investments by considering reasonably possible changes in interest rates and by
limiting the amount of potential interest and currency rate exposures to amounts
that are not material to the Corporation's consolidated results of operations
and cash flows.
Item 8. Financial Statements and Supplementary Data.
- ----------------------------------------------------
The following Consolidated Financial Statements of the Registrant and its
subsidiaries, and supplementary financial information, are included in the
Registrant's Annual Report, which information is incorporated herein by
reference.
Consolidated Statements of Earnings for the years ended December 31,
1998, 1997 and 1996, page 22.
Consolidated Balance Sheets at December 31, 1998 and 1997, page 23.
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996, page 24.
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1998, 1997 and 1996, page 25.
Notes to Consolidated Financial Statements, pages 26 through 37,
inclusive, and Quarterly Results of Operations on page 35.
Report of Independent Accountants for the three years ended December
31, 1998, 1997 and 1996, page 21.
Item 9. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure
- ------------------------------------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers
Of the Registrant
- ----------------------------
Information required in connection with directors and executive officers is
set forth below, as well as under the caption "Election of Directors," in the
Registrant's Proxy Statement with respect to the Corporation's 1999 Annual
Meeting of Stockholders (the "Proxy Statement"), which information is
incorporated herein by reference.
Executive Officers of the Registrant.
The following table sets forth the names, ages, and principal occupations
and employment of all executive officers of Registrant. The period of service is
for at least the past five years and such occupations and employment are with
Curtiss-Wright Corporation, except as otherwise indicated:
<TABLE>
<CAPTION>
Name Principal Occupation Age
And Employment
<S> <C> <C>
David Lasky Chairman (since May 1995) and President 66
Gerald Nachman Executive Vice President; President of Metal Improvement 69
Company, Inc., a wholly owned subsidiary
George J. Yohrling Vice President; President, Curtiss-Wright Flight Systems, 58
Inc., a wholly-owned subsidiary, since April 1998; Executive
Vice President for Aerospace Operations of Curtiss Wright
Flight Systems, Inc. from April 1997 to April 1998,
Senior Vice President from July 1996 to April 1997
of Curtiss Wright Flight Systems, Inc.;
previously Vice President and General Manager of
Curtiss-Wright Flight Systems/Shelby, Inc., then a
wholly-owned subsidiary.
Martin A. Benante Vice President (since April 1996); President (since March 46
1995) of Curtiss-Wright Flow Control Corporation ("CWFC") a
wholly-owned subsidiary; previously Vice President/General
Manager of CWFC.
Robert A. Bosi Vice President-Finance 43
Dana M. Taylor, Jr.* Secretary, General Counsel 66
Gary J. Benschip Treasurer 51
Kenneth P. Slezak Controller 47
<FN>
*Effective March 12, 1999, Mr. Taylor retired as Secretary and General Counsel
of the Corporation. Brian D. O'Neill, age 49, Assistant Secretary of the
Corporation asof September 14, 1998 assumed the positions of Acting General
Counsel of the Corporation effective March 15, 1999. Mr. O'Neill has been an
attorney with the Company since 1980, holding the positions of Assistant General
Counsel from November 1997 to March 1999 and Associate General Counsel from July
1992 to November 1997.
</FN>
</TABLE>
<PAGE>
The executive officers of the Registrant are elected annually by the Board
of Directors at its organization meeting in April and hold office until the
organization meeting in the next subsequent year and until their respective
successors are chosen and qualified.
There are no family relationships among these officers, or between any of
them and any director of Curtiss-Wright Corporation, nor any arrangements or
understandings between any officer and any other person pursuant to which the
officer was elected.
Section 16a Beneficial Ownership Reporting Compliance
-----------------------------------------------------
Dana M. Taylor, Jr., Secretary and General Counsel of the Registrant during the
1998 fiscal year, did not timely file a Form 4 report to report the grant of
options in November 1998, pursuant to the Corporation's 1995 Long-Term Incentive
Plan, to purchase 2,935 shares of the Corporation's common stock.
Item 11. Executive Compensation
- -------------------------------
Information required by this Item is included under the captions "Executive
Compensation" and in the "Summary Compensation Table" in the Registrant's Proxy
Statement, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial
Owners and Management.
- ---------------------------------
See the following portions of the Registrant's Proxy Statement, all of
which information is incorporated herein by reference: (i) the material under
the caption "Security Ownership and Transactions with Certain Beneficial Owners"
and (ii) the material included under the caption "Election of Directors."
<PAGE>
Item 13. Certain Relationships and Related Transactions.
- ------------------------------------------------------
Information required by this Item is included under the captions "Executive
Compensation" and "Security Ownership and Transactions with Certain Beneficial
Owners" in the Registrant's Proxy Statement, which information is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K.
- ------------------------------------------
(a)(1) Financial Statements:
The following Consolidated Financial Statements of Registrant and
supplementary financial information, included in Registrant's Annual
Report, are incorporated herein by reference in Item 8:
(i) Consolidated Statements of Earnings for the years ended December
31, 1998, 1997 and 1996
(ii) Consolidated Balance Sheets at December 31, 1998 and 1997
(iii) Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
(iv) Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998, 1997 and 1996
(v) Notes to Consolidated Financial Statements
(vi) Report of Independent Accountants for the years ended December
31, 1998, 1997 and 1996
(a)(2) Financial Statement Schedules:
The items listed below are presented herein on pages 24 and 25 of this Form
10-K.
Report of Independent Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
<PAGE>
Schedules other than those listed above have been omitted since they are not
required, are not applicable, or because the required information is included in
the financial statements or notes thereto.
(a)(3) Exhibits:
(3)(i) Restated Certificate of Incorporation as amended May
8, 1987 (incorporated by reference to Exhibit 3(a) to
Registrant's Form 10-Q Report for the quarter ended
June 30, 1987). Restated Certificate of Incorporation
as amended through April 18, 1997 to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1997).
(3)(ii) By-Laws as amended through January 30, 1997
(incorporated by reference to Exhibit (3)(ii) to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996).
(4)(i) Agreement to furnish to the Commission upon request,
a copy of any long term debt instrument where the
amount of the securities authorized thereunder does
not exceed 10% of the total assets of the Registrant
and its subsidiaries on a consolidated basis
(incorporated by reference to Exhibit 4 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1985).
(4)(ii) Revolving Credit Agreement dated October 29, 1991
between Registrant, the Lenders parties thereto from
time to time, the Issuing Banks referred to therein
and Mellon Bank, N.A. Article I Definitions, Section
1.01 Certain Definitions; Article VII Negative
Covenants, Section 7.07, Limitation on Dividends and
Stock Acquisitions (incorporated by reference to
Exhibit 10(b), to Registrant's Form 10-Q Report for
the quarter ended September 30, 1991). Amendment No.
1 dated January 7, 1992 and Amendment No. 2 dated
October 1, 1992 to said Agreement (incorporated by
reference to Exhibit 4(ii) to Registrant's Annual
Report on Form 10-K for the year ended December 31,
1993). Third Amendment to Credit Agreement dated as
of October 29, 1994 (incorporated by reference to
Exhibit (4)(ii) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994). Fourth
Amendment to Credit Agreement dated as of October 29,
1996 (incorporated by reference to Exhibit (4)(ii) to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996). Fifth Amendment to Credit
Agreement dated as of October 29, 1997 (incorporated
by reference to Exhibit 4(ii) to Registrant's Annual
Report on Form 10-K for the year ended December 31,
1997). Sixth Amendment to Credit Agreement dated as
of October 29, 1998, filed herewith. Seventh
Amendment to Credit Agreement dated as of December
28, 1998, filed herewith. Eighth Amendment to Credit
Agreement and Waiver dated as of January 26, 1999,
filed herewith.
<PAGE>
(4)(iii) Short-Term Credit Agreement dated as of October 29,
1994 among Curtiss-Wright Corporation, as Borrower,
the Lender Parties and Mellon Bank, N.A., as Agent
(incorporated by reference to Exhibit (4)(iii) to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994). First Amendment to Short
Term Credit Agreement dated as of October 26, 1996
(incorporated by reference to Exhibit (4)(iii) to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996). Second Amendment to
Short-Term Credit Agreement dated as of October 24,
1997 (incorporated by reference to Exhibit 4(iii) to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997). Third Amendment to Short
Term Credit Agreement dated as of October 23, 1998,
filed herewith. Fourth Amendment to Short Term Credit
Agreement dated as of December 28, 1998, filed
herewith.
(10) Material Contracts:
(i) Modified Incentive Compensation Plan, as amended
November 9, 1989 (incorporated by reference to
Exhibit 10(a) to Registrant's Form 10-Q Report for
the quarter ended September 30, 1989).*
(ii) Curtiss-Wright Corporation 1995 Long-Term Incentive
Plan (incorporated by reference to Exhibit 4.1 to
Registrant's Form S-8 Registration Statement No.
95602114 filed December 15, 1995).*
(iii) Standard Severance Agreement with Officers of
Curtiss-Wright (incorporated by reference to Exhibit
10(iv) to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991).*
(iv) Retirement Benefits Restoration Plan as amended April
15, 1997 (incorporated by reference to Exhibit 10 to
Registrant's Form 10-Q Report for the quarter ended
June 30, 1997).*
(v) Curtiss-Wright Corporation Retirement Plan as amended
through August 1, 1997; Fourth Amendment to the
Curtiss-Wright Corporation Retirement Plan dated
October 20, 1997; Fifth Amendment to the
Curtiss-Wright Corporation Retirement Plan dated
January 1, 1998 (incorporated by reference to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997); Amendments to
Curtiss-Wright Retirement Plan dated April 1, 1998,
April 20, 1998, April 30, 1998 and June 30, 1998
(incorporated by reference to Exhibit a(ii) to
Registrant's Quarterly Report for the quarter ended
June 30, 1998).*
<PAGE>
(vi) Curtiss-Wright Corporation Savings and Investment
Plan dated March 1, 1995 (incorporated by reference
to Exhibit (10)(vii) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).*
(vii) Curtiss-Wright Corporation 1996 Stock Plan for
Non-Employee Directors (incorporated by reference to
Exhibit 4.1 to Registrant's Form S-8 Registration
Statement No. 96583181, filed June 19, 1996).*
(viii) Curtiss-Wright Corporation Executive Deferred
Compensation Plan effective November 18, 1997
(incorporated by reference to Exhibit (10)(viii) to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997).*
(ix) Standard Severance Protection Agreement dated June
19, 1998 between the Registrant and Officers of the
Registrant (incorporated by reference to Exhibit A(i)
to Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1998).*
(x) Trust Agreement dated January 20, 1998 by and between
Curtiss-Wright Corporation and PNC Bank, National
Association (incorporated by reference to Exhibit
10(a) to Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998).*
(13) Annual Report to Stockholders for the year ended December 31,
1998
(21) Subsidiaries of the Registrant
(23) Consents of Experts and Counsel - see Consent of Independent
Accountants
(27) Financial Data Schedule
- -----------
*Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
No report on Form 8-K was filed during the three months ended December
31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CURTISS-WRIGHT CORPORATION
(Registrant)
By: /s/ David Lasky
---------------------
David Lasky
Chairman and President
Date: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 29, 1999 By: /s/ Robert A. Bosi
----------------------
Robert A. Bosi
Vice President - Finance
Date: March 29, 1999 By: /s/ Kenneth P. Slezak
-----------------------
Kenneth P. Slezak
Controller
Date: March 29, 1999 By: /s/ Thomas R. Berner
-----------------------
Thomas R. Berner
Director
Date: March 29, 1999 By: /s/ James B.Busey
-----------------------
James B. Busey IV
Director
Date: March 29, 1999 By: /s/ David Lasky
-----------------------
David Lasky
Director
Date: March 29, 1999 By: /s/ William B. Mitchell
-------------------------
William B. Mitchell
Director
<PAGE>
Date: March 29, 1999 By: /s/ John R. Myers
------------------------
John R. Myers
Director
Date: March 29, 1999 By: /s/ William W. Sihler
-----------------------
William W. Sihler
Director
Date: March 29, 1999 By: /s/ J. McLain Stewart
-----------------------
J. McLain Stewart
Director
<PAGE>
PRICEWATERHOUSECOOPERS LLP [LOGO]
PricewaterhouseCoopers LLP
400 Campus Drive
P.O. Box 988
Florham Park, NJ 07932
Telephone (973) 236 4000
Facsimile (973) 236 5000
REPORT ON INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
Our audits of the consolidated financial statements referred to in our report
dated February 1, 1999 appearing on page 21 of the Curtiss-Wright Corporation
1998 Annual Report (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
February 1, 1999
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SCHEDULE II - VALUATION and QUALIFYING ACCOUNTS
for the years ended December 31, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged to Other Balance at
Beginning Costs and Accounts - Deductions - End of
Description of Period Expenses Describe Describe Period
<S> <C> <C> <C> <C> <C>
Deducted from assets
to which they apply:
Reserves for doubtful
accounts and notes:
Year-ended December 31, 1998 $1,747 $352 $ 20(A) $ 209 $1,910
====== ==== ======= ====== ======
Year-ended December 31, 1997 $1,557 $596 $ 406 $1,747
====== ==== ====== ======
Year-ended December 31, 1996 $ 760 $506 $300(B) $ 9 $1,557
====== ==== ======== ====== ======
Deferred tax asset valuation
allowance:
Year-ended December 31, 1998 $ - $ - $ - $ -
====== ==== ====== ======
1998
Year-ended December 31, 1997 $1,212 $ - $1,212(C) $ -
====== ==== ====== ======
Year-ended December 31, 1996 $1,094 $171 $ 289(D) $1,212
====== ==== ====== ======
</TABLE>
Notes:
(A) Acquired from the Purchase of Enertech business.
(B) Acquired from the purchase of Accessory Services business.
(C) Expiration of available capital loss carry forwards.
(D) Utilization of tax benefits under capital-loss carryforward.
<PAGE>
EXHIBIT INDEX
The following is an index of the
exhibits included in this report or
incorporated herein by reference.
Exhibit Name Page
No.
(3)(i) Restated Certificate of Incorporation as amended May 8, 1987 *
(incorporated by reference to Exhibit 3(a) to Registrant's
Form 10-Q Report for the quarter ended June 30, 1987).
Restated Certificate of Incorporation as amended through
April 18, 1997 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997).
(3)(ii) By-Laws as amended through January 30, 1997 (incorporated *
by reference to Exhibit 3(ii) to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996).
(4)(i) Agreement to furnish to the Commission upon request, a copy *
of any long term debt instrument where the amount of the
securities authorized thereunder does not exceed 10% of
the total assets of the Registrant and its subsidiaries on
a consolidated basis (incorporated by reference to Exhibit
4 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1985).
(4)(ii) Revolving Credit Agreement dated October 29, 1991 between *
Registrant, the Lenders parties thereto from time to time,
the Issuing Banks referred to therein and Mellon Bank,
N.A. Article I Definitions, Section 1.01 Certain
Definitions; Article VII Negative Covenants, Section 7.07,
Limitation on Dividends and Stock Acquisitions
(incorporated by reference to Exhibit 10(b), to
Registrant's Form 10-Q Report for the quarter ended
September 30, 1991). Amendment No. 1 dated January 7, 1992
and Amendment No. 2 dated October 1, 1992 to said
Agreement (incorporated by reference to Exhibit 4(ii) to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993).
Third Amendment to Credit Agreement dated as of October *
29, 1994 (incorporated by * reference to Exhibit (4)(ii)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994).
<PAGE>
Fourth Amendment to Credit Agreement dated as of October *
29, 1996 (incorporated by * reference to Exhibit 4(ii) to
Registrant's Annual Report for the fiscal year ended
December 31, 1996).
Fifth Amendment to Credit Agreement dated as of October *
29, 1997 (incorporated by * reference to Exhibit 4(ii) to
Registrant's Annual Report for the fiscal year ended
December 31, 1997).
Sixth Amendment to Credit Agreement dated as of October
29, 1998, filed herewith. Seventh Amendment to Credit
Agreement dated as of December 28, 1998, filed herewith.
Eighth Amendment to Credit Agreement and Waiver dated as
of January 26, 1999, filed herewith.
(4)(iii) Short-Term Credit Agreement dated as of October 29, 1994 *
among Curtiss-Wright Corporation, as Borrower, the Lenders
parties and Mellon Bank, N.A. (incorporated by reference
to Exhibit (4)(iii) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1994).
First Amendment to Short Term Credit Agreement dated as *
of October 26, 1996 (incorporated by reference to Exhibit
4(iii) to Registrant's 10-K for the year ended December
31, 1996).
Second Amendment to Short-Term Credit Agreement dated as *
of October 24, 1997 (incorporated by reference to Exhibit
4(iii) to Registrant's Annual Report for the fiscal year
ended December 31, 1997).
Third Amendment to Short Term Credit Agreement dated as of
October 23, 1998, filed herewith. Fourth Amendment to
Short Term Credit Agreement dated as of December 28, 1998,
filed herewith.
10(i)** Modified Incentive Compensation Plan, as amended November *
9, 1989 (incorporated by reference to Exhibit 10(a) to
Registrant's Form 10-Q Report for the quarter ended
September 30, 1989).
(10)(ii)** Curtiss-Wright Corporation 1995 Long-Term Incentive Plan *
(incorporated by * reference to Exhibit 4.1 to
Registrant's Form S-8 Registration Statement No. 95602114
filed December 15, 1995).
(10)(iii)** Standard Severance Agreement with Officers of Curtiss-Wright *
(incorporated by reference to Exhibit 10(iv) to
Registrant's Annual Report on Form 10-K Report for the
year ended December 31, 1991).
<PAGE>
(10)(iv)** Curtiss-Wright Corporation Retirement Benefits Restoration *
Plan as amended April 15, 1997 (incorporated by reference
to Exhibit 10 to Registrant's Report on Form 10-Q Report
for the quarter ended June 30, 1997).
(10)(v)** Curtiss-Wright Corporation Retirement Plan as amended through *
August 1, 1997; Fourth Amendment to the Curtiss-Wright
Corporation Retirement Plan dated October 20, 1997; Fifth
Amendment to the Curtiss-Wright Corporation Retirement
Plan dated January 1, 1998 (incorporated by reference to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997); Amendments to Curtiss-Wright
Retirement Plan dated April 1, 1998, April 20, 1998, April
30, 1998 and June 30, 1998 (incorporated by reference to
Exhibit a(ii) to Registrant's Quarterly Report for the
quarter ended June 30, 1998).
(10)(vi)** Amended Curtiss-Wright Corporation Savings and Investment Plan *
dated March 1, 1995 (incorporated by reference to Exhibit
(10)(vii) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994).
(10)(vii)** Curtiss-Wright Corporation 1996 Stock Plan for Non-Employee *
Directors (incorporated by reference to Exhibit 4.1 to
Registrant's Form S-8 Registration Statement No. 96583181
filed June 19, 1996).
(10)(viii)**Curtiss-Wright Corporation Executive Deferred Compensation *
Plan effective November 18, 1997 (incorporated by
reference to Exhibit 4.1 to Registrant's Form S-8
Registration Statement No. 96583181, filed June 19, 1996).
(10)(ix)** Standard Severance Protection Agreement dated June 19, 1998 *
between the Registrant and Officers of the Registrant
(incorporated by reference to Exhibit 4.1 to Registrant's
Form S-8 Registration Statement No. 96583181, filed June
19, 1996).
(10)(x)** Trust Agreement approved April 17, 1998 dated as of January *
30, 1998 by and between Registrant and PNC Bank, National
Association (incorporated by reference to Exhibit 10(a) to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).
<PAGE>
(13) Annual Report to Stockholders for the year ended December
31, 1998 (only those portions expressly incorporated
herein by reference in this document are deemed "filed.")
(21) Subsidiaries of the Registrant
(23) Consents of Experts and Counsel - see Consent of Independent
Accountants
(27) Financial Data Schedule
- --------------------------
* Incorporated by reference as noted.
** Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit 4(ii)
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of October 29,
1998 (this "Amendment"), by and between CURTISS-WRIGHT CORPORATION, a Delaware
corporation (the "Borrower"), the lenders parties hereto from time to time (the
"Lenders", as defined further below), the Issuing Banks referred to herein (the
"Issuing Banks") and MELLON BANK, N.A., a national banking association, as agent
for the Lenders and the Issuing Banks hereunder (in such capacity, together with
its successors in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Issuing Banks and the
Agent are parties to a Credit Agreement, dated as of October 29, 1991 (as
amended, the "Credit Agreement"), pursuant to which the Lenders have made Loans
to the Borrower and certain Issuing Banks have issued Letters of Credit on
behalf of the Borrower and its Subsidiaries; and
WHEREAS, the Borrower has requested the Lenders to extend the
Revolving Credit Maturity Date to October 29, 2001; and
WHEREAS, the Lenders are willing to so extend the Revolving Credit
Maturity Date and to amend the Credit Agreement upon the terms and conditions
hereinafter set forth; and
WHEREAS, capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Extension of Revolving Credit Maturity Date. The definition of
the term "Revolving Credit Maturity Date" in Section 1.01 of the Credit
Agreement is hereby amended to substitute the date "October 29, 2001" for the
date "October 29, 2000".
2. Conditions Precedent. The effectiveness of this Amendment is
subject to the accuracy as of the date hereof of the representations and
warranties herein contained, to the performance by the Borrower of its
obligations to be performed hereunder on or before the date hereof and to the
satisfaction, on or before October 29, 1998 (the date of such satisfaction being
referred to herein as the "Effective Date"), of the following further conditions
precedent:
(a) Amendment. Each Lender shall have received a
counterpart of this Amendment, duly executed by the Borrower.
(b) Representations and Warranties; Events of Default
and Potential Defaults. The representations and warranties
contained in Section 3 hereof shall be true and correct on and
as of the Effective Date with the same effect as though made
on and as of such date. On the Effective Date, no Event of
Default and no Potential Default shall have occurred and be
continuing or shall exist or shall occur or exist after giving
effect to this Amendment and the transactions contemplated
hereby. By execution of this Amendment, the Borrower certifies
to the Lenders that as of the Effective Date (a) the
representations and warranties set forth in Section 3 hereof
are true and correct on and as of such date and (b) on such
date no Event of Default or Potential Default has occurred and
is continuing or exists or will occur or exist after giving
effect to this Amendment and the transactions contemplated
hereby.
2. Representations and Warranties. The Borrower hereby represents
and warrants to the Agent and the Lenders that the representations and
warranties set forth in the Credit Agreement, as amended by this Amendment, are
true and correct on and as of the date hereof as if made on and as of the date
hereof, and that no Event of Default or Potential Default has occurred and is
continuing or exists on and as of the date hereof; provided, however, that, for
purposes of the foregoing, all references in the Credit Agreement to "this
Agreement" shall be deemed to be references to this Amendment and the Credit
Agreement as amended by this Amendment. In addition, the reference in Section
4.05 of the Credit Agreement to the financial statements of the Borrower and its
consolidated Subsidiaries as of December 31, 1989 and December 31, 1990 shall be
deemed to be a reference to the financial statements of the Borrower and its
consolidated Subsidiaries as of December 31, 1996 and December 31, 1997,
respectively, the reference in such Section to the parallel interim consolidated
financial statements for and as of the end of the six months ended June 30, 1991
shall be deemed to be a reference to the parallel interim consolidated financial
statements for and as of the end of the second fiscal quarter of the fiscal year
beginning January 1, 1998, and the references in the last sentence of Section
4.05 of the Credit Agreement to June 30, 1991 and December 31, 1990 shall be
deemed to be references to June 30, 1998 and December 31, 1997, respectively;
and the reference in Section 4.10 of the Credit Agreement to December 31, 1990
shall be deemed to be a reference to December 31, 1997.
4. Effectiveness of Amendment. This Amendment shall be effective
from and after the Effective Date upon satisfaction of the conditions precedent
referred to herein.
5. Effect of Amendment. The Credit Agreement, as amended by this
Amendment, is in all respects ratified, approved and confirmed and shall, as so
amended, remain in full force and effect.
6. Governing Law. This Amendment shall be deemed to be a contract
under the laws of the State of New York and for all purposes shall be governed
by and construed and enforced in accordance with the laws of said State.
7. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
CURTISS-WRIGHT CORPORATION
By /s/ Gary Benschip
Title Treasurer
MELLON BANK, N.A., individually and as
Agent
By /s/ David N. Smith
Title Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Judy B. Land
Title Vice President
THE BANK OF NOVA SCOTIA
By /s/ Brian Allen
Title Senior Relationship Manager
<PAGE>
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of December
28, 1998 (this "Amendment"), by and between CURTISS-WRIGHT CORPORATION, a
Delaware corporation (the "Borrower"), the lenders parties hereto from time to
time (the "Lenders", as defined further below), the Issuing Banks referred to
herein (the "Issuing Banks") and MELLON BANK, N.A., a national banking
association, as agent for the Lenders and the Issuing Banks hereunder (in such
capacity, together with its successors in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Issuing Banks and the
Agent are parties to a Credit Agreement, dated as of October 29, 1991 (as
amended, the "Credit Agreement"), pursuant to which the Lenders have made Loans
to the Borrower and certain Issuing Banks have issued Letters of Credit on
behalf of the Borrower and its Subsidiaries; and
WHEREAS, the Borrower has requested the Lenders to amend certain
provisions of the Credit Agreement and to add certain terms thereto; and
WHEREAS, the Lenders are willing to amend the Credit Agreement
upon the terms and conditions hereinafter set forth; and
WHEREAS, capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Amendments to Credit Agreement. The Credit Agreement is hereby
amended as follows:
1.1 Section 1.01 is hereby amended as follows:
(i) The following definitions shall be added thereto
in the proper alphabetical order:
"As-Offered" shall have the meaning set forth in
Section 2.04(a) hereof.
"Dollar Equivalent Amount" of any Revolving Credit
Loan shall mean (a) with respect to a Revolving Credit Loan denominated
in an Other Currency, an amount equal to the amount of Dollars that the
amount of such Other Currency (equal to the principal amount of such
Revolving Credit Loan) could purchase at 12:00 p.m., noon, Pittsburgh
time, on the date of determination, based upon the quoted spot rates of
the Agent, at which its applicable branch or office offers to exchange
Dollars for such currency in the foreign exchange market and (b) with
respect to a Revolving Credit Loan denominated in US Currency, an
amount in Dollars equal to the principal amount of such Revolving
Credit Loan.
"Other Currency" shall mean British Pounds, Swiss
Francs, Belgium Francs, French Francs, Italian Lira, German Marks,
Eurodollars, Singapore Dollars, Dutch Guilders, Denmark Krone and any
freely available currency that is freely transferable and freely
convertible into Dollars and requested by the Borrower and acceptable
to all of the Lenders and to the Agent.
"Subsidiary Borrower" shall mean Curtiss-Wright
Flight Systems, Inc., a Delaware corporation; Metal Improvement
Company, Inc., a Delaware corporation; Curtiss-Wright Flow Control
Corporation, a New York corporation; Curtiss-Wright Flow Control
Service Corporation, a Delaware corporation; Curtiss-Wright Foreign
Sales Corp., a Barbados corporation; Curtiss-Wright Flight Systems
Europe A/S, a Danish corporation. Subsidiary Borrower shall also
include (i) Curtiss-Wright Antriebstechnik GmbH, upon its formation as
a wholly owned subsidiary of Curtiss-Wright Corporation, and (ii) SIG
Antriebstechnik Ag, upon the consummation of the purchased of its
issued and outstanding capital stock by Curtiss-Wright Corporation or a
wholly owned subsidiary of Curtiss-Wright Corporation.
"US Currency" shall mean Dollars.
"Year 2000 Problem" shall mean any significant risk
that computer hardware, software or equipment containing embedded
microchips of any Borrower or any of its Subsidiaries which is
essential to its business or operations will not, in the case of dates
or time periods occurring after December 31, 1999, function at least as
effectively and reliably as in the case of times or time periods
occurring before January 1, 2000, including the making of accurate leap
year calculations.
(ii) The following definitions set forth in Section 1.01 shall
be amended as follows:
"Loan Documents" shall be amended by adding ", the
Guaranty" in the first line thereof after "the Notes" and before "the
Transfer Supplements".
1.2 Article II is deleted in its entirety and Article II shall
be amended and restated, as attached hereto as Annex A.
1.3 A new Section 4.19 is hereby added:
"4.19. Year 2000 Compliance. The Borrower has
reviewed its operations and those of its Subsidiaries with a view to
assessing whether its businesses, or the businesses of any of its
Subsidiaries, will be vulnerable to a Year 2000 Problem or will be
vulnerable to the effects of a Year 2000 Problem suffered by any of the
Borrower's or any of its Subsidiaries' major commercial
counter-parties. The Borrower represents and warrants that it has a
reasonable basis to believe that no Year 2000 Problem will cause a
Material Adverse Effect."
1.4 A new Section 6.17 is hereby added:
"6.17. Year 2000 Compliance. The Borrower shall to
the best of its ability take all actions necessary and commit adequate
resources to assure that its computer-based and other systems (and
those of all Subsidiaries) are able to effectively process data,
including dates before, on and after January 1, 2000, to avoid
experiencing any Year 2000 Problem that could reasonably be expected to
cause a Material Adverse Effect. The Borrower will provide the Agent
with a quarterly certificate within 60 days of the end of each quarter
commencing with such quarter ending at March 31, 1999 containing
assurances and substantiations reasonably acceptable to the Required
Lenders as to the capability of the Borrower and its Subsidiaries to
conduct its and their businesses and operations before, on and after
January 1, 2000 without experiencing a Year 2000 Problem causing a
Material Adverse Effect."
1.5 A new Section 8.03 is hereby added:
"8.03. Judgment Currency. If any Lender or the Agent
obtains a judgment against the Borrower in an Other Currency, the
obligations of the Borrower in respect of any sum adjudged to be due to
such Lender or the Agent hereunder or under the Revolving Credit Notes
(the "Judgment Amount") shall be discharged only to the extent that, on
the Business Day following receipt by such Lender or the Agent of the
Judgment Amount in such Other Currency, such Lender or Agent, in
accordance with normal banking procedures, purchases Dollars with the
Judgment Amount in such Other Currency. If the amount of Dollars so
purchased is less than the amount of Dollars that could have been
purchased with the Judgment Amount on the date or dates the Judgment
Amount was originally due and owing to the Lenders or the Agent
hereunder or under the Revolving Credit Notes (the "Original Due Date")
(excluding the portion of the Judgment Amount which has accrued as a
result of the failure of the Borrower to pay the sum originally due
hereunder or under the Revolving Credit Notes when it was originally
due hereunder or under the Revolving Credit Notes) (the "Loss"), the
Borrower agrees, to indemnify such Lender or the Agent, as the case may
be, against the Loss, and if the amount of Dollars so purchased exceeds
the amount of Dollars that could have been purchased with the Judgment
Amount on the Original Due Date, such Lender or the Agent agrees to
remit such excess to the Borrower."
2. Conditions Precedent. The effectiveness of this Amendment is
subject to the accuracy as of the date hereof of the representations and
warranties herein contained, to the performance by the Borrower of its
obligations to be performed hereunder on or before the date hereof and to the
satisfaction, on or before December 28, 1998 (the date of such satisfaction
being referred to herein as the "Effective Date"), of the following further
conditions precedent:
(a) Amendment. Each Lender shall have received a
counterpart of this Amendment, duly executed by the Borrower.
(b) Representations and Warranties; Events of Default
and Potential Defaults. The representations and warranties
contained in Section 3 hereof shall be true and correct on and
as of the Effective Date with the same effect as though made
on and as of such date. On the Effective Date, no Event of
Default and no Potential Default shall have occurred and be
continuing or shall exist and shall occur or exist after
giving effect to this Amendment and the transactions
contemplated hereby. On the Effective Date, there shall have
been delivered to the Agent a certificate, dated the Effective
Date and signed on behalf of the Borrower by the President,
Treasurer or chief financial officer of the Borrower, that (a)
the representations and warranties set forth in Section 3
hereof are true and correct on and as of such date and (b) on
such date no Event of Default or Potential Default has
occurred and is continuing or exists or will occur or exist
after giving effect to this Amendment and the transactions
contemplated hereby.
(c) Proceedings and Incumbency. On the Effective
Date, there shall have been delivered to the Agent with an
original counterpart for each Lender a certificate, dated the
Effective Date and signed on behalf of the Borrower by the
Secretary or an Assistant Secretary of the Borrower,
certifying as to (i) true copies of the articles of
incorporation and bylaws of the Borrower as in effect on such
date (or a certificate of the Secretary or Assistant Secretary
of the Borrower to the effect that there have been no changes
in such articles of incorporation or bylaws from the forms
thereof previously delivered to the Agent and the Lenders or,
if there have been any such changes, attaching copies
thereof), (ii) true copies of all corporate action taken by
the Borrower relative to this Amendment and (iii) the names,
true signatures and incumbency of the officer or officers of
the Borrower authorized to execute and deliver this Amendment
and the other documents and instrument to be executed and
delivered under the Credit Agreement, as amended hereby. The
Agent shall be entitled to conclusively rely on such
certificate unless and until a later certificate revising the
prior certificate has been furnished to the Agent.
(d) Opinions of Counsel. On the Effective Date, there
shall have been delivered to the Agent written opinions, dated
the Effective Date, of the General Counsel to the Borrower in
form and substance satisfactory to the Agent and as to such
matters incident to the transactions contemplated hereby as
the Agent may reasonably request.
(e) Details, Proceedings and Documents. All legal
details and proceedings in connection with the transactions
contemplated by this Amendment shall be satisfactory to the
Lenders, and, on the Effective Date, the Agent shall have
received all such counterpart originals or certified or other
copies of such documents and proceedings in connection with
such transactions, in form and substance satisfactory to the
Agent and the Lenders, as the Agent or any Lender may
reasonably request.
3. Representations and Warranties. The Borrower hereby represents
and warrants to the Agent and the Lenders that the representations and
warranties set forth in the Credit Agreement, as amended by this Amendment, are
true and correct on and as of the date hereof as if made on and as of the date
hereof, and that no Event of Default or Potential Default has occurred and is
continuing or exists on and as of the date hereof; provided, however, that, for
purposes of the foregoing, all references in the Credit Agreement to "this
Agreement" shall be deemed to be references to this Amendment and the Credit
Agreement as amended by this Amendment.
4. Effectiveness of Amendment. This Amendment shall be effective
from and after the Effective Date upon satisfaction of the conditions precedent
referred to herein.
5. Effect of Amendment. The Credit Agreement, as amended by this
Amendment, is in all respects ratified, approved and confirmed and shall, as so
amended, remain in full force and effect.
6. Governing Law. This Amendment shall be deemed to be a contract
under the laws of the State of New York and for all purposes shall be governed
by, construed and enforced in accordance with the laws of the State of New York,
without regard to principles of conflicts of law.
7. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
CURTISS-WRIGHT CORPORATION
By /s/ Gary Benschip
Title Treasurer
MELLON BANK, N.A., individually and as
Agent
By /s/ David N. Smith
Title Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Judy B. Land
Title Vice President
THE BANK OF NOVA SCOTIA
By /s/ Brian Allen
Title Senior Relationship Manager
<PAGE>
CURTISS-WRIGHT CORPORATION
Subsidiary Note
$ Pittsburgh, Pennsylvania
- -------------------
--------,----------
FOR VALUE RECEIVED, the undersigned, [INSERT PROPER NAME OF
SUBSIDIARY] (the "Borrower"), promises to pay to the order of [INSERT PROPER
NAME OF THE LENDER] (the "Lender") on or before the Revolving Credit Maturity
Date (as defined in the Agreement referred to below), and at such earlier dates
as may be required by such Agreement, the lesser of (i) the principal sum of
($ ) or (ii) the aggregate
- ---------------------------------- -------------------
unpaid principal amount of all Revolving Credit Loans made by the Lender to the
Borrower from time to time pursuant to the Agreement. The Borrower further
promises to pay to the order of the Lender interest on the unpaid principal
amount hereof from time to time outstanding at the rate or rates per annum
determined pursuant to the Agreement, payable on the dates set forth in the
Agreement.
This Note is one of the "Subsidiary Notes" as referred to in,
and is entitled to the benefits of, the Credit Agreement, dated as of October
29, 1991, as amended, by and among the Borrower, the Lenders parties thereto
from time to time, the Issuing Banks from time to time thereunder, and Mellon
Bank, N.A., as Agent (as the same may be amended, modified or supplemented from
time to time, the "Agreement"), which among other things provides for the
acceleration of the maturity hereof upon the occurrence of certain events and
for prepayments in certain circumstances and upon certain terms and conditions.
Terms defined in the Agreement have the same meanings herein.
The Borrower hereby expressly waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note and the
Agreement, and an action for amounts due hereunder or thereunder shall
immediately accrue.
This Note shall be governed by, construed and enforced in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
[INSERT PROPER NAME OF THE SUBSIDIARY]
By:
Name:
Title:
<PAGE>
ANNEX A
ARTICLE II
THE CREDITS
2.01. Revolving Credit Loans.
(a) Revolving Credit Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Lender, severally and not jointly, agrees (such agreement being herein
called such Lender's "Revolving Credit Commitment") to make loans in either US
Currency or in an Other Currency (the "Revolving Credit Loans") to the Borrower
at any time or from time to time on or after the date hereof and to but not
including the Revolving Credit Maturity Date.
Subject to the terms and conditions herein, each Lender agrees
to make Loans to any Subsidiary Borrower at any time or from time to time on or
after the date hereof and to but not including the Revolving Credit Maturity
Date. The Loans shall be made to such Subsidiary Borrower upon the completion of
the following conditions: (i) submit Standard Notice under Section 2.03 hereof,
(ii) Curtiss-Wright Corporation executes and delivers to the Agent a Guaranty
and Suretyship Agreement in favor of Lenders in the form as attached hereto as
Exhibit B (the "Guaranty"), and (iii) the obligation of such Subsidiary Borrower
to repay the unpaid principal amount of the Revolving Credit Loans made to it by
each Lender and to pay interest thereon shall be evidenced in part by promissory
notes from such Subsidiary Borrower to each Lender in substantially the form
attached hereto as Exhibit C (the "Subsidiary Borrower Notes"). In the event
that a Subsidiary Borrower becomes a Borrower under this Section 2.01(a), all
references to "Borrower" in Articles I, II, IV, VI, VII, VIII and X and Section
5.02 shall be deemed to include such Subsidiary Borrower.
A Lender shall have no obligation to make any Revolving Credit
Loan to the extent that the aggregate principal amount of such Lender's Pro Rata
share of the total Revolving Credit Extensions of Credit at any time outstanding
would exceed such Lender's Revolving Credit Committed Amount at such time. Each
Lender's "Revolving Credit Committed Amount" at any time shall be equal to the
amount set forth as its "Initial Revolving Credit Committed Amount" below its
name on the signature pages hereof, as either such amount may have been reduced
under Section 2.02 hereof at such time, and subject to transfer to another
Lender as provided in Section 10.14 hereof.
(b) Nature of Credit. Within the limits of time and amount set
forth in this Section 2.01, and subject to the provisions of this Agreement, the
Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder.
(c) Revolving Credit Notes. The obligation of the Borrower to
repay the unpaid principal amount of the Revolving Credit Loans made to it by
each Lender and to pay interest thereon shall be evidenced in part by (i)
promissory notes of the Borrower, one to each Lender, dated the Closing Date
(the "Borrower Notes") in substantially the form attached hereto as Exhibit A,
with the blanks appropriately filled, payable to the order of such Lender in a
face amount equal to such Lender's Initial Revolving Credit Committed Amount and
(ii) the Subsidiary Notes (the Borrower Notes and the Subsidiary Notes are
collectively the "Revolving Credit Notes").
(d) Maturity. To the extent not due and payable earlier, the
Revolving Credit Loans shall be due and payable on the Revolving Credit Maturity
Date.
(e) Extension of Revolving Credit Maturity Date. The Revolving
Credit Maturity Date may be extended for successive one year periods at the
request of the Borrower with the express consent of each Lender as provided
below. Not later than the date 90 days prior to each Anniversary Date, the
Borrower shall, at its option, in a written notice to the Agent request (an
"Extension Request") that the Revolving Credit Maturity Date be extended for a
period of one year. The Agent shall promptly inform the Lenders of such
Extension Request. Each Lender that agrees with such Extension Request shall
deliver to the Agent its express written consent thereto no later than 60 days
prior to such Anniversary Date. If (i) any Lender notifies the Agent in writing
on or before the 60th day prior to such Anniversary Date that it will not
consent to such Extension Request or (ii) all of the Lenders have not in writing
expressly consented to any such Extension Request as provided in the preceding
sentence, then the Agent shall so notify the Borrower and the Borrower, at its
option, may replace each Lender which has not agreed to such Extension Request
(a "Nonextending Lender") with another commercial lending institution reasonably
satisfactory to the Agent (a "Replacement Lender") by giving notice (not later
than the date 30 days prior to such Anniversary Date) of the name of such
Replacement Lender to the Agent. Unless the Agent shall object to the identity
of such proposed Replacement Lender prior to the date 20 days prior to such
Anniversary Date, upon notice from the Agent, each Nonextending Lender shall
promptly (but in no event later than such Anniversary Date) assign all of its
interests hereunder to such Replacement Lender in accordance with the provisions
of Section 10.14(c) hereof. If, prior to such Anniversary Date some, but not
all, of the Lenders have agreed to such Extension Request, and each Nonextending
Lender has not been replaced by the Borrower in accordance with the terms of
this Section 2.01(e), the Revolving Credit Maturity Date shall be extended in
accordance with such Extension Request; provided, however, that on the original
Revolving Credit Maturity Date (as such date may have been previously extended),
the Commitment of each Nonextending Lender shall be terminated, the Borrower
shall pay to the Agent for the account of such Nonextending Lender such
Nonextending Lender's Pro Rata share of the principal of and interest on all
outstanding Revolving Credit Loans and Letter of Credit Reimbursement
Obligations, and the total Revolving Credit Commitment shall be irrevocably
reduced by an amount equal to the aggregate Commitments of all Nonextending
Lenders. If all Lenders consent to any such Extension Request (or, if any
Nonextending Lenders are replaced in accordance with this Section), then as of
5:00 p.m. Pittsburgh time on the Anniversary Date the Revolving Credit Maturity
Date shall be deemed to have been extended for, and shall be the date, one year
after the then effective Revolving Credit Maturity Date (as such date may have
been previously extended pursuant to this Section).
2.02. Revolving Credit Commitment Fee; Reduction of the
Revolving Credit Committed Amounts.
(a) Revolving Credit Commitment Fee. The Borrower shall pay to
the Agent for the account of each Lender a commitment fee (the "Revolving Credit
Commitment Fee") equal to 0.25% per annum (based on a year of 365 or 366 days,
as the case may be, and actual days elapsed), for each day from and including
the date hereof to but not including the Revolving Credit Maturity Date, on the
amount (not less than zero) equal to (i) such Lender's Revolving Credit
Committed Amount on such day, minus (ii) the Dollar Equivalent Amount aggregate
principal amount of such Lender's Revolving Credit Extensions of Credit
outstanding on such day. Such Revolving Credit Commitment Fee shall be due and
payable for the preceding period for which such fee has not been paid (x) on
each Regular Payment Date, (y) on the date of each reduction of the Revolving
Credit Committed Amount (whether optional or mandatory) on the amount so reduced
and (z) on the Revolving Credit Maturity Date.
(b) Reduction of the Revolving Credit Committed Amounts. The
Borrower may at any time or from time to time reduce Pro Rata the Revolving
Credit Committed Amounts of the Lenders to an aggregate amount (which may be
zero) not less than the Dollar Equivalent Amount sum of the unpaid principal
amount of the Revolving Credit Loans then outstanding plus the principal amount
of all Revolving Credit Loans not yet made as to which notice has been given by
the Borrower under Section 2.03 hereof. Any reduction of the Revolving Credit
Committed Amounts shall be in an aggregate amount which is a minimum amount of
$5,000,000 and integral multiples of $500,000 thereof. Reduction of the
Revolving Credit Committed Amounts shall be made by providing not less than 30
days' notice (which notice shall be irrevocable) to such effect to the Agent.
After the date specified in such notice the Revolving Credit Commitment Fee
shall be calculated upon the Revolving Credit Committed Amounts as so reduced.
Upon reduction of the Revolving Credit Committed Amounts to zero, payment in
full of all Obligations and expiration or termination of all outstanding Letters
of Credit, this Agreement shall be terminated.
2.03. Making of Loans. Whenever the Borrower desires that the
Lenders make Revolving Credit Loans, the Borrower shall provide Standard Notice
to the Agent setting forth the following information:
(a) The currency, which shall be either US Currency or an
Other Currency, in which such Revolving Credit Loans are to be made;
(b) The party making the borrowing thereunder;
(c) The date, which shall be a Business Day, on which
such proposed Loans are to be made;
(d) The aggregate principal amount of such proposed Loans,
which shall be the sum of the principal amounts selected pursuant to
clause (e) of this Section 2.03;
(e) The interest rate Option or Options selected in accordance
with Section 2.04(a) hereof and the principal amounts selected in
accordance with Section 2.04(d) hereof of the Base Rate Portion and
each Funding Segment of the CD Rate Portion and the Euro-Rate Portion,
as the case may be, of such proposed Loans; and
(f) With respect to each such Funding Segment of such proposed
Loans, the Funding Period to apply to such Funding Segment, selected in
accordance with Section 2.04(c) hereof.
Standard Notice having been so provided, the Agent shall promptly notify each
Lender of the information contained therein and of the amount of such Lender's
Loan. Unless any applicable condition specified in Article V hereof has not been
satisfied, on the date specified in such Standard Notice each Lender shall make
the proceeds of its Loan available to the Agent (a) with respect to a Loan
denominated in US Currency, at the Agent's Office, no later than 12:00 o'clock
Noon, Pittsburgh time, in funds immediately available at such Office, and (b)
with respect to a Loan denominated in an Other Currency, at the Agent's London
Office, no later than 12:00 o'clock Noon, London time, in funds immediately
available at such London Office. The Agent will make the funds so received
available to the Borrower in funds immediately available at the Agent's Office
or London Office, as the case may be.
2.04. Interest Rates.
(a) Optional Bases of Borrowing. The unpaid principal amount
of the Loans shall bear interest for each day until due on one or more bases
selected by the Borrower from among the interest rate Options set forth below.
Subject to the provisions of this Agreement the Borrower may select different
options to apply simultaneously to different Portions of the Loans and may
select different Funding Segments to apply simultaneously to different parts of
the CD Rate Portion or the Euro-Rate Portion of the Loans. The aggregate number
of Funding Segments applicable to the CD Rate Portion and the Euro-Rate Portion
of the Revolving Credit Loans at any time shall not exceed five.
(i) Base Rate Option: A rate per annum (computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days
elapsed) for each day equal to the Base Rate for such day plus the
Applicable Margin for such day. The "Base Rate" for any day shall mean
the greater of (A) the Prime Rate for such day or (B) 0.625% plus the
Federal Funds Effective Rate for such day, such interest rate to change
automatically from time to time effective as of the effective date of
each change in the Prime Rate or the Federal Funds Effective Rate.
(ii) CD Rate Option: A rate per annum (based on a year of 360
days and actual days elapsed) for each day equal to the CD Rate for
such day plus the Applicable Margin for such day. "CD Rate" for any day
shall mean for each Funding Segment of the CD Rate Portion
corresponding to a proposed or existing CD Rate Funding Period the rate
per annum determined by the Agent by adding:
(A) the rate per annum obtained by dividing (the
resulting quotient to be rounded upward to the nearest 1/100
of 1%) (1) the rate of interest (which shall be the same for
each day in such CD Rate Funding Period) determined in good
faith by the Agent in accordance with its usual procedures
(which determination shall be conclusive absent manifest
error) to be the average of the secondary market bid rates at
or about 11:00 a.m., Eastern time, on the first day of such CD
Rate Funding Period by dealers of recognized standing in
negotiable certificates of deposit for the purchase at face
value of negotiable certificates of deposit of major money
center banks for delivery on such day in amounts comparable to
such Funding Segment and having maturities comparable to such
CD Rate Funding Period by (2) a number equal to 1.00 minus the
CD Rate Reserve Percentage for such CD Rate Funding Period
plus
(B) the Assessment Rate.
The "CD Rate" may also be expressed by the following formula:
[average of the secondary market ]
[bid rates determined by the Agent ]
CD Rate = [per subsection (A)(1) ] + Assessment Rate
[1.00 - CD Rate Reserve Percentage]
"CD Rate Reserve Percentage" for any day and for any CD Rate
Funding Period shall mean the percentage (expressed as a decimal,
rounded upward to the nearest 1/100 of 1%), as determined in good faith
by the Agent (which determination shall be conclusive absent manifest
error), which is in effect on such day as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) representing
the maximum reserve requirement (including without limitation
supplemental, marginal and emergency reserve requirements) for a member
bank of such System in respect of nonpersonal time deposits in Dollars
in the United States having a maturity comparable to such CD Rate
Funding Period. The CD Rate shall be adjusted automatically as of the
effective date of each change in the CD Rate Reserve Percentage. The CD
Rate Option shall be calculated in accordance with the foregoing
whether or not any Lender is actually required to hold such reserves in
connection with its funding hereof or, if required to hold such
reserves, is required to hold reserves at the "CD Rate Reserve
Percentage" as herein defined.
"Assessment Rate" for any day shall mean the rate per annum
(rounded upward to the nearest 1/100 of 1%) determined in good faith by
the Agent in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the maximum rate per
annum payable by a depository institution insured by the Federal
Deposit Insurance Corporation (or any successor) for such day as an
assessment for insurance on Dollar time deposits, exclusive of any
credit that is or may be allowed against such assessment on account of
assessment payments made or to be made by such depository institution.
The CD Rate shall be adjusted automatically as of the effective date of
each change in the Assessment Rate. The CD Rate Option shall be
calculated in accordance with the foregoing whether or not any Lender
is actually required to pay Federal Deposit Insurance Corporation
assessments or, if required to pay such assessments, is required to pay
such assessments at the "Assessment Rate" as herein defined.
The Agent shall give prompt notice to the Borrower and to the
Lenders of the CD Rate determined or adjusted in accordance with the
definition of CD Rate, which determination or adjustment shall be
conclusive absent manifest error.
(iii) Euro-Rate Option: A rate per annum (based on a year of
365 days and actual days elapsed) for each day equal to the Euro-Rate
for such day plus the Applicable Margin for such day. "Euro-Rate" for
any day, as used herein, shall mean for each Funding Segment of the
Euro-Rate Portion corresponding to a proposed or existing Euro-Rate
Funding Period the rate per annum determined by the Agent by dividing
(the resulting quotient to be rounded upward to the nearest 1/100 of
1%) (A) the rate of interest (which shall be the same for each day in
such Euro-Rate Funding Period) determined in good faith by the Agent in
accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the rates per
annum for deposits in US Currency or any Other Currency, as applicable,
offered to major money center banks in the London interbank market at
approximately 11:00 a.m., London time, two London Business Days prior
to the first day of such Euro-Rate Funding Period for delivery on the
first day of such Euro-Rate Funding Period in amounts comparable to
such Funding Segment and having maturities comparable to such Funding
Period by (B) a number equal to
1.00 minus the Euro-Rate Reserve Percentage.
The "Euro-Rate" may also be expressed by the following
formula:
[average of the rates offered to major money ]
[center banks in the London interbank market]
Euro-Rate = [determined by the Agent per subsection (A) ]
[1.00 - Euro-Rate Reserve Percentage ]
"Euro-Rate Reserve Percentage" for any day shall mean the
percentage (expressed as a decimal, rounded upward to the nearest 1/100
of 1%), as determined in good faith by the Agent (which determination
shall be conclusive absent manifest error), which is in effect on such
day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) representing the maximum reserve requirement
(including, without limitation, supplemental, marginal and emergency
reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency liabilities") of a member bank in such
System. The Euro-Rate shall be adjusted automatically as of the
effective date of each change in the Euro-Rate Reserve Percentage. The
Euro-Rate Option shall be calculated in accordance with the foregoing
whether or not any Lender is actually required to hold reserves in
connection with its eurocurrency funding or, if required to hold such
reserves, is required to hold reserves at the "Euro-Rate Reserve
Percentage" as herein defined.
The Agent shall give prompt notice to the Borrower and to the
Lenders of the Euro-Rate determined or adjusted in accordance with the
definition of the Euro-Rate, which determination or adjustment shall be
conclusive absent manifest error.
(iv) As-Offered Rate Option. A rate per annum (computed on the
basis of a year of 360 days and actual days elapsed) for each day equal
to the "As-Offered Rate" for such day. The "As-Offered Rate" for any
day shall mean such rate per annum as may be offered by the Lenders in
their sole discretion to the Borrower from December 30, 1998 to
December 31, 1998 (the "As-Offered Funding Period") for such Funding
Segment as Lenders shall offer in their sole discretion, which rate
shall remain fixed for the duration of such As-Offered Rate Funding
Period. Without limiting the discretion of Lender or the generality of
the foregoing, the As-Offered Rate (if offered) shall reflect Lender's
fully reserved cost of funds and shall include a margin of at least
0.625%.
(b) Applicable Margin. The "Applicable Margin" for each
interest rate Option for any day shall mean the percentage set forth below:
Interest Rate Option Applicable Margin
Base Rate Option 0
CD Rate Option 0.625%
Euro Rate Option 0.625%
As-Offered 0
(c) Funding Periods. At any time when the Borrower shall
select, convert to or renew the CD Rate Option or the Euro-Rate Option to apply
to any part of the Loans, the Borrower shall specify one or more periods (the
"Funding Periods") during which each such Option shall apply, such Funding
Periods being as set forth below:
Interest Rate Option Available Funding Periods
CD Rate Option
30, 60, 90, 180 days or such
longer period as may be
offered by all of the Lenders
in their sole discretion ("CD
Rate Funding Period"); and
Euro-Rate Option
One, two, three, six months or
one year or such longer period
as may be offered by all of
the Lenders in their sole
discretion ("Euro-Rate Funding
Period");
As-Offered
December 30, 1998 to December
31, 1998 ("As-Offered Funding
Period");
provided, that:
(i) Each CD Rate Funding Period which would otherwise end on a
day which is not a Business Day shall be extended to the next
succeeding Business Day;
(ii) Each Euro-Rate Funding Period shall begin on a London
Business Day, and the term "month", when used in connection with a
Euro-Rate Funding Period, shall be construed in accordance with
prevailing practices in the interbank eurodollar market at the
commencement of such Euro-Rate Funding Period, as determined in good
faith by the Agent (which determination shall be conclusive);
(iii) The Borrower may not select a Funding Period that would
end after the Revolving Credit Maturity Date; and
(iv) The Borrower shall, in selecting any Funding Period,
allow for scheduled mandatory payments and foreseeable mandatory
prepayments of the Loans.
(d) Transactional Amounts. Every selection of, conversion
from, conversion to or renewal of an interest rate Option and every payment or
prepayment of any Loans shall be in a principal amount such that after giving
effect thereto the aggregate principal amount of the Base Rate Portion of the
Revolving Credit Loans, or the aggregate principal amount of each Funding
Segment of the CD Rate Portion or the Euro-Rate Portion of the Revolving Credit
Loans, shall be as set forth below:
- --------------------------------- ---------------------------------------------
Portion or Funding Segment Allowable Aggregate Principal Amounts
- --------------------------------- --------------- -----------------------------
- --------------------------------- ---------------------------------------------
Base Rate Portion an integral multiple of 500,000 of US Currency
or the Other Currency denominated by the
Borrower
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
Each Funding Segment of the an integral multiple
CD Rate Portion of 500,000 of US Currency or
the Other Currency denominated
by the Borrower
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
Each Funding Segment of the an integral multiple of 1,000,000 of US
Euro-Rate Portion Currency or the Other Currency denominated by
the Borrower
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
Each Funding Segment of the an integral multiple of 500,000 of US
As-Offered Portion Currency or the Other Currency
denominated by the Borrower
- --------------------------------- ---------------------------------------------
(e) CD Rate or Euro-Rate Unascertainable; Impracticability.
If
(i) on any date on which a CD Rate or a Euro-Rate would
otherwise be set the Agent (in the case of clauses (A) or (B) below) or
any Lender (in the case of clause (C) below) shall have determined in
good faith (which determination shall be conclusive absent manifest
error) that:
(A) adequate and reasonable means do not exist for
ascertaining such CD Rate or Euro-Rate,
(B) a contingency has occurred which materially and
adversely affects the secondary market for negotiable
certificates of deposit maintained by dealers of recognized
standing or the interbank eurodollar market, as the case may
be, or
(C) the effective cost to such Lender of funding a
proposed Funding Segment of the CD Rate Portion or the
Euro-Rate Portion from a Corresponding Source of Funds shall
exceed the CD Rate or the Euro-Rate, as the case may be,
applicable to such Funding Segment, or
(ii) at any time any Lender shall have determined in good
faith (which determination shall be conclusive absent manifest error)
that the making, maintenance or funding of any part of the CD Rate
Portion or the Euro-Rate Portion has been made impracticable or
unlawful by compliance by such Lender or a Notional Euro-Rate Funding
Office in good faith with any Law or guideline or interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof or with any request or
directive of any such Governmental Authority (whether or not having the
force of law);
then, and in any such event, the Agent or such Lender, as the case may be, may
notify the Borrower of such determination (and any Lender giving such notice
shall notify the Agent). Upon such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given), the obligation
of each of the Lenders to allow the Borrower to select, convert to or renew the
CD Rate Option or Euro-Rate Option, as the case may be, shall be suspended until
the Agent or such Lender, as the case may be, shall have later notified the
Borrower (and any Lender giving such notice shall notify the Agent) of the
Agent's or such Lender's determination in good faith (which determination shall
be conclusive absent manifest error) that the circumstance giving rise to such
previous determination no longer exist.
If any Lender notifies the Borrower of a determination under
subsection (ii) of this Section 2.04(e), the CD Rate Portion or the Euro-Rate
Portion, as the case may be, of the Loans of such Lender (the "Affected Lender")
shall automatically be converted to the Base Rate Option as of the date
specified in such notice (and accrued interest thereon shall be due and payable
on such date).
If at the time the Agent or a Lender makes a determination
under subsection (i) or (ii) of this Section 2.04(e) the Borrower previously has
notified the Agent that it wishes to select, convert to or renew the CD Rate
Option or the Euro-Rate Option, as the case may be, with respect to any proposed
Loans but such Loans have not yet been made, such notification shall be deemed
to provide for selection of, conversion to or renewal of the Base Rate Option
instead of the CD Rate Option or the Euro-Rate Option, as the case may be, with
respect to such Loans or, in the case of a determination by a Lender, such Loans
of such Lender.
2.05. Conversion or Renewal of Interest Rate Options.
(a) Conversion or Renewal. Subject to the provisions of
Sections 2.09(c) and 2.10(b) hereof, unless an Event of Default shall have
occurred and be continuing, the Borrower may convert any part of its Loans from
any interest rate Option or Options to one or more different interest rate
Options and may renew the CD Rate Option or the Euro-Rate Option as to any
Funding Segment of the CD Rate Portion or the Euro-Rate Portion:
(i) At any time with respect to conversion from the Base Rate
Option; or
(ii) At the expiration of any Funding Period with respect to
conversions from the As-Offered Rate Option or conversions from or
renewals of the CD Rate Option or the Euro-Rate Option, as the case may
be, as to the Funding Segment corresponding to such expiring Funding
Period.
Whenever the Borrower desires to convert or renew any interest rate Option or
Options, the Borrower shall provide to the Agent Standard Notice setting forth
the following information:
(w) The date, which shall be a Business Day, on which the
proposed conversion or renewal is to be made;
(x) The principal amounts selected in accordance with Section
2.04(d) hereof of the Base Rate Portion and each Funding Segment of the
As-Offered Rate Option, the CD Rate Portion and the Euro-Rate Portion,
as the case may be, to be converted from or renewed;
(y) The interest rate Option or Options selected in accordance
with Section 2.04(a) hereof and the principal amounts selected in
accordance with Section 2.04(d) hereof of the Base Rate Portion and
each Funding Segment of the As-Offered Rate Option, the CD Rate Portion
and the Euro-Rate Portion, as the case may be, to be converted; and
(z) With respect to each Funding Segment to be converted to or
renewed, the Funding Period selected in accordance with Section 2.04(c)
hereof to apply to such Funding Segment.
Standard Notice having been so provided, after the date specified in such
Standard Notice, interest shall be calculated upon the principal amount of the
Loans as so converted or renewed. Interest on the principal amount of any part
of the Loans converted or renewed (automatically or otherwise) shall be due and
payable on the conversion or renewal date.
(b) Failure to Convert or Renew. Absent due notice from the
Borrower of conversion or renewal in the circumstances described in Section
2.05(a)(ii) hereof, any part of the As-Offered Rate Portion, the CD Rate Portion
or Euro-Rate Portion for which such notice is not received shall be converted
automatically to the Base Rate Option on the last day of the expiring Funding
Period; provided, however, that if any Euro-Rate Portion is in an Other
Currency, such portion shall be renewed automatically for one month on the last
day of the expiring Funding Period.
2.06. Prepayments Generally. Whenever the Borrower desires or
is required to prepay any part of its Loans, it shall provide Standard Notice to
the Agent setting forth the following information:
(a) The currency, which shall be either US Currency or an
Other Currency, in which such prepayment is to be made;
(b) The date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(c) The total principal amount of such prepayment, which shall
be the sum of the principal amounts selected pursuant to clause (c) of
this Section 2.06; and
(d) The principal amounts selected in accordance with Section
2.04(d) hereof of the Base Rate Portion and each part of each Funding
Segment of the As-Offered Rate Portion, the CD Rate Portion and the
Euro-Rate Portion, as the case may be, to be prepaid.
Standard Notice having been so provided, on the date specified in such Standard
Notice, the principal amounts of the Base Rate Portion and each Funding Segment
of the As-Offered Rate Option, the CD Rate Portion and the Euro-Rate Portion
specified in such notice, together with interest on each such principal amount
to such date, shall be due and payable.
2.07. Optional Prepayments. The Borrower shall have the right
at its option from time to time to prepay its Loans in whole or part without
premium or penalty (subject, however, to Section 2.10(b) hereof):
(a) At any time with respect to any part of the Base Rate
Portion; or
(b) At the expiration of any Funding Period with respect to
prepayment of the As-Offered Rate Portion, the CD Rate Portion or the
Euro-Rate Portion, as the case may be, with respect to any part of the
Funding Segment corresponding to such expiring Funding Period.
Any such prepayment shall be made in accordance with Section 2.06 hereof.
2.08. Interest Payment Dates. Interest on the Base Rate
Portion shall be due and payable on each Regular Payment Date. Interest on each
Funding Segment of the As-Offered Portion shall be due and payable on the last
day of the corresponding As-Offered Funding Period. Interest on each Funding
Segment of the CD Rate Portion shall be due and payable on the last day of the
corresponding CD Rate Funding Period and, if such CD Rate Funding Period is
longer than 90 days, also every 90th day during such CD Rate Funding Period.
Interest on each Funding Segment of the Euro-Rate Portion shall be due and
payable on the last day of the corresponding Euro-Rate Funding Period and, if
such Euro-Rate Funding Period is longer than three months, also every third
month during such Funding Period. After maturity of any part of the Loans (by
acceleration or otherwise), interest on such part of the Loans shall be due and
payable on demand.
2.09. Pro Rata Treatment; Payments Generally.
(a) Pro Rata Treatment. Each borrowing and conversion and
renewal of interest rate Options hereunder shall be made, and all payments made
in respect of principal, interest and Revolving Credit Commitment Fees due from
the Borrower hereunder or under the Notes shall be applied, Pro Rata from and to
each Lender, except for payments of interest involving an Affected Lender as
provided in Section 2.04(e) hereof, payments to a Lender under Sections 2.10,
2.12 or 3.07 hereof and payments to any Issuing Bank pursuant to Section 3.02(b)
hereof. The failure of any Lender to make a Loan shall not relieve any other
Lender of its obligation to lend hereunder, but neither the Agent nor any Lender
shall be responsible for the failure of any other Lender to make a Loan.
(b) Payments Generally. The parties agree that (i) all
payments and prepayments of principal, interest and other amounts in connection
with Loans denominated in US Currency and all fees shall be made in US Currency
and (ii) all payments of principal, interest and other amounts (other than fees)
in connection with Revolving Credit Loans denominated in any Other Currency
shall be made in such Other Currency. All payments and prepayments to be made in
respect of principal, interest, fees or other amounts due from the Borrower in
US Currency shall be payable by 12:00 o'clock noon, Pittsburgh time, on the day
when due without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and an action therefor shall immediately
accrue. Except for payments under Sections 2.10 and 10.06, such payments shall
be made to the Agent at its Office in US Currency in funds immediately available
at such Office without setoff, counterclaim or other deduction of any nature.
All payments and prepayments to be made in respect of principal, interest fees
or other amounts due from the Borrower in any Other Currency shall be payable by
12:00 o'clock noon, London time, on the day when due without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
and an action therefor shall immediately accrue. Except for payments under
Sections 2.10 and 10.06, such payments shall be made to the Agent at its London
Office in such Other Currency in funds immediately available at such Office
without setoff, counterclaim or other deduction of any nature. Any payment or
prepayment received (i) in US Currency by the Agent or such Lender after 12:00
o'clock Noon, Pittsburgh time, on any day shall be deemed to have been received
on the next succeeding Business Day and (ii) in any Other Currency by the agent
or such Lender after 12:00 o'clock noon, London time, on any day shall be deemed
to have been received on the next succeeding Business Day. The Agent shall
distribute to the Lenders all such payments received by it from the Borrower as
promptly as practicable after receipt by the Agent.
(c) Default Interest. To the extent permitted by law, from and
after the date on which an Event of Default shall have occurred hereunder, and
so long as such Event of Default continues to exist, principal, interest, fees,
indemnity, expenses or any other amounts due from the Borrower hereunder or
under any other Loan Document, shall bear interest for each day (before and
after judgment), payable on demand, at a rate per annum (in each case based on a
year of 360 days and actual days elapsed) which for each day shall be equal to
the following:
(i) In the case of any part of the As-Offered Rate Portion,
the CD Rate Portion or Euro-Rate Portion of any Loans, (A) until the
end of the applicable then-current Funding Period at a rate per annum
2% above the rate otherwise applicable to such part, and (B) thereafter
in accordance with the following clause (ii); and
(ii) In the case of any other amount due from the Borrower
hereunder or under any Loan Document, 2% above the then-current Base
Rate Option.
To the extent permitted by law, interest accrued under this Section 2.09 on any
amount shall compound on a day-by-day basis, and hence shall be added daily to
the overdue amount to which such interest relates.
2.10. Additional Compensation in Certain Circumstances.
(a) Increased Costs or Reduced Return Resulting From Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law or guideline
or interpretation or application thereof by any Governmental Authority charged
with the interpretation or administration thereof or compliance with any request
or directive of any Governmental Authority (whether or not having the force of
law) now existing or hereafter adopted:
(i) subjects any Lender or any Notional Euro-Rate Funding
Office to any tax or changes the basis of taxation with respect to this
Agreement, the Notes, the Loans or payments by the Borrower of
principal, interest, commitment fees or other amounts due from the
Borrower hereunder or under the Notes (except for taxes on the overall
net income or overall gross receipts of such Lender or such Notional
Euro-Rate Funding Office imposed by the jurisdictions (federal, state
and local) in which the Lender's principal office or Notional Euro-Rate
Funding Office is located),
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or commitments
to extend credit extended by, assets (funded or contingent) of,
deposits with or for the account of, other acquisitions of funds by,
such Lender or any Notional Euro-Rate Funding Office (other than
requirements expressly included herein in the determination of the CD
Rate or the Euro-Rate, as the case may be, hereunder),
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or
contingent) of, or credits or commitments to extend credit extended by,
any Lender or any Notional Euro-Rate Funding Office, or (B) otherwise
applicable to the obligations of any Lender or any Notional Euro-Rate
Funding Office under this Agreement, or
(iv) imposes upon any Lender or any Notional Euro-Rate Funding
Office any other condition or expense with respect to this Agreement,
the Notes or its making, maintenance or funding of any Loan or any
security therefor,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Lender, any Notional Euro-Rate Funding office or, in the case of clause (iii)
hereof, any Person controlling a Lender, with respect to this Agreement, the
Notes or the making, maintenance or funding of any Loan (or, in the case of any
capital adequacy or similar requirement, to have the effect of reducing the rate
of return on such Lender's or controlling Person's capital, taking into
consideration such Lender's or controlling Person's policies with respect to
capital adequacy) by an amount which such Lender deems to be material (such
Lender being deemed for this purpose to have made, maintained or funded each
Funding Segment of the CD Rate Portion and the Euro-Rate Portion from a
Corresponding Source of Funds), such Lender may from time to time notify the
Borrower of the amount determined in good faith (using any averaging and
attribution methods) by such Lender (which determination shall be conclusive) to
be necessary to compensate such Lender or such Notional Euro-Rate Funding Office
for such increase, reduction or imposition. Such amount shall be due and payable
by the Borrower to such Lender five Business Days after such notice is given,
together with an amount equal to interest on such amount from the date two
Business Days after the date demanded until such due date at the Base Rate
Option. A certificate by such Lender as to the amount due and payable under this
Section 2.10(a) from time to time and the method of calculating such amount
shall be conclusive absent manifest error.
(b) Funding Breakage. In addition to all other amounts payable
hereunder, if and to the extent for any reason any part of any Funding Segment
of any As-Offered Rate Portion, CD Rate Portion or Euro-Rate Portion of the
Loans becomes due (by acceleration or otherwise), or is paid, prepaid or
converted to another interest rate Option (whether or not such payment,
prepayment or conversion is mandatory or automatic and whether or not such
payment or prepayment is then due), on a day other than the last day of the
corresponding Funding Period (the date such amount so becomes due, or is so
paid, prepaid or converted, being referred to as the "Funding Breakage Date"),
the Borrower shall pay each Lender an amount ("Funding Breakage Indemnity")
determined by such Lender as follows:
(i) first, calculate the following amount: (A) the principal
amount of such Funding Segment of the Loans owing to such Lender which
so became due, or which was so paid, prepaid or converted, times (B)
the greater of (x) zero or (y) the rate of interest applicable to such
principal amount on the Funding Breakage Date minus the Applicable
Funding Rate as of the Funding Breakage Date, times (C) the number of
days from and including the Funding Breakage Date to but not including
the last day of such Funding Period, times (D) 1/360;
(ii) the Funding Breakage Indemnity to be paid by the Borrower
to such Lender shall be the amount equal to the present value as of the
Funding Breakage Date (discounted at the Applicable Funding Rate as of
such Funding Breakage Date, and calculated on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed) of the
amount described in the preceding clause (i) (which amount described in
the preceding clause (i) is assumed for purposes of such present value
calculation to be payable on the last day of the corresponding Funding
Period).
For purposes of this Section, the term "Applicable Funding Rate" shall mean (i)
in the case of any calculation of a Funding Breakage Indemnity payment with
respect to a particular Funding Segment for which the corresponding Funding
Period was originally one year or longer, the Treasury Rate, and (ii) in the
case of any calculation of a Funding Breakage Indemnity payment with respect to
a Funding Segment for which the corresponding Funding Period was originally less
than one year, the Euro-Rate.
Such Funding Breakage Indemnity shall be due and payable on
demand, and each Lender shall, upon making such demand, notify the Agent of the
amount so demanded. In addition, the Borrower shall, on the due date for payment
of any Funding Breakage Indemnity, pay to such Lender an additional amount equal
to interest on such Funding Breakage Indemnity from the Funding Breakage Date to
but not including such due date at the Base Rate Option applicable to the Loans
(calculated on the basis of a year of 360 days and actual days elapsed). The
amount payable to each Lender under this Section 2.10(b) shall be determined in
good faith by such Lender, and such determination shall be conclusive absent
manifest error.
2.11. HLT Classification. In the event that after the date
hereof the Loans hereunder are classified as a "highly leveraged transaction"
(an "HLT Classification") by any Governmental Authority having jurisdiction over
any Lender, such Lender may in its discretion from time to time so notify the
Agent, and upon receiving such notice the Agent shall promptly give notice of
such event to the Borrower, the Issuing Banks and the Lenders. In such event the
parties hereto shall commence negotiations to agree on revised Revolving Credit
Commitment Fees, interest rates and Applicable Margins hereunder. If the parties
hereto fail to agree on such matters in their respective absolute discretion
within 60 days of the notice given by the Agent referred to above, then the
Required Lenders may at any time or from time to time thereafter direct the
Agent to (a) by ten Business Days' notice to the Borrower, terminate the
Revolving Credit Commitments, and the Revolving Credit Commitments shall
thereupon terminate, or (b) by ten Business Days' notice to the Borrower,
declare the Obligations, together with (without duplication) accrued interest
thereon, to be, and the Obligations shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived, and an action therefor shall immediately accrue. The
Lenders acknowledge that an HLT Classification is not an Event of Default or
Potential Default hereunder.
2.12. Taxes.
(a) Payments Net of Taxes. All payments made by the Borrower
under this Agreement or any other Loan Document shall be made free and clear of,
and without reduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, and all liabilities with respect
thereto, excluding
(i) in the case of the Agent and each Lender, income or
franchise taxes imposed on the Agent or such Lender by the jurisdiction
under the laws of which the Agent or such Lender is organized or any
political subdivision or taxing authority thereof or therein or as a
result of a connection between such Lender and any jurisdiction other
than a connection resulting solely from this Agreement and the
transactions contemplated hereby, and
(ii) in the case of each Lender, income or franchise taxes
imposed by any jurisdiction in which such Lender's lending offices
which make or book Loans are located or any political subdivision or
taxing authority thereof or therein
(all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld or deducted from any amounts payable to the Agent or any Lender under
this Agreement or any other Loan Document, the Borrower shall pay the relevant
amount of such Taxes and the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
other Loan Documents. Whenever any Taxes are paid by the Borrower with respect
to payments made in connection with this Agreement or any other Loan Document,
as promptly as possible thereafter, the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof.
(b) Indemnity. The Borrower hereby indemnifies the Agent and
each of the Lenders for the full amount of such Taxes and any present or future
claims, liabilities or losses with respect to or resulting from any omission to
pay or delay in paying such Taxes (including any incremental Taxes, interest or
penalties that may become payable by the Agent or such Lender as a result of any
failure to pay such Taxes but excluding any claims, liabilities or losses with
respect to or arising from omissions to pay or delays in payment attributable to
the act or omission of the Agent or any Lender), whether or not such Taxes were
correctly or legally asserted. Such indemnification shall be made within 30 days
from the date such Lender or the Agent, as the case may be, makes written demand
therefor.
(c) Withholding and Backup Withholding. Each Lender that is
incorporated or organized under the laws of any jurisdiction other than the
United States or any state thereof agrees that, on or prior to the date any
payment is due to be made to it hereunder or under any other Loan Document, it
will furnish to the Borrower and the Agent
(i) two valid, duly completed copies of United States Internal
Revenue Service Form 4224 or United States Internal Revenue Form 1001
or successor applicable form, as the case may be, certifying in each
case that such Lender is entitled to receive payments under this
Agreement and the other Loan Documents without deduction or withholding
of any United States federal income taxes and
(ii) a valid, duly completed Internal Revenue Service Form W-8
or W-9 or successor applicable form, as the case may be, to establish
an exemption from United States backup withholding tax.
Each Lender which so delivers to the Borrower and the Agent a Form 1001 or 4224
and Form W-8 or W-9, or successor applicable forms agrees to deliver to the
Borrower and the Agent two further copies of the said Form 1001 or 4224 and Form
W-8 or W-9, or successor applicable forms, or other manner of certification, as
the case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from withholding tax, or after the occurrence of any event
requiring a change in the most recent form previously delivered by it, and such
extensions or renewals thereof as may reasonably be requested by the Borrower
and the Agent, certifying in the case of a Form 1001 or Form 4224 that such
Lender is entitled to receive payments under this Agreement or any other Loan
Document without deduction or withholding of any United States federal income
taxes, unless in any such cases an event (including any changes in Law) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such letter or form with respect
to it and such Lender advises the Borrower and the Agent that it is not capable
of receiving payments without any deduction or withholding of United States
federal income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
2.13. Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. Each Lender shall have the right from
time to time, prospectively or retrospectively, without notice to the Borrower,
to deem any branch, subsidiary or affiliate of such Lender to have made,
maintained or funded any part of the Euro-Rate Portion at any time. Any branch,
subsidiary or affiliate so deemed shall be known as a "Notional Euro-Rate
Funding office." Such Lender shall deem any part of the Euro-Rate Portion of the
Loans or the funding therefor to have been transferred to a different Notional
Euro-Rate Funding Office if such transfer would avoid or cure an event or
condition described in Section 2.04(e)(ii) hereof or would lessen compensation
payable by the Borrower under Section 2.10(a) hereof, and if such Lender
determines in its sole discretion that such transfer would be practicable and
would not have a Material Adverse Effect on such part of the Loans, such Lender
or any Notional Euro-Rate Funding office (it being assumed for purposes of such
determination that each part of the Euro-Rate Portion is actually made or
maintained by or funded through the corresponding Notional Euro-Rate Funding
Office). Notional Euro-Rate Funding Offices may be selected by such Lender
without regard to such Lender's actual methods of making, maintaining or funding
Loans or any sources of funding actually used by or available to such Lender.
(b) Actual Funding. Each Lender shall have the right from time
to time to make or maintain any part of the Euro-Rate Portion by arranging for a
branch, subsidiary or affiliate of such Lender to make or maintain such part of
the Euro-Rate Portion. Such Lender shall have the right to (i) hold any
applicable Note payable to its order for the benefit and account of such branch,
subsidiary or affiliate or (ii) request the Borrower to issue one or more
substitute promissory notes in the principal amount of such Euro-Rate Portion,
in substantially the form attached hereto as Exhibit A, with the blanks
appropriately filled, payable to such branch, subsidiary or affiliate and with
appropriate changes reflecting that the holder thereof is not obligated to make
any additional Loans to the Borrower; provided, that if a Lender requests the
Borrower to issue one or more substitute promissory notes in accordance with
clause (ii) above, the amount of the Note payable to such Lender shall
automatically be reduced accordingly. The Borrower agrees to comply promptly
with any request under subsection (ii) of this Section 2.13(b). If any Lender
causes a branch, subsidiary or affiliate to make or maintain any part of the
Euro-Rate Portion hereunder, all terms and conditions of this Agreement shall,
except where the context clearly requires otherwise, be applicable to such part
of the Euro-Rate Portion and to any note payable to the order of such branch,
subsidiary or affiliate to the same extent as if such part of the Euro-Rate
Portion were made or maintained and such note were a Revolving Credit Note
payable to such Lender's order.
2.14. Closing Fee. The Borrower shall pay to the Agent for the
account of each Lender on the Closing Date a fee equal to .10 of 1% of each
Lender's Revolving Credit Commitment.
2.15. Multicurrency Payments.
(a) Dollar Equivalent Amounts.
(i) Calculation of Dollar Equivalent Amounts. Upon each making
and upon each payment of a Revolving Credit Loan denominated in an Other
Currency, the Agent shall calculate the Dollar Equivalent Amount of such
Revolving Credit Loan, as the case may be, and shall provide written
confirmation to the Lenders.
(ii) Recalculation of Dollar Equivalent Amounts. In
determining the Dollar Equivalent Amount of the aggregate Revolving Credit
Extensions of Credit of the Lenders, the Agent may use the respective Dollar
Equivalent Amounts for the Revolving Credit Loans pursuant to paragraph (i) of
this subsection (a), unless such Dollar Equivalent Amount so calculated exceeds
90% of the Revolving Credit Commitment Amount, in which case the Agent shall
recalculate the Dollar Equivalent Amount of the Revolving Credit Loans
outstanding no less frequently than once each week. The Agent may recalculate
the Dollar Equivalent Amounts of each of the Revolving Credit Loans as
frequently as it determines to do so in its discretion, provided, that such
recalculation shall be made for all of the Revolving Credit Loans no less
frequently than once each week during any period when the aggregate Dollar
Equivalent Amount of the aggregate Credit Exposure of the Lenders exceeds 90% of
the Revolving Credit Commitment Amount.
(b) Unavailability.
(i) General. Subject to paragraph (ii) of this subsection (b),
if, in the reasonable judgment of the Agent, any Other Currency ceases to be
available and freely tradable in the London foreign exchange market, such Other
Currency shall cease to be an Other Currency. The Agent shall give prompt notice
to the Borrower and the Lenders of such event. In the event that (A) the Agent
has determined that an Other Currency has ceased to be available and freely
tradable in the London foreign exchange market and (B) the Agent has determined
in good faith that such Other Currency is not otherwise available to the
Borrower, then, on the date any Revolving Credit Loan denominated in such Other
Currency would become due under the terms of this Agreement (other than as a
result of an optional prepayment under Section 2.07 or of the acceleration of
such Revolving Credit Loans under Section 8.02), the Borrower shall repay such
Revolving Credit Loans by paying to each Lender an amount in Dollars equal to
the amount determined in good faith by such Lender (which determination shall be
conclusive absent manifest error) necessary to compensate such Lender for the
principal of and accrued interest on such Revolving Credit Loans and any
additional cost, expense or loss incurred by such Lender as a result of such
Revolving Credit Loans being repaid in Dollars (rather than in the denominated
Other Currency).
(ii) European Monetary Union.
A. Definitions. In this Section 2.15 and Article II
and in each other provision of this Agreement to which
reference is made in this Section 2.15 expressly or impliedly,
the following terms have the meanings given to them in this
Section 2.15:
"commencement of the third stage of EMU" means the
date of commencement of the third stage of EMU (at the date of
this Agreement expected to be January 1, 1999) or the date on
which circumstances arise which (in the opinion of the
Administrative Agent) have substantially the same effect and
result in substantially the same consequences as commencement
of the third stage of EMU as contemplated by the Treaty on
European Union.
"EMU" means economic and monetary union as
contemplated in the Treaty on European Union.
"EMU legislation" means legislative measures of the
European Council for the introduction of, changeover to or
operation of a single or unified European currency (whether
known as the euro or otherwise), being in part the
implementation of the third stage of EMU;
"euro" means the single currency of participating
member states of the European Union;
"euro unit" means the currency unit of the euro;
"national currency unit" means the unit of currency
(other than a euro unit) of a participating member state;
"participating member state" means each state so
described in any EMU legislation; and
"Treaty on European Union" means the Treaty of Rome
of March 25, 1957, as amended by the Single European Act 1986
and the Maastricht Treaty (which was signed at Maastricht on
February 7, 1992, and came into force on November 1, 1993), as
amended from time to time.
B. Effectiveness of Provisions. The provisions of
paragraphs C to G below (inclusive) shall be effective at and from the
commencement of the third stage of EMU, provided, that if and to the extent that
any such provision relates to any state (or the currency of such state) that is
not a participating member state on the commencement of the third stage of EMU,
such provision shall become effective in relation to such state (and the
currency of such state) at and from the date on which such state becomes a
participating member state.
C. Redenomination and Alternative Currencies.
Each obligation under this Agreement of a party to this Agreement which has been
denominated in the national currency unit of a participating member state shall
be redenominated into the euro unit in accordance with EMU legislation,
provided, that if and to the extent that any EMU legislation provides that
following the commencement of the third stage of EMU an amount denominated
either in the euro or in the national currency unit of a participating member
state and payable within that participating member state by crediting an account
of the creditor can be paid by the debtor either in the euro unit or in that
national currency unit, each party to this Agreement shall be entitled to pay or
repay any such amount either in the euro unit or such national currency unit.
D. Business Days. With respect to any amount
denominated or to be denominated in the euro or a national currency unit, any
reference to a "Business Day" shall be construed as a reference to a day (other
than a Saturday or Sunday) on which banks are generally open for business in
London and Pittsburgh, Pennsylvania and/or such principal financial center or
centers in such participating member state or states as the Agent may from time
to time denominate for this purpose.
E. Payments by the Agent Generally. With respect to
the payment of any amount denominated in the euro or in a national currency
unit, the Agent shall not be liable to the Borrower or any of the Lenders in any
way whatsoever for any delay, or the consequences of any delay, in the crediting
to any account of any amount required by this Agreement to be paid by the Agent
if the Agent shall have taken all relevant steps to achieve, on the date
required by this Agreement, the payment of such amount in immediately available,
freely transferable, cleared funds (in the euro unit or, as the case may be, in
a national currency unit) to the account with the bank in the principal
financial center in the participating member state which the Borrower shall have
specified for such purpose. In this paragraph E, "all relevant steps" means all
such steps as may be prescribed from time to time by the regulations or
operating procedures of such clearing or settlement system as the Agent may from
time to time determine for the purpose of clearing or settling payments of euro.
F. Rounding and Other Consequential Changes. Without
prejudice and in addition to any method of conversion or rounding prescribed by
any EMU legislation and without prejudice to the respective liabilities for
indebtedness of the Borrower to the Lenders and the Lenders to the Borrower
under or pursuant to this Agreement:
(i) each reference in this Agreement to a minimum
amount (or an integral multiple thereof) in a national currency unit to
be paid to or by the Agent shall be replaced by a reference to such
reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Agent may from time to time specify;
and
(ii) except as expressly provided in this Section
2.15, each provision of this Agreement shall be subject to such
reasonable changes of construction as the Agent may from time to time
specify to be necessary or appropriate to reflect the introduction of
or changeover to the euro in participating member states.
G. Increased Costs. The Borrower shall from time to
time, at the request of the Agent, pay to the Agent for the account of each
Lender the amount of any cost or increased cost incurred by, or of any reduction
in any amount payable to or in the effective return on its capital to, or of
interest or other return foregone by, such Lender or any holding company of such
Lender as a result of the introduction of, changeover to or operation of the
euro in any participating member state.
<PAGE>
EIGHTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER, dated as
of January 26, 1999 (this "Amendment"), by and between CURTISS-WRIGHT
CORPORATION, a Delaware corporation (the "Borrower"), the lenders parties hereto
from time to time (the "Lenders", as defined further below), the Issuing Banks
referred to herein (the "Issuing Banks") and MELLON BANK, N.A., a national
banking association, as agent for the Lenders and the Issuing Banks hereunder
(in such capacity, together with its successors in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Issuing Banks and the
Agent are parties to a Credit Agreement, dated as of October 29, 1991 (as
amended, the "Credit Agreement"), pursuant to which the Lenders have made Loans
to the Borrower and certain Issuing Banks have issued Letters of Credit on
behalf of the Borrower and its Subsidiaries; and
WHEREAS, the Borrower, the Lenders and the Agent are parties
to a Short Term Credit Agreement, dated as of October 29, 1994 (as amended, the
"Short Term Credit Agreement"), pursuant to which the Lenders have made Loans to
the Borrower; and
WHEREAS, the Borrower has requested the Lenders to amend
certain provisions of the Credit Agreement and to waive certain terms under the
Credit Agreement and the Short Term Credit Agreement; and
WHEREAS, the Lenders are willing to amend the Credit Agreement
and to waive certain terms under the Credit Agreement and the Short Term Credit
Agreement upon the terms and conditions hereinafter set forth; and
WHEREAS, capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Amendments to Credit Agreement. Section 7.03 of the Credit
Agreement is hereby amended to substitute in the fifth line thereof the amount
"$25,000,000" for the amount "$15,250,000".
2. Waiver. The Lenders hereby consent to the Borrower's
deviation from compliance with the provisions of Section 7.03 of the Credit
Agreement to the extent, but only to the extent, that such deviation occurred
prior to the date hereof and resulted from the Borrower permitting its domestic
Subsidiaries to create, incur, assume, suffer to exist or have outstanding
Funded Indebtedness which in the aggregate for all domestic Subsidiaries
exceeded $15,250,000; provided, however, that at no time such Funded
Indebtedness exceeded $25,000,000. Any Event of Default under the Credit
Agreement or the Short Term Credit Agreement arising out of the Borrower's
deviation from Section 7.03 for the reason described above prior to the date
hereof is hereby waived.
3. Conditions Precedent. The effectiveness of this Amendment
is subject to the accuracy as of the date hereof of the representations and
warranties herein contained, to the performance by the Borrower of its
obligations to be performed hereunder on or before the date hereof and to the
satisfaction, on or before January 26, 1999 (the date of such satisfaction being
referred to herein as the "Effective Date"), of the following further conditions
precedent:
(a) Amendment. Each Lender shall have received a
counterpart of this Amendment, duly executed by the Borrower.
(b) Representations and Warranties; Events of Default
and Potential Defaults. The representations and warranties
contained in Section 4 hereof shall be true and correct on and
as of the Effective Date with the same effect as though made
on and as of such date. On the Effective Date, no Event of
Default and no Potential Default shall have occurred and be
continuing or shall exist or shall occur or exist after giving
effect to this Amendment and the transactions contemplated
hereby. By execution of this Amendment, the Borrower certifies
to the Lenders that as of the Effective Date (a) the
representations and warranties set forth in Section 4 hereof
are true and correct on and as of such date and (b) on such
date no Event of Default or Potential Default has occurred and
is continuing or exists or will occur or exist after giving
effect to this Amendment and the transactions contemplated
hereby.
(c) Opinions of Counsel. On the Effective Date, there
shall have been delivered to the Agent written opinions, dated
the Effective Date, of the General Counsel to the Borrower in
form and substance satisfactory to the Agent and as to such
matters incident to the transactions contemplated hereby as
the Agent may reasonably request.
4. Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders that the representations
and warranties set forth in the Credit Agreement, as amended by this Amendment,
are true and correct on and as of the date hereof as if made on and as of the
date hereof, and that no Event of Default or Potential Default has occurred and
is continuing or exists on and as of the date hereof; provided, however, that,
for purposes of the foregoing, all references in the Credit Agreement to "this
Agreement" shall be deemed to be references to this Amendment and the Credit
Agreement as amended by this Amendment. In addition, the reference in Section
4.05 of the Credit Agreement to the financial statements of the Borrower and its
consolidated Subsidiaries as of December 31, 1989 and December 31, 1990 shall be
deemed to be a reference to the financial statements of the Borrower and its
consolidated Subsidiaries as of December 31, 1997 and December 31, 1998,
respectively, the reference in such Section to the parallel interim consolidated
financial statements for and as of the end of the six months ended June 30, 1991
shall be deemed to be a reference to the parallel interim consolidated financial
statements for and as of the end of the second fiscal quarter of the fiscal year
beginning January 1, 1998, and the references in the last sentence of Section
4.05 of the Credit Agreement to June 30, 1991 and December 31, 1990 shall be
deemed to be references to June 30, 1998 and December 31, 1997, respectively;
and the reference in Section 4.10 of the Credit Agreement to December 31, 1990
shall be deemed to be a reference to December 31, 1998.
5. Effectiveness of Amendment. This Amendment shall be
effective from and after the Effective Date upon satisfaction of the conditions
precedent referred to herein.
6. Effect of Amendment. The Credit Agreement, as amended by
this Amendment, is in all respects ratified, approved and confirmed and shall,
as so amended, remain in full force and effect.
7. Governing Law. This Amendment shall be deemed to be a
contract under the laws of the State of New York and for all purposes shall be
governed by, construed and enforced in accordance with the laws of the State of
New York, without regard to principles of conflicts of law.
8. Counterparts. This Amendment may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
CURTISS-WRIGHT CORPORATION
By /s/ Gary Benschip
Title Treasurer
MELLON BANK, N.A., individually and as
Agent
By /s/ David N. Smith
Title Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Judy B. Land
Title Vice President
THE BANK OF NOVA SCOTIA
By /s/ Brian Allen
Title Senior Relationship Manager
Exhibit 4(iii)
THIRD AMENDMENT TO SHORT TERM CREDIT AGREEMENT
THIS THIRD AMENDMENT TO SHORT TERM CREDIT AGREEMENT, dated as of
October 23, 1998 (this "Amendment"), by and between CURTISS-WRIGHT CORPORATION,
a Delaware corporation (the "Borrower"), the lenders parties hereto from time to
time (the "Lenders", as defined further below), and MELLON BANK, N.A., a
national banking association, as agent for the Lenders hereunder (in such
capacity, together with its successors in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent are parties to a
Short Term Credit Agreement, dated as of October 29, 1994 (as amended, the
"Credit Agreement"), pursuant to which the Lenders have made Loans to the
Borrower; and
WHEREAS, the Borrower has requested the Lenders to extend the
Expiration Date to October 22, 1999; and
WHEREAS, the Lenders are willing to so extend the Expiration Date
upon the terms and conditions hereinafter set forth; and
WHEREAS, capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Extension of Expiration Date. The date "October 23, 1998"
appearing in the definition of the term "Expiration Date" in Section 1.01 of the
Credit Agreement is hereby amended to be "October 22, 1999".
2. Conditions Precedent. The effectiveness of this Amendment is
subject to the accuracy as of the date hereof of the representations and
warranties herein contained, to the performance by the Borrower of its
obligations to be performed hereunder on or before the date hereof and to the
satisfaction, on or before October 23, 1998 (the date of such satisfaction being
referred to herein as the "Effective Date"), of the following further conditions
precedent:
(a) Amendment. Each Lender shall have received a
counterpart of this Amendment, duly executed by the Borrower.
(b) Representations and Warranties; Events of Default
and Potential Defaults. The representations and warranties
contained in Section 3 hereof shall be true and correct on and
as of the Effective Date with the same effect as though made
on and as of such date. On the Effective Date, no Event of
Default and no Potential Default shall have occurred and be
continuing or shall exist or shall occur or exist after giving
effect to this Amendment and the transactions contemplated
hereby. By execution of this Amendment, the Borrower certifies
to the Lenders that (a) the representations and warranties set
forth in Section 3 hereof are true and correct on and as of
such date and (b) on such date no Event of Default or
Potential Default has occurred and is continuing or exists or
will occur or exist after giving effect to this Amendment and
the transactions contemplated hereby.
3. Representations and Warranties. The Borrower hereby represents
and warrants to the Agent and the Lenders that the representations and
warranties set forth in the Credit Agreement, as amended by this Amendment, are
true and correct on and as of the date hereof as if made on and as of the date
hereof, and that no Event of Default or Potential Default has occurred and is
continuing or exists on and as of the date hereof; provided, however, that, for
purposes of the foregoing, all references in the Credit Agreement to "this
Agreement" shall be deemed to be references to this Amendment and the Credit
Agreement as amended by this Amendment.
4. Effectiveness of Amendment. This Amendment shall be effective
from and after the Effective Date upon satisfaction of the conditions precedent
referred to herein.
5. Effect of Amendment. The Credit Agreement, as amended by this
Amendment, is in all respects ratified, approved and confirmed and shall, as so
amended, remain in full force and effect.
6. Governing Law. This Amendment shall be deemed to be a contract
under the laws of the State of New York and for all purposes shall be governed
by and construed and enforced in accordance with the laws of said State.
7. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
CURTISS-WRIGHT CORPORATION
By /s/ Gary Benschip
Title Treasurer
MELLON BANK, N.A., individually and as
Agent
By /s/ David N. Smith
Title Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Judy B. Land
Title Vice President
THE BANK OF NOVA SCOTIA
By /s/ Brian Allen
Title Senior Relationship Manager
<PAGE>
FOURTH AMENDMENT TO SHORT TERM CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO SHORT TERM CREDIT AGREEMENT, dated as
of December 28, 1998 (this "Amendment"), by and between CURTISS-WRIGHT
CORPORATION, a Delaware corporation (the "Borrower"), the lenders parties hereto
from time to time (the "Lenders", as defined further below), and MELLON BANK,
N.A., a national banking association, as agent for the Lenders hereunder (in
such capacity, together with its successors in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent are parties
to a Short Term Credit Agreement, dated as of October 29, 1994 (as amended, the
"Credit Agreement"), pursuant to which the Lenders have made Loans to the
Borrower; and
WHEREAS, the Borrower has requested the Lenders to amend
certain provisions of the Credit Agreement and to add certain terms thereto; and
WHEREAS, the Lenders are willing to amend the Credit Agreement
upon the terms and conditions hereinafter set forth; and
WHEREAS, capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Amendments to Credit Agreement. The Credit Agreement is
hereby amended as follows:
1.1 Section 1.01 is hereby amended as follows:
(i) The following definitions shall be added thereto
in the proper alphabetical order:
"As-Offered Rate" shall have the meaning set forth in
Section 2.04(a) hereof.
"Dollar Equivalent Amount" of any Revolving Credit
Loan shall mean (a) with respect to a Revolving Credit Loan denominated
in an Other Currency, an amount equal to the amount of Dollars that the
amount of such Other Currency (equal to the principal amount of such
Revolving Credit Loan) could purchase at 12:00 p.m., noon, Pittsburgh
time, on the date of determination, based upon the quoted spot rates of
the Agent, at which its applicable branch or office offers to exchange
Dollars for such currency in the foreign exchange market and (b) with
respect to a Revolving Credit Loan denominated in US Currency, an
amount in Dollars equal to the principal amount of such Revolving
Credit Loan.
"Other Currency" shall mean British Pounds, Swiss
Francs, Belgium Francs, French Francs, Italian Lira, German Marks,
Eurodollars, Singapore Dollars, Dutch Guilders, Denmark Krone and any
freely available currency that is freely transferable and freely
convertible into Dollars and requested by the Borrower and acceptable
to all of the Lenders and to the Agent.
"Subsidiary Borrower" shall mean Curtiss-Wright
Flight Systems, Inc., a Delaware corporation; Metal Improvement
Company, Inc., a Delaware corporation; Curtiss-Wright Flow Control
Corporation, a New York corporation; Curtiss-Wright Flow Control
Service Corporation, a Delaware corporation; Curtiss-Wright Foreign
Sales Corp., a Barbados corporation; Curtiss-Wright Flight Systems
Europe A/S, a Danish corporation. Subsidiary Borrower shall also
include (i) Curtiss-Wright Antriebstechnik GmbH, upon its formation as
a wholly owned subsidiary of Curtiss-Wright Corporation, and (ii) SIG
Antriebstechnik Ag, upon the consummation of the purchased of its
issued and outstanding capital stock by Curtiss-Wright Corporation or a
wholly owned subsidiary of Curtiss-Wright Corporation.
"US Currency" shall mean Dollars.
(ii) The following definitions set forth in Section 1.01 shall
be amended as follows:
"Loan Documents" shall be amended by adding ", the
Guaranty" in the first line thereof after "the Notes" and before "the
Transfer Supplements".
1.2 Article II is deleted in its entirety and Article II shall
be amended and restated, as attached hereto as Annex A.
1.3 A new Section 8.03 is hereby added:
"8.03. Judgment Currency. If any Lender or the Agent
obtains a judgment against the Borrower in an Other Currency, the
obligations of the Borrower in respect of any sum adjudged to be due to
such Lender or the Agent hereunder or under the Revolving Credit Notes
(the "Judgment Amount") shall be discharged only to the extent that, on
the Business Day following receipt by such Lender or the Agent of the
Judgment Amount in such Other Currency, such Lender or Agent, in
accordance with normal banking procedures, purchases Dollars with the
Judgment Amount in such Other Currency. If the amount of Dollars so
purchased is less than the amount of Dollars that could have been
purchased with the Judgment Amount on the date or dates the Judgment
Amount was originally due and owing to the Lenders or the Agent
hereunder or under the Revolving Credit Notes (the "Original Due Date")
(excluding the portion of the Judgment Amount which has accrued as a
result of the failure of the Borrower to pay the sum originally due
hereunder or under the Revolving Credit Notes when it was originally
due hereunder or under the Revolving Credit Notes) (the "Loss"), the
Borrower agrees, to indemnify such Lender or the Agent, as the case may
be, against the Loss, and if the amount of Dollars so purchased exceeds
the amount of Dollars that could have been purchased with the Judgment
Amount on the Original Due Date, such Lender or the Agent agrees to
remit such excess to the Borrower."
2. Conditions Precedent. The effectiveness of this Amendment
is subject to the accuracy as of the date hereof of the representations and
warranties herein contained, to the performance by the Borrower of its
obligations to be performed hereunder on or before the date hereof and to the
satisfaction, on or before December 28, 1998 (the date of such satisfaction
being referred to herein as the "Effective Date"), of the following further
conditions precedent:
(a) Amendment. Each Lender shall have received a
counterpart of this Amendment, duly executed by the Borrower.
(b) Representations and Warranties; Events of Default
and Potential Defaults. The representations and warranties
contained in Section 3 hereof shall be true and correct on and
as of the Effective Date with the same effect as though made
on and as of such date. On the Effective Date, no Event of
Default and no Potential Default shall have occurred and be
continuing or shall exist and shall occur or exist after
giving effect to this Amendment and the transactions
contemplated hereby. On the Effective Date, there shall have
been delivered to the Agent a certificate, dated the Effective
Date and signed on behalf of the Borrower by the President,
Treasurer or chief financial officer of the Borrower, that (a)
the representations and warranties set forth in Section 3
hereof are true and correct on and as of such date and (b) on
such date no Event of Default or Potential Default has
occurred and is continuing or exists or will occur or exist
after giving effect to this Amendment and the transactions
contemplated hereby.
(c) Proceedings and Incumbency. On the Effective
Date, there shall have been delivered to the Agent with an
original counterpart for each Lender a certificate, dated the
Effective Date and signed on behalf of the Borrower by the
Secretary or an Assistant Secretary of the Borrower,
certifying as to (i) true copies of the articles of
incorporation and bylaws of the Borrower as in effect on such
date (or a certificate of the Secretary or Assistant Secretary
of the Borrower to the effect that there have been no changes
in such articles of incorporation or bylaws from the forms
thereof previously delivered to the Agent and the Lenders or,
if there have been any such changes, attaching copies
thereof), (ii) true copies of all corporate action taken by
the Borrower relative to this Amendment and (iii) the names,
true signatures and incumbency of the officer or officers of
the Borrower authorized to execute and deliver this Amendment
and the other documents and instrument to be executed and
delivered under the Credit Agreement, as amended hereby. The
Agent shall be entitled to conclusively rely on such
certificate unless and until a later certificate revising the
prior certificate has been furnished to the Agent.
(d) Opinions of Counsel. On the Effective Date, there
shall have been delivered to the Agent written opinions, dated
the Effective Date, of the General Counsel to the Borrower in
form and substance satisfactory to the Agent and as to such
matters incident to the transactions contemplated hereby as
the Agent may reasonably request.
(e) Details, Proceedings and Documents. All legal
details and proceedings in connection with the transactions
contemplated by this Amendment shall be satisfactory to the
Lenders, and, on the Effective Date, the Agent shall have
received all such counterpart originals or certified or other
copies of such documents and proceedings in connection with
such transactions, in form and substance satisfactory to the
Agent and the Lenders, as the Agent or any Lender may
reasonably request.
3. Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders that the representations
and warranties set forth in the Credit Agreement, as amended by this Amendment,
are true and correct on and as of the date hereof as if made on and as of the
date hereof, and that no Event of Default or Potential Default has occurred and
is continuing or exists on and as of the date hereof; provided, however, that,
for purposes of the foregoing, all references in the Credit Agreement to "this
Agreement" shall be deemed to be references to this Amendment and the Credit
Agreement as amended by this Amendment.
4. Effectiveness of Amendment. This Amendment shall be
effective from and after the Effective Date upon satisfaction of the conditions
precedent referred to herein.
5. Effect of Amendment. The Credit Agreement, as amended by
this Amendment, is in all respects ratified, approved and confirmed and shall,
as so amended, remain in full force and effect.
6. Governing Law. This Amendment shall be deemed to be a
contract under the laws of the State of New York and for all purposes shall be
governed by, construed and enforced in accordance with the laws of the State of
New York, without regard to principles of conflicts of law.
7. Counterparts. This Amendment may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
CURTISS-WRIGHT CORPORATION
By /s/ Gary Benschip
Title Treasurer
MELLON BANK, N.A., individually and as
Agent
By /s/ David N. Smith
Title Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Judy B. Land
Title Vice President
THE BANK OF NOVA SCOTIA
By /s/ Brian Allen
Title Senior Relationship Manager
<PAGE>
CURTISS-WRIGHT CORPORATION
Subsidiary Note
$ Pittsburgh, Pennsylvania
-----------------
-----------,----------
FOR VALUE RECEIVED, the undersigned, [INSERT PROPER NAME OF
SUBSIDIARY] (the "Borrower"), promises to pay to the order of [INSERT PROPER
NAME OF THE LENDER] (the "Lender") on or before the Expiration Date (as defined
in the Agreement referred to below), and at such earlier dates as may be
required by such Agreement, the lesser of (i) the principal sum of
($ ) or (ii) the aggregate
- ---------------------------------- -------------------
unpaid principal amount of all Revolving Credit Loans made by the Lender to the
Borrower from time to time pursuant to the Agreement. The Borrower further
promises to pay to the order of the Lender interest on the unpaid principal
amount hereof from time to time outstanding at the rate or rates per annum
determined pursuant to the Agreement, payable on the dates set forth in the
Agreement.
This Note is one of the "Subsidiary Notes" as referred to in,
and is entitled to the benefits of, the Short Term Credit Agreement, dated as of
October 29, 1994, as amended, by and among the Borrower, the Lenders parties
thereto from time to time, the Issuing Banks from time to time thereunder, and
Mellon Bank, N.A., as Agent (as the same may be amended, modified or
supplemented from time to time, the "Agreement"), which among other things
provides for the acceleration of the maturity hereof upon the occurrence of
certain events and for prepayments in certain circumstances and upon certain
terms and conditions. Terms defined in the Agreement have the same meanings
herein.
The Borrower hereby expressly waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note and the
Agreement, and an action for amounts due hereunder or thereunder shall
immediately accrue.
This Note shall be governed by, construed and enforced in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
[INSERT PROPER NAME OF THE SUBSIDIARY]
By:
Name:
Title:
<PAGE>
Annex A
ARTICLE II
THE CREDITS
2.01. Revolving Credit Loans.
(a) Revolving Credit Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Lender, severally and not jointly, agrees (such agreement being herein
called such Lender's "Revolving Credit Commitment") to make loans in either US
Currency or in an Other Currency (the "Revolving Credit Loans") to the Borrower
at any time or from time to time on or after the date hereof and to but not
including the Expiration Date.
Subject to the terms and conditions herein, each Lender agrees
to make Loans to any Subsidiary Borrower at any time or from time to time on or
after the date hereof and to but not including the Expiration Date. The Loans
shall be made to such Subsidiary Borrower upon the completion of the following
conditions: (i) submit Standard Notice under Section 2.03 hereof, (ii)
Curtiss-Wright Corporation executes and delivers to the Agent a Guaranty and
Suretyship Agreement in favor of Lenders in the form as attached hereto as
Exhibit B (the "Guaranty"), and (iii) the obligation of such Subsidiary Borrower
to repay the unpaid principal amount of the Revolving Credit Loans made to it by
each Lender and to pay interest thereon shall be evidenced in part by promissory
notes from such Subsidiary Borrower to each Lender in substantially the form
attached hereto as Exhibit C (the "Subsidiary Borrower Notes"). In the event
that a Subsidiary Borrower becomes a Borrower under this Section 2.01(a), all
references to "Borrower" herein shall be deemed to include such Subsidiary
Borrower.
A Lender shall have no obligation to make any Revolving Credit
Loan to the extent that the aggregate principal amount of such Lender's Pro Rata
share of the total Revolving Credit Loans at any time outstanding would exceed
such Lender's Revolving Credit Committed Amount at such time. Each Lender's
"Revolving Credit Committed Amount" at any time shall be equal to the amount set
forth as its "Initial Revolving Credit Committed Amount" below its name on the
signature pages hereof, as either such amount may have been reduced under
Section 2.02 hereof at such time, and subject to transfer to another Lender as
provided in Section 8.14 hereof.
(b) Nature of Credit. Within the limits of time and amount set
forth in this Section 2.01, and subject to the provisions of this Agreement, the
Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder.
(c) Revolving Credit Notes. The obligation of the Borrower to
repay the unpaid principal amount of the Revolving Credit Loans made to it by
each Lender and to pay interest thereon shall be evidenced in part by (i)
promissory notes of the Borrower, one to each Lender, dated the Closing Date
(the "Borrower Notes") in substantially the form attached hereto as Exhibit A,
with the blanks appropriately filled, payable to the order of such Lender in a
face amount equal to such Lender's Initial Revolving Credit Committed Amount and
(ii) the Subsidiary Notes (the Borrower Notes and the Subsidiary Notes are
collectively the "Revolving Credit Notes").
(d) Maturity. To the extent not due and payable earlier, the
Revolving Credit Loans shall be due and payable on the Expiration Date.
2.02. Fees; Reduction of the Committed Amounts.
(a) Commitment Fee. The Borrower shall pay to the Agent for
the account of each Lender a commitment fee (the "Commitment Fee") equal to
0.125% per annum (based on a year of 365 or 366 days, as the case may be, and
actual days elapsed), for each day from and including the date hereof to but not
including the Expiration Date, on the amount (not less than zero) equal to (i)
such Lender's Revolving Credit Committed Amount on such day, minus (ii) the
aggregate principal amount of such Lender's Revolving Credit Loans outstanding
on such day. Such Commitment Fee shall be due and payable for the preceding
period for which such fee has not been paid (x) on each Regular Payment Date,
(y) on the date of each reduction of the Revolving Credit Committed Amount
(whether optional or mandatory) on the amount so reduced and (z) on the
Expiration Date.
(b) Reduction of the Revolving Credit Committed Amounts. The
Borrower may at any time or from time to time reduce Pro Rata the Revolving
Credit Committed Amounts of the Lenders to an aggregate amount (which may be
zero) not less than the sum of the unpaid principal amount of the Revolving
Credit Loans then outstanding plus the principal amount of all Revolving Credit
Loans not yet made as to which notice has been given by the Borrower under
Section 2.03 hereof. Any reduction of the Revolving Credit Committed Amounts
shall be in an aggregate amount which is a minimum amount of $5,000,000 and
integral multiples of $500,000 thereof. Reduction of the Revolving Credit
Committed Amounts shall be made by providing not less than 30 days' notice
(which notice shall be irrevocable) to such effect to the Agent. After the date
specified in such notice the Revolving Credit Commitment Fee shall be calculated
upon the Revolving Credit Committed Amounts as so reduced. Upon reduction of the
Revolving Credit Committed Amounts to zero, payment in full of all Loans, this
Agreement shall be terminated. After the date specified in such notice the
Commitment Fee shall be calculated upon the Revolving Credit Committed Amounts
as so reduced.
2.03. Making of Loans. Whenever the Borrower desires that the
Lenders make Revolving Credit Loans, the Borrower shall provide Standard Notice
to the Agent setting forth the following information:
(a) The currency, which shall be either US Currency or an
Other Currency, in which such Revolving Credit Loans are to be made;
(b) The party making the borrowing thereunder;
(c) The date, which shall be a Business Day, on which such
proposed Loans are to be made;
(d) The aggregate principal amount of such proposed Loans,
which shall be the sum of the principal amounts selected pursuant to
clause (e) of this Section 2.03;
(e) The interest rate Option or Options selected in accordance
with Section 2.04(a) hereof and the principal amounts selected in
accordance with Section 2.04(d) hereof of the Base Rate Portion and
each Funding Segment of the CD Rate Portion and the Euro-Rate Portion,
as the case may be, of such proposed Loans; and
(f) With respect to each such Funding Segment of such proposed
Loans, the Funding Period to apply to such Funding Segment, selected in
accordance with Section 2.04(c) hereof.
Standard Notice having been so provided, the Agent shall promptly notify each
Lender of the information contained therein and of the amount of such Lender's
Loan. Unless any applicable condition specified in Article V hereof has not been
satisfied, on the date specified in such Standard Notice each Lender shall make
the proceeds of its Loan available to the Agent (a) with respect to a Loan
denominated in US Currency, at the Agent's Office, no later than 12:00 o'clock
Noon, Pittsburgh time, in funds immediately available at such Office, and (b)
with respect to a Loan denominated in an Other Currency, at the Agent's London
Office, no later than 12:00 o'clock Noon, London time, in funds immediately
available at such London Office. The Agent will make the funds so received
available to the Borrower in funds immediately available at the Agent's Office
or London Office, as the case may be.
2.04. Interest Rates.
(a) Optional Bases of Borrowing. The unpaid principal amount
of the Loans shall bear interest for each day until due on one or more bases
selected by the Borrower from among the interest rate options set forth below.
Subject to the provisions of this Agreement the Borrower may select different
options to apply simultaneously to different Portions of the Loans and may
select different Funding Segments to apply simultaneously to different parts of
the CD Rate Portion or the Euro-Rate Portion of the Loans. The aggregate number
of Funding Segments applicable to the CD Rate Portion and the Euro-Rate Portion
of the Revolving Credit Loans at any time shall not exceed five.
(i) Base Rate Option: A rate per annum (computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days
elapsed) for each day equal to the Base Rate for such day plus the
Applicable Margin for such day. The "Base Rate" for any day shall mean
the greater of (A) the Prime Rate for such day or (B) 0.625% plus the
Federal Funds Effective Rate for such day, such interest rate to change
automatically from time to time effective as of the effective date of
each change in the Prime Rate or the Federal Funds Effective Rate.
(ii) CD Rate Option: A rate per annum (based on a year of 360
days and actual days elapsed) for each day equal to the CD Rate for
such day plus the Applicable Margin for such day. "CD Rate" for any day
shall mean for each Funding Segment of the CD Rate Portion
corresponding to a proposed or existing CD Rate Funding Period the rate
per annum determined by the Agent by adding:
(A) the rate per annum obtained by dividing (the
resulting quotient to be rounded upward to the nearest 1/100
of 1%) (1) the rate of interest (which shall be the same for
each day in such CD Rate Funding Period) determined in good
faith by the Agent in accordance with its usual procedures
(which determination shall be conclusive absent manifest
error) to be the average of the secondary market bid rates at
or about 11:00 a.m., Eastern time, on the first day of such CD
Rate Funding Period by dealers of recognized standing in
negotiable certificates of deposit for the purchase at face
value of negotiable certificates of deposit of major money
center banks for delivery on such day in amounts comparable to
such Funding Segment and having maturities comparable to such
CD Rate Funding Period by (2) a number equal to 1.00 minus the
CD Rate Reserve Percentage for such CD Rate Funding Period
plus
(B) the Assessment Rate.
The "CD Rate" may also be expressed by the following formula:
[average of the secondary market ]
[bid rates determined by the Agent ]
CD Rate = [per subsection (A)(1) ] + Assessment Rate
[1.00 - CD Rate Reserve Percentage]
"CD Rate Reserve Percentage" for any day and for any CD Rate
Funding Period shall mean the percentage (expressed as a decimal,
rounded upward to the nearest 1/100 of 1%), as determined in good faith
by the Agent (which determination shall be conclusive absent manifest
error), which is in effect on such day as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) representing
the maximum reserve requirement (including without limitation
supplemental, marginal and emergency reserve requirements) for a member
bank of such System in respect of nonpersonal time deposits in Dollars
in the United States having a maturity comparable to such CD Rate
Funding Period. The CD Rate shall be adjusted automatically as of the
effective date of each change in the CD Rate Reserve Percentage. The CD
Rate Option shall be calculated in accordance with the foregoing
whether or not any Lender is actually required to hold such reserves in
connection with its funding hereof or, if required to hold such
reserves, is required to hold reserves at the "CD Rate Reserve
Percentage" as herein defined.
"Assessment Rate" for any day shall mean the rate per annum
(rounded upward to the nearest 1/100 of 1%) determined in good faith by
the Agent in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the maximum rate per
annum payable by a depository institution insured by the Federal
Deposit Insurance Corporation (or any successor) for such day as an
assessment for insurance on Dollar time deposits, exclusive of any
credit that is or may be allowed against such assessment on account of
assessment payments made or to be made by such depository institution.
The CD Rate shall be adjusted automatically as of the effective date of
each change in the Assessment Rate. The CD Rate Option shall be
calculated in accordance with the foregoing whether or not any Lender
is actually required to pay Federal Deposit Insurance Corporation
assessments or, if required to pay such assessments, is required to pay
such assessments at the "Assessment Rate" as herein defined.
The Agent shall give prompt notice to the Borrower and to the
Lenders of the CD Rate determined or adjusted in accordance with the
definition of CD Rate, which determination or adjustment shall be
conclusive absent manifest error.
(iii) Euro-Rate Option: A rate per annum (based on a year of
365 days and actual days elapsed) for each day equal to the Euro-Rate
for such day plus the Applicable Margin for such day. "Euro-Rate" for
any day, as used herein, shall mean for each Funding Segment of the
Euro-Rate Portion corresponding to a proposed or existing Euro-Rate
Funding Period the rate per annum determined by the Agent by dividing
(the resulting quotient to be rounded upward to the nearest 1/100 of
1%) (A) the rate of interest (which shall be the same for each day in
such Euro-Rate Funding Period) determined in good faith by the Agent in
accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the rates per
annum for deposits in US Currency or any Other Currency, as applicable,
offered to major money center banks in the London interbank market at
approximately 11:00 a.m., London time, two London Business Days prior
to the first day of such Euro-Rate Funding Period for delivery on the
first day of such Euro-Rate Funding Period in amounts comparable to
such Funding Segment and having maturities comparable to such Funding
Period by (B) a number equal to
1.00 minus the Euro-Rate Reserve Percentage.
The "Euro-Rate" may also be expressed by the following
formula:
[average of the rates offered to major money ]
[center banks in the London interbank market]
Euro-Rate = [determined by the Agent per subsection (A) ]
[1.00 - Euro-Rate Reserve Percentage ]
"Euro-Rate Reserve Percentage" for any day shall mean the
percentage (expressed as a decimal, rounded upward to the nearest 1/100
of 1%), as determined in good faith by the Agent (which determination
shall be conclusive absent manifest error), which is in effect on such
day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) representing the maximum reserve requirement
(including, without limitation, supplemental, marginal and emergency
reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency liabilities") of a member bank in such
System. The Euro-Rate shall be adjusted automatically as of the
effective date of each change in the Euro-Rate Reserve Percentage. The
Euro-Rate Option shall be calculated in accordance with the foregoing
whether or not any Lender is actually required to hold reserves in
connection with its eurocurrency funding or, if required to hold such
reserves, is required to hold reserves at the "Euro-Rate Reserve
Percentage" as herein defined.
The Agent shall give prompt notice to the Borrower and to the
Lenders of the Euro-Rate determined or adjusted in accordance with the
definition of the Euro-Rate, which determination or adjustment shall be
conclusive absent manifest error.
(iv) As-Offered Rate Option. A rate per annum (computed on the
basis of a year of 360 days and actual days elapsed) for each day equal
to the "As-Offered Rate" for such day. The "As-Offered Rate" for any
day shall mean such rate per annum as may be offered by the Lenders in
their sole discretion to the Borrower from December 30, 1998 to
December 31, 1998 (the "As-Offered Rate Funding Period") for such
Funding Segment as Lenders shall offer in their sole discretion, which
rate shall remain fixed for the duration of such As-Offered Rate
Funding Period. Without limiting the discretion of Lender or the
generality of the foregoing, the As-Offered Rate (if offered) shall
reflect Lender's fully reserved cost of funds and shall include a
margin of at least 0.625%.
(b) Applicable Margin. The "Applicable Margin" for each
interest rate Option for any day shall
mean the percentage set forth below:
Interest Rate Option Applicable Margin
-------------------- -----------------
Base Rate Option 0
CD Rate Option 0.625%
Euro Rate Option 0.625%
As-Offered Option 0
(c) Funding Periods. At any time when the Borrower shall
select, convert to or renew the CD Rate Option or the Euro-Rate Option to apply
to any part of the Loans, the Borrower shall specify one or more periods (the
"Funding Periods") during which each such Option shall apply, such Funding
Periods being as set forth below:
Interest Rate Option Available Funding Periods
CD Rate Option
30, 60, 90, 180 days or such
longer period as may be
offered by all of the Lenders
in their sole discretion ("CD
Rate Funding Period"); and
Euro-Rate Option
One, two, three, six months or
one year or such longer period
as may be offered by all of
the Lenders in their sole
discretion ("Euro-Rate Funding
Period");
As-Offered
December 30, 1998 to December
31, 1998 ("As-Offered Funding
Period");
provided, that:
(i) Each CD Rate Funding Period which would otherwise end on a
day which is not a Business Day shall be extended to the next
succeeding Business Day;
(ii) Each Euro-Rate Funding Period shall begin on a London
Business Day, and the term "month", when used in connection with a
Euro-Rate Funding Period, shall be construed in accordance with
prevailing practices in the interbank eurodollar market at the
commencement of such Euro-Rate Funding Period, as determined in good
faith by the Agent (which determination shall be conclusive);
(iii) The Borrower may not select a Funding Period that would
end after the Expiration Date; and
(iv) The Borrower shall, in selecting any Funding Period,
allow for scheduled mandatory payments and foreseeable mandatory
prepayments of the Loans.
(d) Transactional Amounts. Every selection of, conversion
from, conversion to or renewal of an interest rate Option and every payment or
prepayment of any Loans shall be in a principal amount such that after giving
effect thereto the aggregate principal amount of the Base Rate Portion of the
Revolving Credit Loans, or the aggregate principal amount of each Funding
Segment of the CD Rate Portion or the Euro-Rate Portion of the Revolving Credit
Loans, shall be as set forth below:
- --------------------------------- ---------------------------------------------
Portion or Funding Segment Allowable Aggregate Principal Amounts
- --------------------------------- --------------- -----------------------------
- --------------------------------- ---------------------------------------------
Base Rate Portion an integral multiple of 500,000 of US Currency
or the Other Currency denominated by the
Borrower
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
Each Funding Segment of the an integral multiple
CD Rate Portion of 500,000 of US Currency or
the Other Currency denominated
by the Borrower
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
Each Funding Segment of the an integral multiple of 1,000,000 of US
Euro-Rate Portion Currency or the Other Currency denominated by
the Borrower
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
Each Funding Segment of the an integral multiple of 500,000 of US
As-Offered Portion Currency or the Other Currency
denominated by the Borrower
- --------------------------------- ---------------------------------------------
(e) CD Rate or Euro-Rate Unascertainable; Impracticability.
If
(i) on any date on which a CD Rate or a Euro-Rate would
otherwise be set the Agent (in the case of clauses (A) or (B) below) or
any Lender (in the case of clause (C) below) shall have determined in
good faith (which determination shall be conclusive absent manifest
error) that:
(A) adequate and reasonable means do not exist for
ascertaining such CD Rate or Euro-Rate,
(B) a contingency has occurred which materially and
adversely affects the secondary market for negotiable
certificates of deposit maintained by dealers of recognized
standing or the interbank eurodollar market, as the case may
be, or
(C) the effective cost to such Lender of funding a
proposed Funding Segment of the CD Rate Portion or the
Euro-Rate Portion from a Corresponding Source of Funds shall
exceed the CD Rate or the Euro-Rate, as the case may be,
applicable to such Funding Segment, or
(ii) at any time any Lender shall have determined in good
faith (which determination shall be conclusive absent manifest error)
that the making, maintenance or funding of any part of the CD Rate
Portion or the Euro-Rate Portion has been made impracticable or
unlawful by compliance by such Lender or a Notional Euro-Rate Funding
Office in good faith with any Law or guideline or interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof or with any request or
directive of any such Governmental Authority (whether or not having the
force of law);
then, and in any such event, the Agent or such Lender, as the case may be, may
notify the Borrower of such determination (and any Lender giving such notice
shall notify the Agent). Upon such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given), the obligation
of each of the Lenders to allow the Borrower to select, convert to or renew the
CD Rate Option or Euro-Rate Option, as the case may be, shall be suspended until
the Agent or such Lender, as the case may be, shall have later notified the
Borrower (and any Lender giving such notice shall notify the Agent) of the
Agent's or such Lender's determination in good faith (which determination shall
be conclusive absent manifest error) that the circumstance giving rise to such
previous determination no longer exist.
If any Lender notifies the Borrower of a determination under
subsection (ii) of this Section 2.04(e), the CD Rate Portion or the Euro-Rate
Portion, as the case may be, of the Loans of such Lender (the "Affected Lender")
shall automatically be converted to the Base Rate Option as of the date
specified in such notice (and accrued interest thereon shall be due and payable
on such date).
If at the time the Agent or a Lender makes a determination
under subsection (i) or (ii) of this Section 2.04(e) the Borrower previously has
notified the Agent that it wishes to select, convert to or renew the CD Rate
Option or the Euro-Rate Option, as the case may be, with respect to any proposed
Loans but such Loans have not yet been made, such notification shall be deemed
to provide for selection of, conversion to or renewal of the Base Rate Option
instead of the CD Rate Option or the Euro-Rate Option, as the case may be, with
respect to such Loans or, in the case of a determination by a Lender, such Loans
of such Lender.
2.05. Conversion or Renewal of Interest Rate Options.
(a) Conversion or Renewal. Subject to the provisions of
Sections 2.09(c) and 2.10(b) hereof, unless an Event of Default shall have
occurred and be continuing, the Borrower may convert any part of its Loans from
any interest rate Option or Options to one or more different interest rate
Options and may renew the CD Rate Option or the Euro-Rate Option as to any
Funding Segment of the CD Rate Portion or the Euro-Rate Portion:
(i) At any time with respect to conversion from the Base Rate
Option; or
(ii) At the expiration of any Funding Period with respect to
conversions from the As-Offered Option or conversions from or renewals
of the CD Rate Option or the Euro-Rate Option, as the case may be, as
to the Funding Segment corresponding to such expiring Funding Period.
Whenever the Borrower desires to convert or renew any interest rate Option or
Options, the Borrower shall provide to the Agent Standard Notice setting forth
the following information:
(w) The date, which shall be a Business Day, on which the
proposed conversion or renewal is to be made;
(x) The principal amounts selected in accordance with Section
2.04(d) hereof of the Base Rate Portion and each Funding Segment of the
As-Offered Rate Option, the CD Rate Portion and the Euro-Rate Portion,
as the case may be, to be converted from or renewed;
(y) The interest rate Option or Options selected in accordance
with Section 2.04(a) hereof and the principal amounts selected in
accordance with Section 2.04(d) hereof of the Base Rate Portion and
each Funding Segment of the As-Offered Rate Option, the CD Rate Portion
and the Euro-Rate Portion, as the case may be, to be converted; and
(z) With respect to each Funding Segment to be converted to or
renewed, the Funding Period selected in accordance with Section 2.04(c)
hereof to apply to such Funding Segment.
Standard Notice having been so provided, after the date specified in such
Standard Notice, interest shall be calculated upon the principal amount of the
Loans as so converted or renewed. Interest on the principal amount of any part
of the Loans converted or renewed (automatically or otherwise) shall be due and
payable on the conversion or renewal date.
(b) Failure to Convert or Renew. Absent due notice from the
Borrower of conversion or renewal in the circumstances described in Section
2.05(a)(ii) hereof, any part of the As-Offered Rate Portion, the CD Rate Portion
or Euro-Rate Portion for which such notice is not received shall be converted
automatically to the Base Rate Option on the last day of the expiring Funding
Period; provided, however, that if any Euro-Rate Portion is in an Other
Currency, such portion shall be renewed automatically for one month on the last
day of the expiring Funding Period.
2.06. Prepayments Generally. Whenever the Borrower desires or
is required to prepay any part of its Loans, it shall provide Standard Notice to
the Agent setting forth the following information:
(a) The currency, which shall be either US Currency or an
Other Currency, in which such prepayment is to be made;
(b) The date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(c) The total principal amount of such prepayment, which shall
be the sum of the principal amounts selected pursuant to clause (c) of
this Section 2.06; and
(d) The principal amounts selected in accordance with Section
2.04(d) hereof of the Base Rate Portion and each part of each Funding
Segment of the As-Offered Rate Option, the CD Rate Portion and the
Euro-Rate Portion, as the case may be, to be prepaid.
Standard Notice having been so provided, on the date specified in such Standard
Notice, the principal amounts of the Base Rate Portion and each Funding Segment
of the As-Offered Rate Option, the CD Rate Portion and the Euro-Rate Portion
specified in such notice, together with interest on each such principal amount
to such date, shall be due and payable.
2.07. Optional Prepayments. The Borrower shall have the right
at its option from time to time to prepay its Loans in whole or part without
premium or penalty (subject, however, to Section 2.10(b) hereof):
(a) At any time with respect to any part of the Base Rate
Portion; or
(b) At the expiration of any Funding Period with respect to
prepayment of the As-Offered Rate Option, the CD Rate Portion or the
Euro-Rate Portion, as the case may be, with respect to any part of the
Funding Segment corresponding to such expiring Funding Period.
Any such prepayment shall be made in accordance with Section 2.06 hereof.
2.08. Interest Payment Dates. Interest on the Base Rate
Portion shall be due and payable on each Regular Payment Date. Interest on each
Funding Segment of the As-Offered Portion shall be due and payable on the last
day of the corresponding As-Offered Funding Period. Interest on each Funding
Segment of the CD Rate Portion shall be due and payable on the last day of the
corresponding CD Rate Funding Period and, if such CD Rate Funding Period is
longer than 90 days, also every 90th day during such CD Rate Funding Period.
Interest on each Funding Segment of the Euro-Rate Portion shall be due and
payable on the last day of the corresponding Euro-Rate Funding Period and, if
such Euro-Rate Funding Period is longer than three months, also every third
month during such Funding Period. After maturity of any part of the Loans (by
acceleration or otherwise), interest on such part of the Loans shall be due and
payable on demand.
2.09. Pro Rata Treatment; Payments Generally.
(a) Pro Rata Treatment. Each borrowing and conversion and
renewal of interest rate Options hereunder shall be made, and all payments made
in respect of principal, interest and Revolving Credit Commitment Fees due from
the Borrower hereunder or under the Notes shall be applied, Pro Rata from and to
each Lender, except for payments of interest involving an Affected Lender as
provided in Section 2.04(e) hereof, payments to a Lender under Sections 2.10 or
2.12 hereof. The failure of any Lender to make a Loan shall not relieve any
other Lender of its obligation to lend hereunder, but neither the Agent nor any
Lender shall be responsible for the failure of any other Lender to make a Loan.
(b) Payments Generally. The parties agree that (i) all
payments and prepayments of principal, interest and other amounts in connection
with Loans denominated in US Currency and all fees shall be made in US Currency
and (ii) all payments of principal, interest and other amounts (other than fees)
in connection with Revolving Credit Loans denominated in any Other Currency
shall be made in such Other Currency. All payments and prepayments to be made in
respect of principal, interest, fees or other amounts due from the Borrower in
US Currency shall be payable by 12:00 o'clock noon, Pittsburgh time, on the day
when due without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and an action therefor shall immediately
accrue. Except for payments under Sections 2.10 and 8.06, such payments shall be
made to the Agent at its Office in US Currency in funds immediately available at
such Office without setoff, counterclaim or other deduction of any nature. All
payments and prepayments to be made in respect of principal, interest fees or
other amounts due from the Borrower in any Other Currency shall be payable by
12:00 o'clock noon, London time, on the day when due without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
and an action therefor shall immediately accrue. Except for payments under
Sections 2.10 and 8.06, such payments shall be made to the Agent at its London
Office in such Other Currency in funds immediately available at such Office
without setoff, counterclaim or other deduction of any nature. Any payment or
prepayment received (i) in US Currency by the Agent or such Lender after 12:00
o'clock Noon, Pittsburgh time, on any day shall be deemed to have been received
on the next succeeding Business Day and (ii) in any Other Currency by the agent
or such Lender after 12:00 o'clock noon, London time, on any day shall be deemed
to have been received on the next succeeding Business Day. The Agent shall
distribute to the Lenders all such payments received by it from the Borrower as
promptly as practicable after receipt by the Agent.
(c) Default Interest. To the extent permitted by law, from and
after the date on which an Event of Default shall have occurred hereunder, and
so long as such Event of Default continues to exist, principal, interest, fees,
indemnity, expenses or any other amounts due from the Borrower hereunder or
under any other Loan Document, shall bear interest for each day (before and
after judgment), payable on demand, at a rate per annum (in each case based on a
year of 360 days and actual days elapsed) which for each day shall be equal to
the following:
(i) In the case of any part of the As-Offered Portion, the CD
Rate Portion or Euro-Rate Portion of any Loans, (A) until the end of
the applicable then-current Funding Period at a rate per annum 2% above
the rate otherwise applicable to such part, and (B) thereafter in
accordance with the following clause (ii); and
(ii) In the case of any other amount due from the Borrower
hereunder or under any Loan Document, 2% above the then-current Base
Rate Option.
To the extent permitted by law, interest accrued under this Section 2.09 on any
amount shall compound on a day-by-day basis, and hence shall be added daily to
the overdue amount to which such interest relates.
2.10. Additional Compensation in Certain Circumstances.
(a) Increased Costs or Reduced Return Resulting From Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law or guideline
or interpretation or application thereof by any Governmental Authority charged
with the interpretation or administration thereof or compliance with any request
or directive of any Governmental Authority (whether or not having the force of
law) now existing or hereafter adopted:
(i) subjects any Lender or any Notional Euro-Rate Funding
Office to any tax or changes the basis of taxation with respect to this
Agreement, the Notes, the Loans or payments by the Borrower of
principal, interest, commitment fees or other amounts due from the
Borrower hereunder or under the Notes (except for taxes on the overall
net income or overall gross receipts of such Lender or such Notional
Euro-Rate Funding Office imposed by the jurisdictions (federal, state
and local) in which the Lender's principal office or Notional Euro-Rate
Funding Office is located),
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or commitments
to extend credit extended by, assets (funded or contingent) of,
deposits with or for the account of, other acquisitions of funds by,
such Lender or any Notional Euro-Rate Funding Office (other than
requirements expressly included herein in the determination of the CD
Rate or the Euro-Rate, as the case may be, hereunder),
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or
contingent) of, or credits or commitments to extend credit extended by,
any Lender or any Notional Euro-Rate Funding Office, or (B) otherwise
applicable to the obligations of any Lender or any Notional Euro-Rate
Funding Office under this Agreement, or
(iv) imposes upon any Lender or any Notional Euro-Rate Funding
Office any other condition or expense with respect to this Agreement,
the Notes or its making, maintenance or funding of any Loan or any
security therefor,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Lender, any Notional Euro-Rate Funding office or, in the case of clause (iii)
hereof, any Person controlling a Lender, with respect to this Agreement, the
Notes or the making, maintenance or funding of any Loan (or, in the case of any
capital adequacy or similar requirement, to have the effect of reducing the rate
of return on such Lender's or controlling Person's capital, taking into
consideration such Lender's or controlling Person's policies with respect to
capital adequacy) by an amount which such Lender deems to be material (such
Lender being deemed for this purpose to have made, maintained or funded each
Funding Segment of the CD Rate Portion and the Euro-Rate Portion from a
Corresponding Source of Funds), such Lender may from time to time notify the
Borrower of the amount determined in good faith (using any averaging and
attribution methods) by such Lender (which determination shall be conclusive) to
be necessary to compensate such Lender or such Notional Euro-Rate Funding Office
for such increase, reduction or imposition. Such amount shall be due and payable
by the Borrower to such Lender five Business Days after such notice is given,
together with an amount equal to interest on such amount from the date two
Business Days after the date demanded until such due date at the Base Rate
Option. A certificate by such Lender as to the amount due and payable under this
Section 2.10(a) from time to time and the method of calculating such amount
shall be conclusive absent manifest error.
(b) Funding Breakage. In addition to all other amounts payable
hereunder, if and to the extent for any reason any part of any Funding Segment
of any As-Offered Portion, CD Rate Portion or Euro-Rate Portion of the Loans
becomes due (by acceleration or otherwise), or is paid, prepaid or converted to
another interest rate Option (whether or not such payment, prepayment or
conversion is mandatory or automatic and whether or not such payment or
prepayment is then due), on a day other than the last day of the corresponding
Funding Period (the date such amount so becomes due, or is so paid, prepaid or
converted, being referred to as the "Funding Breakage Date"), the Borrower shall
pay each Lender an amount ("Funding Breakage Indemnity") determined by such
Lender as follows:
(i) first, calculate the following amount: (A) the principal
amount of such Funding Segment of the Loans owing to such Lender which
so became due, or which was so paid, prepaid or converted, times (B)
the greater of (x) zero or (y) the rate of interest applicable to such
principal amount on the Funding Breakage Date minus the Applicable
Funding Rate as of the Funding Breakage Date, times (C) the number of
days from and including the Funding Breakage Date to but not including
the last day of such Funding Period, times (D) 1/360;
(ii) the Funding Breakage Indemnity to be paid by the Borrower
to such Lender shall be the amount equal to the present value as of the
Funding Breakage Date (discounted at the Applicable Funding Rate as of
such Funding Breakage Date, and calculated on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed) of the
amount described in the preceding clause (i) (which amount described in
the preceding clause (i) is assumed for purposes of such present value
calculation to be payable on the last day of the corresponding Funding
Period).
For purposes of this Section, the term "Applicable Funding Rate" shall mean (i)
in the case of any calculation of a Funding Breakage Indemnity payment with
respect to a particular Funding Segment for which the corresponding Funding
Period was originally one year or longer, the Treasury Rate, and (ii) in the
case of any calculation of a Funding Breakage Indemnity payment with respect to
a Funding Segment for which the corresponding Funding Period was originally less
than one year, the Euro-Rate.
Such Funding Breakage Indemnity shall be due and payable on
demand, and each Lender shall, upon making such demand, notify the Agent of the
amount so demanded. In addition, the Borrower shall, on the due date for payment
of any Funding Breakage Indemnity, pay to such Lender an additional amount equal
to interest on such Funding Breakage Indemnity from the Funding Breakage Date to
but not including such due date at the Base Rate Option applicable to the Loans
(calculated on the basis of a year of 360 days and actual days elapsed). The
amount payable to each Lender under this Section 2.10(b) shall be determined in
good faith by such Lender, and such determination shall be conclusive absent
manifest error.
2.11. HLT Classification. In the event that after the date
hereof the Loans hereunder are classified as a "highly leveraged transaction"
(an "HLT Classification") by any Governmental Authority having jurisdiction over
any Lender, such Lender may in its discretion from time to time so notify the
Agent, and upon receiving such notice the Agent shall promptly give notice of
such event to the Borrower and the Lenders. In such event the parties hereto
shall commence negotiations to agree on revised Revolving Credit Commitment
Fees, interest rates and Applicable Margins hereunder. If the parties hereto
fail to agree on such matters in their respective absolute discretion within 60
days of the notice given by the Agent referred to above, then the Required
Lenders may at any time or from time to time thereafter direct the Agent to (a)
by ten Business Days' notice to the Borrower, terminate the Revolving Credit
Commitments, and the Revolving Credit Commitments shall thereupon terminate, or
(b) by ten Business Days' notice to the Borrower, declare the Loans, together
with (without duplication) accrued interest thereon, to be, and the Loans shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived, and an
action therefor shall immediately accrue. The Lenders acknowledge that an HLT
Classification is not an Event of Default or Potential Default hereunder.
2.12. Taxes.
(a) Payments Net of Taxes. All payments made by the Borrower
under this Agreement or any other Loan Document shall be made free and clear of,
and without reduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, and all liabilities with respect
thereto, excluding
(i) in the case of the Agent and each Lender, income or
franchise taxes imposed on the Agent or such Lender by the jurisdiction
under the laws of which the Agent or such Lender is organized or any
political subdivision or taxing authority thereof or therein or as a
result of a connection between such Lender and any jurisdiction other
than a connection resulting solely from this Agreement and the
transactions contemplated hereby, and
(ii) in the case of each Lender, income or franchise taxes
imposed by any jurisdiction in which such Lender's lending offices
which make or book Loans are located or any political subdivision or
taxing authority thereof or therein
(all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld or deducted from any amounts payable to the Agent or any Lender under
this Agreement or any other Loan Document, the Borrower shall pay the relevant
amount of such Taxes and the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
other Loan Documents. Whenever any Taxes are paid by the Borrower with respect
to payments made in connection with this Agreement or any other Loan Document,
as promptly as possible thereafter, the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof.
(b) Indemnity. The Borrower hereby indemnifies the Agent and
each of the Lenders for the full amount of such Taxes and any present or future
claims, liabilities or losses with respect to or resulting from any omission to
pay or delay in paying such Taxes (including any incremental Taxes, interest or
penalties that may become payable by the Agent or such Lender as a result of any
failure to pay such Taxes but excluding any claims, liabilities or losses with
respect to or arising from omissions to pay or delays in payment attributable to
the act or omission of the Agent or any Lender), whether or not such Taxes were
correctly or legally asserted. Such indemnification shall be made within 30 days
from the date such Lender or the Agent, as the case may be, makes written demand
therefor.
(c) Withholding and Backup Withholding. Each Lender that is
incorporated or organized under the laws of any jurisdiction other than the
United States or any state thereof agrees that, on or prior to the date any
payment is due to be made to it hereunder or under any other Loan Document, it
will furnish to the Borrower and the Agent
(i) two valid, duly completed copies of United States Internal
Revenue Service Form 4224 or United States Internal Revenue Form 1001
or successor applicable form, as the case may be, certifying in each
case that such Lender is entitled to receive payments under this
Agreement and the other Loan Documents without deduction or withholding
of any United States federal income taxes and
(ii) a valid, duly completed Internal Revenue Service Form W-8
or W-9 or successor applicable form, as the case may be, to establish
an exemption from United States backup withholding tax.
Each Lender which so delivers to the Borrower and the Agent a Form 1001 or 4224
and Form W-8 or W-9, or successor applicable forms agrees to deliver to the
Borrower and the Agent two further copies of the said Form 1001 or 4224 and Form
W-8 or W-9, or successor applicable forms, or other manner of certification, as
the case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from withholding tax, or after the occurrence of any event
requiring a change in the most recent form previously delivered by it, and such
extensions or renewals thereof as may reasonably be requested by the Borrower
and the Agent, certifying in the case of a Form 1001 or Form 4224 that such
Lender is entitled to receive payments under this Agreement or any other Loan
Document without deduction or withholding of any United States federal income
taxes, unless in any such cases an event (including any changes in Law) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such letter or form with respect
to it and such Lender advises the Borrower and the Agent that it is not capable
of receiving payments without any deduction or withholding of United States
federal income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
2.13. Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. Each Lender shall have the right from
time to time, prospectively or retrospectively, without notice to the Borrower,
to deem any branch, subsidiary or affiliate of such Lender to have made,
maintained or funded any part of the Euro-Rate Portion at any time. Any branch,
subsidiary or affiliate so deemed shall be known as a "Notional Euro-Rate
Funding office." Such Lender shall deem any part of the Euro-Rate Portion of the
Loans or the funding therefor to have been transferred to a different Notional
Euro-Rate Funding Office if such transfer would avoid or cure an event or
condition described in Section 2.04(e)(ii) hereof or would lessen compensation
payable by the Borrower under Section 2.10(a) hereof, and if such Lender
determines in its sole discretion that such transfer would be practicable and
would not have a Material Adverse Effect on such part of the Loans, such Lender
or any Notional Euro-Rate Funding office (it being assumed for purposes of such
determination that each part of the Euro-Rate Portion is actually made or
maintained by or funded through the corresponding Notional Euro-Rate Funding
Office). Notional Euro-Rate Funding Offices may be selected by such Lender
without regard to such Lender's actual methods of making, maintaining or funding
Loans or any sources of funding actually used by or available to such Lender.
(b) Actual Funding. Each Lender shall have the right from time
to time to make or maintain any part of the Euro-Rate Portion by arranging for a
branch, subsidiary or affiliate of such Lender to make or maintain such part of
the Euro-Rate Portion. Such Lender shall have the right to (i) hold any
applicable Note payable to its order for the benefit and account of such branch,
subsidiary or affiliate or (ii) request the Borrower to issue one or more
substitute promissory notes in the principal amount of such Euro-Rate Portion,
in substantially the form attached hereto as Exhibit A, with the blanks
appropriately filled, payable to such branch, subsidiary or affiliate and with
appropriate changes reflecting that the holder thereof is not obligated to make
any additional Loans to the Borrower; provided, that if a Lender requests the
Borrower to issue one or more substitute promissory notes in accordance with
clause (ii) above, the amount of the Note payable to such Lender shall
automatically be reduced accordingly. The Borrower agrees to comply promptly
with any request under subsection (ii) of this Section 2.13(b). If any Lender
causes a branch, subsidiary or affiliate to make or maintain any part of the
Euro-Rate Portion hereunder, all terms and conditions of this Agreement shall,
except where the context clearly requires otherwise, be applicable to such part
of the Euro-Rate Portion and to any note payable to the order of such branch,
subsidiary or affiliate to the same extent as if such part of the Euro-Rate
Portion were made or maintained and such note were a Revolving Credit Note
payable to such Lender's order.
2.14. Extension of Expiration Date. (a) Extension of
Expiration Date. The Revolving Credit Commitment of the Lenders shall expire and
shall be automatically reduced to zero on the Expiration Date. Not later than 45
days and not sooner than 60 days immediately preceding the Expiration Date then
in effect, if the Borrower wishes the Lenders to extend the Expiration Date for
an additional period (not to exceed 300 days) beyond the Expiration Date then in
effect, the Borrower shall so advise the Agent in writing (an "Extension
Request"). The Agent shall thereupon promptly notify each of the Lenders of such
Extension Request of the Borrower. Within 20 days of its receipt of such
Extension Request from the Borrower, the Agent shall notify the Borrower as to
whether the Lenders have agreed so to extend the Expiration Date and, if so, as
to any additional or different terms on which such extension is conditioned (the
determination of the Lenders as to whether to agree to such extension and upon
what terms being in the sole, absolute and unconditional discretion of each
Lender). If such notice contains any such additional or different terms, the
Borrower shall advise the Agent in writing within 5 days next following receipt
of such notice from the Agent as to whether the Borrower agrees to such terms.
If the Borrower notifies the Agent that it so agrees, or if the Agent's notice
that the Lenders have agreed to extend the Expiration Date contains no such
additional or different terms, the Expiration Date shall automatically be
extended for the additional period requested by the Borrower. If the Agent fails
to notify the Borrower within 20 days of the Agent's receipt of any Extension
Request from the Borrower as specified above as to whether the Lenders have
agreed to such Extension Request, the Lenders shall be deemed not to have agreed
to such Extension Request.
(b) If (i) any Lender notifies the Agent in writing that it
will not consent to such Extension Request or (ii) all of the Lenders have not
in writing expressly consented to any such Extension Request as provided in the
preceding paragraph, then the Agent shall so notify the Borrower and the
Borrower, at its option, may replace each Lender which has not agreed to such
Extension Request (a "Nonextending Lender") with another commercial lending
institution reasonably satisfactory to the Agent (a "Replacement Lender") by
giving notice of the name of such Replacement Lender to the Agent. Unless the
Agent shall object to the identity of such proposed Replacement Lender prior to
the date 5 days prior to the then current Expiration Date, upon notice from the
Agent, each Nonextending Lender shall promptly (but in no event later than the
then current Expiration Date) assign all of its interests hereunder to such
Replacement Lender in accordance with the provisions of Section 8.14(c) hereof.
If, immediately prior to the Expiration Date some, but not all, of the Lenders
have agreed to such Extension Request, and each Nonextending Lender has not been
replaced by the Borrower in accordance with the terms of this Section 2.14(b),
the Expiration Date shall be extended in accordance with such Extension Request;
provided, however, that on the original Expiration Date (as such date may have
been previously extended), the total Revolving Credit Commitment shall be
irrevocably reduced by an amount equal to the Commitment of each Nonextending
Lender. If all Lenders consent to any such Extension Request (or, if any
Nonextending Lenders are replaced in accordance with this Section), then as of
5:00 pm. New York time on the then current Expiration Date, such Expiration Date
shall be deemed to have been extended for the period requested by the Borrower
in the related Extension Request.
2.15. Multicurrency Payments.
(a) Dollar Equivalent Amounts.
(i) Calculation of Dollar Equivalent Amounts. Upon each making
and upon each payment of a Revolving Credit Loan denominated in an Other
Currency, the Agent shall calculate the Dollar Equivalent Amount of such
Revolving Credit Loan, as the case may be, and shall provide written
confirmation to the Lenders.
(ii) Recalculation of Dollar Equivalent Amounts. In
determining the Dollar Equivalent Amount of the aggregate Revolving Credit
Extensions of Credit of the Lenders, the Agent may use the respective Dollar
Equivalent Amounts for the Revolving Credit Loans pursuant to paragraph (i) of
this subsection (a), unless such Dollar Equivalent Amount so calculated exceeds
90% of the Revolving Credit Commitment Amount, in which case the Agent shall
recalculate the Dollar Equivalent Amount of the Revolving Credit Loans
outstanding no less frequently than once each week. The Agent may recalculate
the Dollar Equivalent Amounts of each of the Revolving Credit Loans as
frequently as it determines to do so in its discretion, provided, that such
recalculation shall be made for all of the Revolving Credit Loans no less
frequently than once each week during any period when the aggregate Dollar
Equivalent Amount of the aggregate Credit Exposure of the Lenders exceeds 90% of
the Revolving Credit Commitment Amount.
(b) Unavailability.
(i) General. Subject to paragraph (ii) of this subsection (b),
if, in the reasonable judgment of the Agent, any Other Currency ceases to be
available and freely tradable in the London foreign exchange market, such Other
Currency shall cease to be an Other Currency. The Agent shall give prompt notice
to the Borrower and the Lenders of such event. In the event that (A) the Agent
has determined that an Other Currency has ceased to be available and freely
tradable in the London foreign exchange market and (B) the Agent has determined
in good faith that such Other Currency is not otherwise available to the
Borrower, then, on the date any Revolving Credit Loan denominated in such Other
Currency would become due under the terms of this Agreement (other than as a
result of an optional prepayment under Section 2.07 or of the acceleration of
such Revolving Credit Loans under Section 8.02), the Borrower shall repay such
Revolving Credit Loans by paying to each Lender an amount in Dollars equal to
the amount determined in good faith by such Lender (which determination shall be
conclusive absent manifest error) necessary to compensate such Lender for the
principal of and accrued interest on such Revolving Credit Loans and any
additional cost, expense or loss incurred by such Lender as a result of such
Revolving Credit Loans being repaid in Dollars (rather than in the denominated
Other Currency).
(ii) European Monetary Union.
A. Definitions. In this Section 2.15 and Article II
and in each other provision of this Agreement to which reference is made in this
Section 2.15 expressly or impliedly, the following terms have the meanings given
to them in this Section 2.15:
"commencement of the third stage of EMU" means the
date of commencement of the third stage of EMU (at the date of
this Agreement expected to be January 1, 1999) or the date on
which circumstances arise which (in the opinion of the
Administrative Agent) have substantially the same effect and
result in substantially the same consequences as commencement
of the third stage of EMU as contemplated by the Treaty on
European Union.
"EMU" means economic and monetary union as
contemplated in the Treaty on European Union.
"EMU legislation" means legislative measures of the
European Council for the introduction of, changeover to or
operation of a single or unified European currency (whether
known as the euro or otherwise), being in part the
implementation of the third stage of EMU;
"euro" means the single currency of participating
member states of the European Union;
"euro unit" means the currency unit of the euro;
"national currency unit" means the unit of currency
(other than a euro unit) of a participating member state;
"participating member state" means each state so
described in any EMU legislation; and
"Treaty on European Union" means the Treaty of Rome
of March 25, 1957, as amended by the Single European Act 1986
and the Maastricht Treaty (which was signed at Maastricht on
February 7, 1992, and came into force on November 1, 1993), as
amended from time to time.
B. Effectiveness of Provisions. The provisions of
paragraphs C to G below (inclusive) shall be effective at and from the
commencement of the third stage of EMU, provided, that if and to the extent that
any such provision relates to any state (or the currency of such state) that is
not a participating member state on the commencement of the third stage of EMU,
such provision shall become effective in relation to such state (and the
currency of such state) at and from the date on which such state becomes a
participating member state.
C. Redenomination and Alternative Currencies. Each
obligation under this Agreement of a party to this Agreement which has been
denominated in the national currency unit of a participating member state shall
be redenominated into the euro unit in accordance with EMU legislation,
provided, that if and to the extent that any EMU legislation provides that
following the commencement of the third stage of EMU an amount denominated
either in the euro or in the national currency unit of a participating member
state and payable within that participating member state by crediting an account
of the creditor can be paid by the debtor either in the euro unit or in that
national currency unit, each party to this Agreement shall be entitled to pay or
repay any such amount either in the euro unit or such national currency unit.
D. Business Days. With respect to any amount
denominated or to be denominated in the euro or a national currency unit, any
reference to a "Business Day" shall be construed as a reference to a day (other
than a Saturday or Sunday) on which banks are generally open for business in
London and Pittsburgh, Pennsylvania and/or such principal financial center or
centers in such participating member state or states as the Agent may from time
to time denominate for this purpose.
E. Payments by the Agent Generally. With respect to
the payment of any amount denominated in the euro or in a national currency
unit, the Agent shall not be liable to the Borrower or any of the Lenders in any
way whatsoever for any delay, or the consequences of any delay, in the crediting
to any account of any amount required by this Agreement to be paid by the Agent
if the Agent shall have taken all relevant steps to achieve, on the date
required by this Agreement, the payment of such amount in immediately available,
freely transferable, cleared funds (in the euro unit or, as the case may be, in
a national currency unit) to the account with the bank in the principal
financial center in the participating member state which the Borrower shall have
specified for such purpose. In this paragraph E, "all relevant steps" means all
such steps as may be prescribed from time to time by the regulations or
operating procedures of such clearing or settlement system as the Agent may from
time to time determine for the purpose of clearing or settling payments of euro.
F. Rounding and Other Consequential Changes. Without
prejudice and in addition to any method of conversion or rounding prescribed by
any EMU legislation and without prejudice to the respective liabilities for
indebtedness of the Borrower to the Lenders and the Lenders to the Borrower
under or pursuant to this Agreement:
(i) each reference in this Agreement to a minimum
amount (or an integral multiple thereof) in a national currency unit to
be paid to or by the Agent shall be replaced by a reference to such
reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Agent may from time to time specify;
and
(ii) except as expressly provided in this Section
2.15, each provision of this Agreement shall be subject to such
reasonable changes of construction as the Agent may from time to time
specify to be necessary or appropriate to reflect the introduction of
or changeover to the euro in participating member states.
G. Increased Costs. The Borrower shall from time to
time, at the request of the Agent, pay to the Agent for the account of each
Lender the amount of any cost or increased cost incurred by, or of any reduction
in any amount payable to or in the effective return on its capital to, or of
interest or other return foregone by, such Lender or any holding company of such
Lender as a result of the introduction of, changeover to or operation of the
euro in any participating member state.
[GRAPHIC OMITTED]
==========================
CURTISS-WRIGHT CORPORATION 98
--------------------------
ANNUAL REPORT
<PAGE>
Curtiss-Wright Corporation, headquartered in Lyndhurst, N.J., is a diversified
multinational manufacturing and service concern that designs, manufactures and
overhauls precision components and systems and provides highly engineered
services to the aerospace, defense, automotive, shipbuilding, oil,
petrochemical, agricultural equipment, power generation, railroad, metalworking,
and fire and rescue industries. The Company employs approximately 2,050 people.
Operations are conducted through five manufacturing facilities (four domestic
and one in Switzerland), 36 metal treatment service facilities located in North
America and Europe, and four component overhaul facilities located in Florida,
North Carolina, Denmark and Singapore.
Contents
1 | Industry Focus
2 | Financial Highlights
3 | Letter to Stockholders
6 | Review of Operations
8 | At a Glance
Products
Services
Benefits
10 | Acquisitions
12 | Product Development
14 | New Markets
16 | Quarterly Results of Operations (Unaudited)
16 | Consolidated Selected Financial Data (Unaudited)
16 | Forward-Looking Statements
17 | Management's Discussion and Analysis of Financial
Condition and Results of Operations
21 | Report of the Corporation
21 | Report of Independent Accountants
22 | Consolidated Financial Statements
26 | Notes to Consolidated Financial Statements
38 | Corporate Directory and Information
<PAGE>
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INDUSTRY FOCUS
- --------------
industry focus
In 1998, the aerospace industry faced record shipments of new commercial
aircraft while struggling to cope with the production strains created by the
rapid ramp-up of production volumes. Looming in the background were order
cancellations and delivery delays resulting from the economic disruptions
occurring in the Pacific Rim that threatened to dampen production levels in the
near future. The current delivery schedule for aircraft with capacities
exceeding 100 seats calls for still higher levels in 1999, with some declines
expected beginning in the year 2000. These out-year deliveries, while lower, are
still expected to be at profitable levels for the industry, and the overall
downturn is not expected to be as severe as the one that began in 1991.
Throughout 1998, the larger airlines continued to leverage their
purchasing power, generating large orders to meet their long-term requirements
at the lowest possible prices from Airbus and Boeing. Driving the industry's
performance continues to be the airlines, which, in general, remain profitable.
The economic outlook appears favorable; the economies of North America and
Europe appear healthy, while the Asian market has suffered a severe downturn.
Some feel that the worst of the Asian crisis is behind us and a recovery, while
gradual, may have begun. The current unknown is the impact of any downturn in
South America that may result from the recent disturbances in Brazil.
While new aircraft production tends to produce demand surges in the
industry, a stabilizing force in the commercial area is the repair and overhaul
market. The total repair market is expected to grow at a long-term rate of 2--3%
per year. This growth reflects the outlook for passenger miles, which drive
maintenance needs. In the short term, repair market growth may exceed this rate
as the average age of aircraft increases; however, as older planes are replaced
for economic, noise and pollution regulation reasons, growth levels will return
to long-term expectations. For third-party maintenance providers such as
Curtiss-Wright, growth should exceed that of the total market as increased
outsourcing by airlines continues. Although airlines still perform most overhaul
and repair activities themselves, many appear to be refocusing their attention
on the basic services they provide and are beginning to accept that third-party
vendors can more effectively meet their maintenance requirements.
Military aircraft production is currently at low levels. Procurement for
existing models is, for the most part, limited to purchases by foreign
governments. Procurement by the United States Air Force is at minimal levels,
with most spending related to development activities. On a positive note,
production of the F-22 (Raptor) and V-22 (Osprey) has been initiated and should
ramp up to higher levels in the foreseeable future.
To summarize the state of the aerospace industry, those markets in which
Curtiss-Wright participates are expected to remain at healthy levels overall.
Commercial business will see some decline but is projected to maintain adequate
levels. Overhaul and repair activities will provide a stable base with growth
opportunities in increased outsourcing, and additional upside benefits are
expected from the increased activity on the military programs.
The stable revenue base that Curtiss-Wright has developed as a supplier of
valves and services to the worldwide nuclear power industry became even more
solid with a 1998 acquisition. It increases our participation in new
construction programs in South Korea and Taiwan, where projects underway have
progressed without disruption. We continue to pursue business in China, where an
aggressive new construction program for nuclear power plants is planned to meet
the current power capacity shortage. Outside the nuclear power market, the
United States proposed build schedule for nuclear submarines and aircraft
carriers, for which we are a valve supplier, is the strongest in recent years.
1 | Curtiss-Wright Corporation and Subsidiaries
<PAGE>
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
(In thousands, except per share data) 1998 1997 1996
==============================================
<S> <C> <C> <C>
Performance:
Sales $249,413 $ 219,395 $ 170,536
Earnings before interest, taxes, depreciation and amortization 57,726 51,383 33,462
Net earnings 29,053 27,885 16,109
Diluted earnings per common share 2.82 2.71 1.58
Return on sales 11.6% 12.7% 9.4%
Return on assets 9.1% 10.1% 6.3%
Return on average stockholders' equity 13.4% 14.4% 9.1%
Research and development costs:
Corporation sponsored 1,346 1,877 997
Customer sponsored 7,669 12,403 15,248
New orders 232,217 259,260 171,649
Backlog at year-end 198,297 149,201 109,336
-------------------------------------------------
Year-End Financial Position:
Working capital $ 130,763 $ 132,751 $ 115,417
Current ratio 2.9 to 1 4.4 to 1 3.7 to 1
Total assets $ 352,740 $ 284,708 $ 267,164
Stockholders' equity $ 229,593 $ 204,853 $ 183,363
Stockholders' equity per common share $ 22.53 $ 20.13 $ 18.04
-------------------------------------------------
Other Year-End Data:
Depreciation and amortization $ 9,661 $ 9,097 $ 8,946
Capital expenditures $ 10,642 $ 11,231 $ 14,156
Shares of common stock outstanding 10,190,790 10,175,140 10,162,206
Number of stockholders 3,926 4,142 4,719
Number of employees 2,052 1,884 1,738
-------------------------------------------------
Dividends per Common Share $ .52 $ .505 $ .50
=================================================
</TABLE>
[GRAPHIC OMITTED]
[The following table was depicted as a line graph in the printed material.]
Sales/Backlog
(in thousands)
94 95 96 97 98
Sales $249,413
Backlog $198,297
[GRAPHIC OMITTED]
[The following table was depicted as a line graph in the printed material.]
Operating Income/Net Earnings
(in thousands)
94 95 96 97 98
Operating Income $36,347
Net Earnings $29,053
[GRAPHIC OMITTED]
[The following table was depicted as a line graph in the printed material.]
Return on Equity
(percentage)
94 95 96 97 98
13.4%
Curtiss-Wright Corporation and Subsidiaries | 2
<PAGE>
- -----------------------
LETTERS TO STOCKHOLDERS
- -----------------------
FELLOW STOCKHOLDERS:
In 1998 we continued to implement our strategies for balanced growth that we
outlined in last year's annual report:
| Growing our positions in the aftermarket segments of our businesses
| Increasing our role as a service provider
| Diversifying our customer base
| Diversifying the industries we serve
| Continuing our efforts to globalize the Company
These strategies are designed to enable us to achieve our financial objectives
of 15% average annual revenue growth and 12% average return on capital. While in
1998 Curtiss-Wright posted a 14% increase in sales, for the last two years our
sales increased at a compound annual rate of 21%. Our return on average capital
(excluding cash and short-term investments) in 1998 was 17%. We have set our
growth objectives at what we believe to be realistically attainable levels for
Curtiss-Wright to strive for on a long-term basis while maintaining good profit
margins. Achievement of these objectives will result in growing value for
Curtiss-Wright's stockholders. Throughout 1998, we pursued our strategies
through acquisitions, new product development, and market expansion, each of
which is discussed in greater detail on the following pages.
Our Acquisition Program Moved Ahead in 1998
In 1998, Curtiss-Wright completed three strategic acquisitions, adding to each
of our business operations. Focused acquisitions are an important part of our
strategy for growth. We have established programs for each of our businesses and
are actively pursuing acquisition candidates. An important non-financial
ingredient we look for, not only in our evaluation of acquisition candidates but
also as a parameter in selecting investments for internal development programs,
is that they make us a better competitor and supplier to our customers.
Among the benefits we look for in acquisitions are technologies that will
expand our existing capabilities. In many areas in which we do business we want
to control a broader scope of the systems we supply. We also want to add to our
existing base of products and services to expand the value we can provide
existing customers. Our customer relationships are excellent, and we seek to
build upon this strength.
We completed three acquisitions in 1998, and because of our strong balance
sheet and cash flow, we still ended the year in a solid position to finance
additional acquisitions. Each acquisition is accretive to earnings and will
contribute to our long-term financial growth. With a focus on new products, new
markets and regional expansion, enhanced by our acquisition program, each of our
business segments has entered 1999 better positioned for long-term success.
Growing Our Precision Manufacturing Products & Services Business
Curtiss-Wright has been a provider of shot-peen forming services to put the
curvature in wing skins for most Airbus commercial aircraft. This has resulted
in an 18-year relationship with British Aerospace (BAe), which supplies wings to
the Airbus consortium. This long-standing relationship was continued in 1998
with a long-term contract extension under which we will continue to provide
forming and other services for Airbus aircraft, including the new A340-600. In
order to meet the increased demand for these services, we are in the process of
constructing a new 170,000-square-foot facility on land provided by BAe that is
adjacent to their plant in the United Kingdom. The facility, which will replace
our current, smaller facility, is scheduled to become operational toward the end
of 1999. Current Airbus projections indicate aircraft deliveries increasing in
1999 as well as in the year 2000.
In addition to our new facility, we have been growing our Precision
Manufacturing Products & Services (PMPS) business through the addition of other
new facilities in recent years. Our expansion
3 | Curtiss-Wright Corporation and Subsidiaries
<PAGE>
has included three new operations in Europe in the last two years, as well as
another in the United States. In addition, Alpha Heat Treaters, in York,
Pennsylvania, was acquired in April of 1998. Our high level of activity reflects
the growth opportunities we see for this business. We plan to grow not only
through the addition of locations but also by an expansion of the services we
provide.
In 1999, the performance of PMPS will include its newly opened facilities,
expanded production schedules at Airbus, and new contracts to form wing skins on
the Boeing 717 aircraft and a large military transport plane. The segment will
also continue to benefit from acquisitions such as the 1998 purchase of Alpha
Heat Treaters. Alpha gives Curtiss-Wright a presence in an important Northeast
industrial corridor and contributed to our growth in 1998. As a consolidator of
heat-treating facilities in industrial areas around the world, and a greenfield
developer of shot-peening services worldwide, we intend to continue gaining
strategic, local presence in geographically diversified industrial and aerospace
markets.
We Have Reduced Our Exposure to Commercial Aircraft Production Cycles
While Boeing is an important customer and source of business, Curtiss-Wright is
not overly dependent on the company. We have taken actions, including
acquisitions, that continue to grow our actuation and control products segments
beyond servicing Boeing.
During this past year, we signed an agreement with GEC-Marconi to develop
a trailing edge flap drive actuation system for the Ayres Loadmaster LM2000
cargo utility aircraft. We continued production work on the V-22 Vertical
Take-Off and Landing craft, which began initial low-rate production in 1999. We
are preparing for initial production of the F-22 Advanced Tactical Fighter. Of
the three systems we have on the F-22, the leading edge flap system has
completed the development and testing stages. The other programs for the main
and side weapons bay doors are well along in final testing.
Overhaul and repair operations are also poised to grow in 1999. During
1998, we expanded our business with airlines and cargo haulers, which will
contribute to next year's revenues. Additionally, we will be relocating our
overhaul and repair business from our Shelby, North Carolina facility to one
dedicated solely to that operation.
Supplementing our internal growth efforts, the Actuation and Control
Products & Services segment will benefit from the establishment of
Curtiss-Wright Drive Technology (CWDT), which was created with the acquisition
of SIG Drive Technology AG in December. CWDT designs and manufactures drives and
suspension systems for armored military vehicles and tilting systems for
high-speed railway car applications. This new operation, which will remain
headquartered in Neuhausen am Rheinfall, Switzerland, gives us access to
technology that we will adapt to certain of our aerospace products. CWDT does
not currently sell into the North American market. We view this as a longer-term
opportunity to gain acceptance of CWDT's products and technology in the North
American marketplace.
In light of the anticipated delivery slowdowns at Boeing, and with our new
military programs not expected to achieve full production levels for a few
years, we were faced with a period where activity was not adequate to support
two manufacturing facilities for our Actuation and Control business. This
resulted in our decision to consolidate the OEM manufacturing operations carried
out at our Fairfield, New Jersey facility into our plant in Shelby, North
Carolina. Restructuring expenses affected our 1998 financial performance by
approximately $500,000 after tax, and additional relocation expenses estimated
at $1,600,000 after tax will be incurred in 1999. The consolidation, expected to
be completed in the third quarter of 1999, will result in longer-term cost
efficiencies as our manufacturing capacity will better match our forecasted
requirements.
Addition of Enertech to Our Flow Control Products & Services Business Segment
Our 1998 acquisition of Enertech fits into our Flow Control Products & Services
group. Enertech, headquartered in Brea, California, expands our product line and
gives us services we are now able to offer to a greater variety of customers.
Enertech will help us diversify our Flow Control operations, not merely beyond
the nuclear containment area of ships and power plants, but further into
commercial
Curtiss-Wright Corporation and Subsidiaries | 4
<PAGE>
and industrial applications. We also expect that the combination of Enertech's
sales and marketing organization with our existing personnel will strengthen our
aftermarket products position and result in an invigorated approach to current
and new markets. Finally, we believe Enertech's outstanding service organization
will help us build a presence in the growing on-site service market for
maintenance and nuclear utility repair operations, which are becoming
increasingly important components of the domestic power business.
Internal development programs have opened the door to other new
applications. We will be looking to expand our leakless valve technology and use
alternative materials for nonnuclear Navy and chemical/petrochemical plant
applications. The unique nature of our designs lends itself to extended life
while requiring little maintenance. We have also recently supplied titanium
valves to electrical power plants for seawater applications.
Conclusion
In 1998, we strengthened our Company, further diversified our operations, and
improved our position for long-term growth. As we move forward, we understand
the challenges and tasks we must address to capitalize on 1998's achievements.
We further recognize the market's current valuation of our stock as
disappointing and have initiated a stock repurchase program to demonstrate our
belief that Curtiss-Wright is undervalued. We believe that achieving our goals,
in 1999 and in future years, will result in a growing recognition of the value
of this company and greater value for our stockholders.
Nineteen ninety-nine will mark Curtiss-Wright's 70th year of operation. We
are looking forward to this milestone, and to adding to the Company's
reputation, history and legacy. Still, our work is far from complete. As we
continue this journey we thank our employees and stockholders for their
continued support.
Sincerely,
/s/ David Lasky
David Lasky
Chairman and President
February 2, 1999
[PHOTO OMITTED]
5 | Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------
REVIEW OF OPERATIONS
- --------------------
FINANCIAL PERFORMANCE OVERVIEW:
Net income for 1998 of $29.1 million, or $2.82 per diluted share, was 4.2%
greater than 1997 earnings of $27.9 million or $2.71 per share. Included in 1998
results were insurance recoveries as well as the costs of consolidation related
to the moving of manufacturing operations from our facility in Fairfield, New
Jersey to Shelby, North Carolina. The net after-tax impact on 1998 net income of
these items was a benefit of $1.3 million, or $.13 per share. Earnings in 1997
included gains on the sale of property of $2.0 million or $0.20 per share.
Absent these items, earnings in 1998 were $27.8 million or $2.69 per share, an
increase of 7.3% over 1997 earnings of $25.9 million, or $2.51 per share.
Sales in 1998 of $249.4 million represented an increase of 13.7% over 1997
sales of $219.4 million. Sales in 1998 benefited from the acquisitions of Alpha
Heat Treaters on April 30th and Enertech on July 31st. Additionally, greater
production levels for commercial aircraft on the part of our customers increased
the demand for our products and services.
We made significant progress on two of our long-term business initiatives
in 1998. These included the reduction of our reliance on the military as a
source of revenues and the expansion of our service operations. Growth in
commercial operations in 1998, combined with a general decline in military
procurement, resulted in more than 83% of our 1998 revenues coming from
commercial sources and less than 17% from the military. Despite a military
component of our newly acquired Curtiss-Wright Drive Technology and our steady
pursuit of defense business, we expect military sales as a percentage of our
total business to be maintained at a relatively low level. The mix of our sales
in 1998 between service and manufacturing operations maintained about the same
relationship experienced in 1997. Our service operations represented 64% of our
total sales versus 36% for manufacturing.
CURTISS-WRIGHT CORPORATION
[GRAPHICS OMITTED]
[The following tables were depicted as pie charts in the printed material.]
Sales by Business Segment
Precision Manufacturing 43%
Actuation & Control 42%
Flow Control 15%
Sales by Industry
Commercial Aerospace 56%
Other 10%
Power Generation 10%
Automotive 6%
Marine 6%
Military Aerospace 5%
Transportation 3%
Agriculture 1%
Construction & Mining 1%
Oil & Petroleum 1%
Rescue 1%
Precision Manufacturing Products & Services
Precision Manufacturing Products & Services (PMPS) experienced its fifth
consecutive year of improvements in revenues and operating income. This was
accomplished through gaining new customers, extending the range of products
serviced and geographical expansion. Particular strength in 1998 came from
advanced applications for metal-treating services for aerospace customers
worldwide. We not only provide shot-peen forming services for wings of
commercial, business and military aircraft but also furnish metal-treating
services to jet engine manufacturers which have product going on all new
aircraft being produced. We expect our aerospace-related business in this
segment to continue to increase in 1999 over 1998 levels.
Operating results for 1998 were affected slightly by the start-up costs
associated with four new facilities that opened in 1997 and 1998. These service
locations are now fully operational and are expected to have improved
performance in 1999, as marketing and sales efforts are carried out to increase
their customer base and sales levels.
In order to increase capacity to meet growing regional demands, we will be
relocating three of our operations to larger facilities in 1999. The metal
treatment centers affected are our operations in the Chester, U.K. area,
Belleville, Michigan, which services the Detroit region, and Bayonne, France.
These expansions supplement the relocation in 1998 to larger quarters of our
Lynn, Massachusetts facility. Although the increased capacity will enhance our
ability to meet customer demands and take on additional business, there will be
some expenses incurred in 1999 related to these facility relocations.
Curtiss-Wright Corporation and Subsidiaries |6
<PAGE>
Having facilities in North America and Europe and servicing a broad
industrial base, Curtiss-Wright has been able to participate in the general
economic expansions that occurred in those regions. Over the long term there has
been a reduction in the dependency of PMPS on the aerospace sector as new
facilities and customers have been added. This expansion has provided the
opportunity for considerable growth for this segment. Additional markets where
new facilities can be established continue to open up, as the number of
applications for our services and the acceptance of the benefits of our
treatment processes broaden.
Actuation and Control Products & Services
Actuation and Control Products & Services (ACPS) accounted for 42% of total
revenues in 1998 but produced unsatisfactory returns. Throughout the year,
manufacturing activities were driven largely by the continued ramp-up to meet
Boeing's production schedules. We continued to meet our delivery obligations
despite the ramp-up. Although Boeing was a primary growth driver for this
segment, our overall diversification efforts have expanded our other business
areas.
Our aerospace component and overhaul operation continued to generate sales
growth in 1998. We have increased the number of component parts on which we are
qualified, and that number now approximates 9,700, compared to about 7,000 at
the end of 1997. In 1999, as part of our program to improve our manufacturing
efficiencies, we will be moving the repair and overhaul activities performed at
the Shelby, North Carolina facility to its own dedicated location. The new
facility will be near our current location, and the continuity of the labor
force is expected to remain intact.
In the fourth quarter of 1998 we began to consolidate our Fairfield, New
Jersey manufacturing operations into our facility in Shelby, North Carolina.
Administration of our military programs, design engineering functions and
testing will remain in New Jersey. The consolidation was targeted to align our
capacity requirements with manufacturing activity levels. Thus we will improve
our manufacturing efficiencies from current inadequate levels and allow
Curtiss-Wright to be more competitive in obtaining future business. A charge of
$0.5 million after taxes associated with the consolidation was made in the last
quarter of 1998. In addition, relocation expenses are being recognized as they
are incurred during the moving process. In 1999, expenses associated with the
consolidation are expected to total approximately $1.6 million after taxes. The
consolidation is scheduled to be completed in the third quarter of 1999.
[GRAPHICS OMITTED]
[The following tables were depicted as pie charts in the printed material.]
Actuation and Controls
1998 Sales Balance
Aftermarket 52%
OEM 48%
Flow Control Products & Services
In 1998, commercial revenues in this segment exceeded those from the military
sector. This was largely attributable to the acquisition of Enertech in the
third quarter. Aside from this factor, commercial business increases were
associated with our greater involvement in foreign nuclear plant construction
and higher revenues related to upgrade programs at domestic nuclear power
facilities. Our success in 1998 on upgrade programs reflects our ability to
develop better solutions for our customers. Their decisions to replace already
installed and fully operational valves were driven by the improved efficiencies
that our products provided. Success in this area not only benefits current
performance, but increases the installed base of our valves, leading to future
spare part and replacement sales.
Sales to the nuclear power generation industry in the United States
provides stability to our sales and profits, allowing the Company to address the
new construction market for nuclear plants overseas and the expansion of our
domestic service organization. The combined service offering of Enertech and our
existing services will establish a strong base from which we can increase our
presence in this growing market. Investments have been made both in building our
service organization and in further developing diagnostic systems to provide
engineering, inspection and testing services to the nuclear community.
Military sales were lower in 1998 as compared to the prior year because of
the absence in 1998 of special programs related to improved valve designs and
the utilization of new materials for the U.S. Navy, which benefited sales in
1997. Nevertheless, in 1998 we continued to enjoy considerable success in the
U.S. Navy's nuclear program, as evidenced by winning a significant number of
contract awards. The forecasted build rate for new submarines and aircraft
carriers is encouraging. We expect to be successful in continuing to obtain the
contracts we pursue on these programs, enhancing an already solid business base.
In addition, we intend to build upon our base in naval sales by expanding beyond
products for nuclear applications to become a supplier for other shipboard
requirements where our valve technology and manufacturing capabilities are
applicable.
[GRAPHICS OMITTED]
[The following tables were depicted as pie charts in the printed material.]
Flow Control
1998 Sales Balance
Commercial 62%
Military 38%
7 | Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- -----------
AT A GLANCE
- -----------
Precision Manufacturing Products & Services
Products and Services
Among the approximately 50 services provided are:
| Aluminum/Nonferrous Treating
| Annealing/Stress Relieving
| Austempering/Brazing
| Blast Cleaning
| Carbonitriding/Nitriding
| Carbon Restoration/Carburizing
| Cryogenic Treatments
| Deburring
| Edge, Vibratory & Superfinishing
| Engineering & Field Services
| Fabrication of Machinery, Tooling, Parts & Supplies
| Fatigue & Physical Testing
| Flame, Induction & Precipitation Hardening
| Marquenching/Normalizing
| Nondestructive Testing
| Painting/Plating
| Shot-Peening
| Shot-Peen Forming
| Straightening
| Texturizing
| Vacuum Treatments
| Valve Reed Manufacturing
Major Markets
| Aerospace Manufacturers
| Automotive Manufacturers
| Metalworking Industries
| Oil and Gas Drilling/Exploration
| Power Generation
| Jet Engine Manufacturers
| Agricultural Equipment
| Transportation
| Construction and Mining
Actuation and Control Products & Services
| Control and Actuation
Components and Systems
| Aerospace Overhaul Services
| Hydropneumatic Suspension Systems
| Electromechanical Drives and Systems
| Electrohydraulic Drives and Systems
| Rescue Tools
| Aerospace Manufacturers
| Commercial Airlines
| Military Air Forces
| Military Vehicle Manufacturers
| Railway Car Manufacturers
| Diesel Engine Manufacturers
| Rescue Tool Industry
Flow Control Products & Services
| Military & Commercial Nuclear/Nonnuclear Valves (globe, gate, control,
safety, solenoid and relief)
| Fluid Power Products and Systems
| Valve Overhaul and Repair
| Engineering, Inspection and Testing Services
| U.S. Navy Propulsion Systems
| U.S. Navy Shipbuilding
| Nuclear Power Plants
| Automotive Manufacturers
| Petrochemical/Chemical Industry
| Entertainment Industry
PRODUCTS
[PHOTO OMITTED]
Every product we manufacture at Curtiss-Wright meets with the highest level of
quality and performance requirements. This is demanded by the applications for
which they are used.
We supply the actuators for controlling wing flaps on commercial and
military aircraft where dependability in harsh weather conditions and
temperature ranges is a necessity. We will be providing the systems for
operating the side and main bay weapons doors on the F-22 Raptor, which in order
to maintain its stealth qualities must open, deploy weapons and close in a time
requirement measured in seconds. This must all be accomplished under the
stresses generated in high-speed flight.
Our flow control valves are used in nuclear environments where the
integrity of performance of the product must be unquestioned. As with valves
used in other applications, performance in controlling and monitoring flows is
important. In addition, our products must be able to operate with absolutely no
tolerance for leakage. Our technology and designs fulfill these requirements.
The quality and performance requirements of our products reflect the
engineering and manufacturing capabilities of Curtiss-Wright. Our development,
design and testing capabilities and ability to manufacture to exact
specifications with very narrow tolerances allow us to maintain the high
standards demanded and required by our customers.
SERVICES
[PHOTO OMITTED]
Services represent an increasing proportion of our total operations and provide
fertile opportunities for future growth for the Company.
Our metal treatment operation is the largest service business in which we
are involved. We provide a broad variety of metal treating services. Our success
in this business is attributable to processes that improve our customers'
products and are delivered at a reasonable cost. Working with our customers, we
identify areas where our processes can enhance their products or provide
solutions to existing problems. Our ability to maintain these services is
demonstrated by the fact that we have a satisfied customer base numbering in
excess of 5,000.
In 1992 we began to expand our manufacturing of actuation components and
systems for aerospace OEM customers to provide maintenance, repair and overhaul
(MRO) services on not only our products, but also those produced by others. We
have continuously expanded our capabilities and today MRO sales volume equals
that of products we manufacture. We have recently established an MRO base for
our flow control business and we seek to be as successful in growing this
segment as we have our other service areas.
In order not to disrupt customers' manufacturing processes our metal
treatment operations must be able to meet strict time requirements as well as
performance and quality standards. We have accomplished this by establishing a
network of regional facilities that allows us to be close to our customers.
Quick turnaround time is also a major concern for our aerospace overhaul and
repair customers to minimize downtime of aircraft being serviced. We established
a new standard when we provided seven-day turnaround on repair and overhaul for
products that were originally manufactured by Curtiss-Wright.
BENEFITS
[PHOTO OMITTED]
Curtiss-Wright plays an important role in thousands of products that touch
people every day, in many ways. As an example, most cars contain component parts
that we have metal-treated. Almost every large commercial aircraft has wing
flaps operated by our actuation systems or wing skins that were formed by our
processes. Electricity is generated by nuclear plants that use Curtiss-Wright
valves.
Curtiss-Wright Corporation and Subsidiaries | 8 & 9
<PAGE>
[PHOTO OMITTED]
| Focused acquisitions are an
important part of our strategy for growth.
- ------------
ACQUISITIONS
- ------------
In 1998, we used our strong balance sheet to finance a measured acquisition
strategy. Through acquisitions, we sought to increase the breadth of our product
lines, and to identify related markets for our technologies. We looked to expand
our network of services to make Curtiss-Wright more of a full-service provider
in specific markets. We sought to increase our technological expertise and to
expand the markets we serve.
The acquisitions of Enertech, Alpha Heat Treaters, and Curtiss-Wright
Drive Technology are excellent strategic fits for Curtiss-Wright. The
capabilities they bring offer opportunities to continue to meet our growth
objectives and grow stockholder value.
Enertech is a provider of advanced valves, engineering programs and
services to the nuclear power industry. The company also designs and
manufactures hydraulic systems for the automotive and entertainment industries.
Enertech offers diagnostic testing, predictive maintenance, parts repair and
rebuilding, training, engineering and staff augmentation in technical areas.
Enertech continues to operate with its original management from its facilities
in Brea, California, and Suwanee, Georgia.
Enertech, with annual revenues of approximately $25 million, significantly
strengthens our presence in the nuclear power market. Most importantly, Enertech
broadens Curtiss-Wright's product line and expands what we can do for the
customer. Enertech also enhances our service offerings to include engineering,
inspection and diagnostic services.
The acquisition of Alpha Heat Treaters expands our network of
heat-treating facilities by providing a strong regional presence and a solid
reputation in York, Pennsylvania, a highly industrialized area. Alpha provides
carburizing, surface hardening, stress relieving, induction hardening and black
oxide surface treatment services. These processes extend the life of industrial
components and prevent metal fatigue from causing component failures and lost
productivity.
Curtiss-Wright Drive Technology (CWDT) was established via the acquisition
of a subsidiary of SIG Swiss Industrial Company Holding LTD that closed on
December 31, 1998. CWDT is a leading provider of high-technology solutions for
drive technology applications to military tracked and wheeled vehicles, railroad
car leveling systems and marine propulsion. This Swiss-based operation serves a
growing customer base in Europe and Asia. Its addition not only introduces us
into these new markets served by CWDT, but also provides us with hydraulic and
electronic capabilities that we can apply to our aerospace product lines. This
expands our in-house systems integration capabilities as a provider of aerospace
actuation systems.
- ------------
acquisitions
- ------------
Through acquisitions we plan to build a network of heat-treating facilities.
[PHOTO OMITTED]
Enertech increased our capabilities for servicing the nuclear power industry.
[PHOTO OMITTED]
Technology applied to other markets can be integrated into our aerospace
systems.
[PHOTO OMITTED]
[GRAPHIC OMITTED]
Curtiss-Wright Corporation and Subsidiaries | 10 & 11
<PAGE>
[PHOTO OMITTED]
| Internal development programs have
opened the door to other new applications.
- -------------------
PRODUCT DEVELOPMENT
- -------------------
Our internal growth strategies include the development of new products. New
product development must accomplish one of three objectives for Curtiss-Wright:
expand a product or service line currently provided to satisfy a need in a
market we currently serve; reduce the costs of servicing our customers; or apply
an existing or modified product or technology to a new market.
We currently have a number of initiatives underway to expand our product
lines and increase the service offerings we provide in many of our markets.
Curtiss-Wright has been developing wing flap actuation systems for applications
to types of aircraft with which we have not previously been associated. This
would include business jets and cargo/utility aircraft. In the aerospace
component overhaul and repair areas, we have expanded the number of parts we are
certified to repair to 9,700.
In Precision Manufacturing Products & Services, we are developing a new
laser metal-treating technology called Lasershot(TM) Peening. This process will
be used in lieu of traditional shot-peening for selected areas where increased
compressive stresses are required. Lasershot(TM) Peening extends the benefits of
compressive stresses much deeper into the surface of metal than controlled
shot-peening.
Within our Flow Control Products & Services segment, we are developing
products that apply our valve technology to areas beyond our traditional
applications. We believe that opportunities exist in all of our current markets:
the nuclear navy, power generation and process industries. An example of such an
opportunity relates to naval ships. We want to expand our valve applications
beyond the nuclear containment areas. We are working to respond to two specific
needs of the United States Navy. The first is a requirement to lower shipboard
manning levels. Through the development of "smart valves," which are
self-monitoring and regulating, manual requirements can be significantly
reduced. We are developing such products through the use of both internal
resources and teaming arrangements where appropriate. We are also responding to
another need, which is to provide titanium valves that have greater resistance
to salt water corrosion and are made of materials more compatible with on-board
piping systems. Success in these areas would expand our opportunities with a
customer with whom we have had a long-term relationship.
Flow Control Products & Services also has developed a Risk-Informed
Program that has been submitted to the Nuclear Regulatory Commission for review
and approval. It is a program designed to improve the inspection process for
welded joints at nuclear power plants resulting in reduced costs to electrical
utilities. If we are successful in obtaining the Commission's approval, we feel
that it has outstanding potential as an additional service that Curtiss-Wright
can provide to our customers.
An example of expanding our existing technologies to new products and
markets has been the application of our aerospace actuator gear technology to
the rescue market, which resulted in the Curtiss-Wright PowerHawk(R) Rescue
Tool--a product we feel has significant advantages over competitive
alternatives. In 1998, we continued to expand the line of accessories that can
be used in conjunction with the tool. Our line of PowerHawk(R) products now
includes a power pusher ram for vehicle extraction and building collapse
situations, a turboventilator/portable blower, and a portable winch. Although
sales of our PowerHawk(R) line of products have not grown as fast as originally
anticipated, based upon customer feedback, we continue to believe that through
persistence and market education, the significant advantages of our patented
technology will make themselves apparent.
- -------------------
product development
- -------------------
New flow control products can expand our business with the U.S. Navy.
[PHOTO OMITTED]
Our valve technology can be applied to new products for use outside the nuclear
power industry.
[PHOTO OMITTED]
Our development work on laser technology illustrates why we are considered a
technological leader for metal-treating applications.
[PHOTO OMITTED]
[GRAPHIC OMITTED]
Curtiss-Wright Corporation and Subsidiaries | 12 & 13
<PAGE>
[PHOTO OMITTED]
| We will continue to enter new
global markets and expand the applications of our
products, technologies and services.
- -----------
NEW MARKETS
- -----------
Curtiss-Wright has been involved in the aviation industry since each of the
original companies, the Wright Company and the Curtiss Aeroplane and Motor
Corporation, began operations. Throughout Curtiss-Wright's 69-year history, we
have been a major force in aviation and much of our prosperity has resulted from
the strength of the commercial aviation market.
Many industry analysts are projecting a slowdown in the aerospace
industry. As we look to the future, we are seeking to continue to expand our
diversified base to new markets for added balance to our growth and to offset
the effect the aviation industry's cyclical nature has had on our financial
performance. In diversifying, we seek to expand our current capabilities in
metal treatment and flow control and in applying aviation technology to other
industries, to increase our market share in our existing product lines, and to
stretch our geographic reach. The acquisitions we made in 1998 were steps toward
more diversified growth.
The acquisition of Enertech gives Curtiss-Wright access to new markets--we
move outside the nuclear containment area into the entire plant and increase our
service capabilities. These opportunities will broaden our exposure to the
entire nuclear power industry. Our Flow Control Products & Services business was
also enhanced with the award of contracts to supply valves for nuclear power
plant construction in Eastern Asia. This success reflects the design
capabilities of Curtiss-Wright and gives us the ability to participate in new
nuclear plant construction in Asian markets.
Enertech also provides us with a presence in the design, manufacture and
distribution of fluid power products and systems. Enertech currently conducts
activities in the automotive and entertainment industries and looks to
potentially expand its applications to serve existing needs in other markets.
In our Precision Manufacturing Products & Services operation, we see
significant opportunities for new market development. First, the high cost of
shipping parts for metal treating and short turnaround requirements create
pressures to locate facilities near the original manufacturing sites. To date,
we have established 36 facilities around the world, and we intend to continue
increasing that number. We seek to establish a network of heat-treating
facilities, while expanding the number of shot-peening operations. In 1998, we
added Alpha Heat Treaters in York, Pennsylvania. We have also opened three
facilities in Europe in the last two years. Geographical expansion is an
emphasis for these businesses as there are a number of attractive markets where
we have yet to establish a presence.
New market opportunities resulted from the acquisition of Curtiss-Wright
Drive Technology (CWDT). CWDT takes us into military vehicle and railway
markets. These markets are not tied to the commercial aircraft build cycle and
should help us dampen the effect of downturns in that market on the Company's
performance.
- -----------
new markets
- -----------
Global expansion will provide new opportunities as we continue to enter new
markets overseas.
[PHOTO OMITTED]
We will be increasing our presence in the growing market for maintenance, repair
and overhaul services at electrical power plants.
[PHOTO OMITTED]
A benefit of a 1998 acquisition is that we now have military vehicles and
railway cars as new markets in which to participate.
[PHOTO OMITTED]
[GRAPHIC OMITTED]
Curtiss-Wright Corporation and Subsidiaries | 14 & 15
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
(In thousands except per share amounts) First Second Third Fourth
===================================================
<S> <C> <C> <C> <C>
1998 Quarters:
Sales $ 60,846 $ 59,405 $ 62,603 $ 66,559
Gross profit 18,122 21,749 20,851 21,292
Net earnings 6,605 7,701 6,758 7,989
Earnings per share:
Basic earnings per common share $ .65 $ .76 $ .66 $ .78
Dividends per common share $ .13 $ .13 $ .13 $ .13
---------------------------------------------------
1997 Quarters:
Sales $53,148 $ 54,412 $ 52,677 $ 59,158
Gross profit 16,644 19,125 19,002 20,918
Net earnings 4,955 7,050 8,076 7,804
Earnings per share:
Basic earnings per common share .49 .69 .79 .77
Dividends per common share .125 .125 .125 .13
---------------------------------------------------
</TABLE>
CONSOLIDATED SELECTED FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
(In thousands except per share data) 1998 1997 1996 1995 1994
=================================================================
<S> <C> <C> <C> <C> <C>
Sales $249,413 $219,395 $170,536 $154,446 $155,001
Earnings before changes in accounting
principles 29,053 27,885 16,109 18,169 19,547
Net earnings 29,053 27,885 16,109 18,169 19,303
Total assets 352,740 284,708 267,164 246,201 238,694
Long-term debt 20,162 10,347 10,347 10,347 9,047
Basic earnings per common share:
Earnings before changes in accounting
principles $ 2.85 $ 2.74 $ 1.59 $ 1.79 $ 1.93
Net earnings $ 2.85 $ 2.74 $ 1.59 $ 1.79 $ 1.91
Cash dividends $ .52 $ .505 $ .50 $ .50 $ .50
-----------------------------------------------------------------
</TABLE>
FORWARD-LOOKING STATEMENTS
This annual report contains not only historical information but also
forward-looking statements regarding expectations for future company
performance. Forward-looking statements involve risk and uncertainty. See the
Company's 1998 Annual Report on Form 10-K for a discussion of factors which
could cause future results to differ from current expectations.
Curtiss-Wright Corporation and Subsidiaries | 16
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Curtiss-Wright Corporation continued to post improved sales and operating
performance in 1998. Sales for the year totaled $249.4 million reflecting a 14%
increase over 1997 sales of $219.4 million and 46% above 1996 sales of $170.5
million. Operating income increased 21% from $30.0 million in 1997 to $36.3
million in 1998 and more than doubled operating income of $15.5 million from
1996. For the year, the Corporation posted consolidated net earnings of $29.1
million or $2.82 per diluted share, 4% above 1997 net earnings of $27.9 million
or $2.71 per diluted share and 80% above the net earnings of $16.1 million
posted in 1996.
Sales increases for 1998, as compared with 1997, were achieved in all of
the Corporation's business operating segments. Sales from Enertech, a valve
manufacturing and service concern acquired on July 31, 1998, sales from Alpha
Heat Treaters acquired on April 30, 1998 and an expansion of Precision
Manufacturing Products & Services ("PMPS") operations, which added three
additional facilities, augmented this increase. 1997 was also the first full
year of operations for the overhaul and repair facility in Miami that was
acquired in mid-year 1996. In the aggregate, acquisitions and business
expansions have added sales of $42.3 million to the Corporation's 1998 total.
Net earnings for 1998 were, however, impaired by the high level of
additional charges for anticipated losses on Actuation and Control Products &
Services ("ACPS") segment military development programs, inventory adjustments
and costs related to the consolidation of its manufacturing operations referred
to below. In the aggregate, 1998 net earnings were lowered by $3.9 million or
$.38 per share as a result these charges. Partially offsetting those charges was
the recognition in 1998 of insurance claims proceeds. The 1997 earnings results
included a one-time gain from the sale of excess real estate which, after the
benefit of a capital-loss carry-forward, added $2.0 million or $.20 per share.
Net earnings for both 1997 and 1996 had also been impacted by losses caused by
significant overruns on military actuation development contracts. In 1996 there
were lower levels of non-operating revenue in comparison to 1997 and 1998.
New orders recorded in 1998 totaled $232.2 million with an ending backlog
of $198.3 million. This represents a $49 million increase in backlog compared to
the $149.2 million backlog at the end of 1997 substantially due to the
acquisition of SIG Drive Technology Limited ("SDT") on December 31, 1998. It
should be noted that sales in the PMPS segment are sold with very modest lead
times. Accordingly, backlog for these product lines is less of an indication of
future sales activity than the Corporation's backlog of long-lead Actuation and
Control and Flow Control segment products.
SEGMENT PERFORMANCE
Precision Manufacturing Products & Services
The Corporation's PMPS business continues to achieve substantial increases in
sales for 1998 as compared with the prior year. Sales improved 11% for 1998,
reflecting increases in applications, particularly in aerospace, oil tool,
petrochemical and other industrial markets, worldwide. In addition, 1998 sales
benefited from contributions of an additional heat-treating facility in York,
Pennsylvania acquired in April 1998. Sales improvements also reflect newly
opened facilities in Belgium, Germany, England and Kansas. 1998 net income for
the segment increased from 1997 by $3.3 million or 22% to $18.2 million. This
increase reflected improved sales in traditional markets, growth in producing
flapper valve components, lower overhead costs and a reduction in start-up costs
from new facilities.
Sales and net earnings for 1997 had shown substantial improvements over
1996 results as well. 1997 sales and net earnings were 15% and 67%,
respectively, above sales of $82.6 million and net earnings of $9.0 million
posted in 1996. When comparing 1997 to 1996, increases were largely the result
of a worldwide improvement in aerospace applications and reflected the
diversification of products serviced by this segment, including services to form
wingskins of commercial, regional and business aircraft and services on engine
components and other aircraft parts.
Flow Control Products & Services
The Corporation's Flow Control Products & Services ("FCPS") segment posted
increases in sales and net earnings of 43% and 39% from 1997 to 1998. These
sales increases largely reflect the July 31, 1998 acquisition of Enertech, LLC.
Enertech manufactures, distributes and represents a number of products for sale
into commercial nuclear power plants, both domestically and internationally, and
provides a broad range of overhaul and maintenance services to such plants. In
1998, sales of commercial valve products increased reflecting work performed for
a foreign nuclear power plant under a contract received in late 1997. Net income
for the year also bene-fited from improved cost performance on valve remakes and
upgrade programs. While the Asian financial situation has not had an adverse
effect on this business, the Corporation anticipates some slow-downs or
stretch-outs in orders from this area in the future.
Sales for 1997 were 14% above those of 1996, while net income decreased by
3% in the comparable periods. Two U.S. Navy military valve programs and a high
level of commercial field service and spare parts sales accounted for the sales
improvements. Net earnings for 1997, as compared to 1996, were slightly impaired
by higher administrative costs and expenses relating to a commercial royalty
agreement.
- --------------------------------------------------------------------------------
17 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
Actuation and Control Products & Services
The ACPS segment posted a sales increase of 8% for 1998 when compared with those
of 1997 primarily reflecting the continued high level of original equipment
manufactured (OEM) products for Boeing. However, as the market approaches the
projected peak of the jetliner production cycle, this segment continues to
experience a number of cost and efficiency issues. In addition, inventory
write-offs, book to physical and valuation adjustments severely impacted profits
for this segment. In the aggregate, accounting adjustments, cost overruns on
military development contracts and costs related to the consolidation of
manufacturing operations resulted in a charge to net earnings of $3.9 million or
$.38 per share in 1998.
Sales of military actuation products were slightly below those of 1997 as
sales resulting from the completion of "safety of flight" testing on F-22
components early in 1998 were offset by the end of an F-16 shaft retrofit
contract and lower foreign military sales. Sales of component overhaul services
to foreign regions, while slightly below expectations, have been steady in 1998
and are above 1997 levels. The economic problems of foreign regions, including
Asia, have not had an adverse impact on current performance. During 1998, the
Corporation's sales of component overhaul and repair services in the aggregate
have improved 7% compared with the prior year.
In the fourth quarter of 1998, the Corporation announced its plans to move
the manufacturing operations of its Fairfield, New Jersey facility to its
Shelby, North Carolina facility to reduce its operating costs. The Corporation
recorded a charge of $.5 million after taxes for severance and other
employee-related costs and anticipates expenditures of $1.6 million after taxes,
in transportation and plant rearrangement costs in 1999.
Sales of this segment improved 51% in 1997 over 1996 and the segment
reported net earnings of $2.1 million as compared to a net loss of $1.0 million
in 1996. OEM sales of commercial aircraft components more than doubled those of
1996, reflecting increased Boeing requirements for actuation and control
equipment. The Corporation participates on every Boeing commercial aircraft
currently flying and production levels were at a record high at the end of 1997.
Sales of overhaul and repair services increased 53% when comparing 1997 to 1996.
Sales improvements were primarily reflective of a full year's operation from the
Miami-based location, which had been acquired in May 1996. The net loss for this
segment reported in 1996 was the combined result of additions to the workforce,
associated training and other costs incurred during the start-up phase of new
Boeing production programs. Costs were further increased by the timing and
magnitude of increased production work stemming from Boeing's aggressive
ramp-up.
CORPORATE AND OTHER EXPENSES
These costs include administrative expenses, recognition of remediation costs,
costs for legal services to pursue claims against related parties and related
recoveries of such claims.
OTHER REVENUES
The Corporation recorded other non-operating net revenues for 1998 aggregating
$11.7 million compared with $12.3 million in 1997 and $9.0 million in 1996. In
1997, the Corporation sold two parcels of undeveloped land generating the
significant increase in other revenues for 1997, as compared with 1996. The
Corporation recognized net earnings of $2.0 million or $.20 per share, which
reflects tax benefits from the application of a capital-loss carry-forward to
the gains realized on the sales. Other revenues generated by investments and
rental properties have been relatively consistent over the last three years.
Included in other revenues for the Corporation is pension income resulting
from the amortization into income of the excess of the retirement plan's assets
over the estimated obligations under the plan. On an after-tax basis, pension
income amounted to $3.2 million in 1998 as compared with $2.2 million in 1997
and $2.3 million in 1996. The amount recorded largely reflects the extent to
which the expected return on plan assets exceeds the service and interest costs
of providing benefits, as detailed in Note 12 to Consolidated Financial
Statements.
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 18
<PAGE>
- --------------------------------------------------------------------------------
CHANGES IN FINANCIAL POSITION
Liquidity and Capital Resources
The Corporation's working capital decreased slightly at December 31, 1998,
totaling $130.8 million as compared with $132.8 million at December 31, 1997.
The ratio of current assets to current liabilities was 2.9 to 1 at December 31,
1998 compared with 4.4 to 1 at the end of 1997. The Corporation's balance of
cash and short-term investments totaled $72.3 million at December 31, 1998
increasing $3.5 million over balances at December 31, 1997.
Working capital changes were highlighted by an increase in accounts
receivable of $19.3 million and inventories of $4.3 million during the year.
These increases are largely due to the acquisitions of Alpha, Enertech and SDT
during 1998. Current liabilities increased $29.2 million at December 31, 1998,
compared with the prior year end, largely due to borrowings under the
Corporation's short-term credit agreement used to fund the SDT acquisition.
At December 31, 1998, the Corporation's balance sheet was dramatically
different than its balance sheet at December 31, 1997. The changes reflect the
acquisition of three companies in 1998, two of which involved aggregated cash
outflows of $19.3 million, while the third added $21.9 million of debt to the
year-end financial position. Acquisitions in 1998 also added $27.0 million of
goodwill to the balance sheet for the excess of the purchase prices over the
combined fair value of the net assets acquired. In addition, the Corporation
completed an industrial revenue bond (IRB) financing in 1998. The additional
$8.4 million of debt provided for the plant expansion of the Shelby, North
Carolina facility and related equipment purchases necessary to meet the demands
of the new Boeing contracts and the growth of the overhaul service business.
The Corporation continues to maintain its $22.5 million revolving credit
lending facility and its $22.5 million short-term credit agreement. As discussed
above and in Note 9 to Consolidated Financial Statements, these credit
agreements were used to finance the SDT acquisition at December 31, 1998. The
revolving credit agreement also encompasses various letters of credit issued
primarily in connection with outstanding industrial revenue bonds. The combined
maximum available credit unused under these agreements at December 31, 1998 was
$3.0 million. Borrowings under the short-term credit agreement total $20.5
million and are payable at the expiration of the agreement on October 22, 1999.
However, the Corporation intends to seek an extension of this agreement in
advance of its expiration or explore other financing vehicles as necessary to
extend the payment of this debt beyond 1999.
Capital expenditures were $10.6 million in 1998, decreasing from $11.2
million spent in 1997 and well below capital expenditures of $14.1 million in
1996. Principal expenditures were for the expansion of PMPS facilities, which is
relocating three sites to larger, more efficient facilities, and purchased
additional equipment to service those facilities. Strategic purchases for the
FCPS segment include procuring state-of-the-art welding capabilities to service
nuclear customer requirements and additional machining capabilities for large
valve components. ACPS segment capital costs in 1998 were predominantly to
replace older equipment to maintain the segment's manufacturing capabilities.
In 1999, capital expenditures are expected to increase significantly due
to the continued expansion of the PMPS and the relocation of the ACPS segment's
overhaul business to a second North Carolina facility. In addition, expenditures
for OEM equipment in both the ACPS and FCPS segments are expected. At December
31, 1998, the Corporation had commitments of $7.5 million primarily for the
relocation of the PMPS segment's United Kingdom facility and to purchase capital
equipment in 1999.
Cash generated from operations and current short-term investment holdings
are considered adequate to meet the Corporation's overall cash requirements for
the upcoming year, absent the debt repayments as discussed above. This includes
planned capital expenditures, normal dividends, satisfying environmental
obligations and working capital requirements.
Year 2000
As many computer systems and other equipment with embedded chips or processors
(collectively, "Business Systems") use only two digits to represent the year,
they may be unable to process accurately certain data before, during or after
the year 2000. As a result, business and governmental entities are at risk for
possible miscalculations or systems failures causing disruptions in their
business operations. This is commonly known as the "Y2K" issue. The Y2K issue
can arise at any point in the Corporation's supply, manufacturing, processing,
distribution and financial chains.
The Corporation and each of its operating units are in the process of
implementing a Y2K program with the objective of having all of their business
systems, including those that affect facilities and manufacturing activities,
functioning properly with respect to the Y2K issue before January 1, 2000. Each
operating entity of the Company is in a different stage of readiness. The scope
of work includes ensuring the compliance of all applications, operating systems
and hardware on mainframe, PC and LAN platforms, non-information technology
software and equipment and addressing key suppliers and customers.
- --------------------------------------------------------------------------------
19 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
The first component of the readiness program was to identify the internal
business systems of the Corporation that are susceptible to system failures or
processing errors as a result of the Y2K issue. This effort is substantially
complete for existing sites and is being expanded to include the SDT
acquisition.
The second component of the Y2K readiness program involves the actual
remediation and replacement of business systems. The Corporation is using both
internal and external resources to identify Y2K non-compliance problems, modify
code and test the resulting modifications. Those business systems considered
most critical to continuing operations are being given the highest priority. In
some cases, non-compliant software and hardware will be replaced. Based on the
current schedule, the Corporation expects to be in full compliance with its
internal business systems during 1999.
As part of the Y2K readiness program, significant service providers,
vendors, suppliers and customers that are believed to be critical to on-going
business operations have been identified and contacted in an attempt to
ascertain their stage of readiness through questionnaires and other available
means. To the extent that responses to Y2K readiness are unsatisfactory, the
Corporation intends to seek alternative suppliers, service providers or
contractors who have demonstrated Y2K readiness. In the event that any of the
Corporation's significant customers and suppliers do not successfully and timely
achieve Y2K compliance, and the Corporation is unable to replace them with new
customers or alternate suppliers, the Corporation's business or operations could
be adversely affected.
Concurrently, with the Y2K readiness measures described above, the
Corporation and its operating units are developing contingency plans intended to
mitigate the possible disruption in business operations that may result from the
Y2K issue and are developing cost estimates for such plans.
It is currently estimated that the incremental costs of the Corporation's
Y2K remediation efforts will be approximately $.5 million of which approximately
$.2 million has been spent. These costs are being expensed as they are incurred.
The costs associated with the replacement of computerized systems and hardware
are currently estimated to be $.3 million, which would be capitalized. These
amounts do not include any costs associated with the implementation of
contingency plans that are in the process of being developed.
The Corporation's Y2K readiness program is an on-going process and the
estimates of costs and completion dates are subject to change.
Euro Conversion
Curtiss-Wright operates in Europe through PMPS and ACPS segment facilities
located in the United Kingdom, France, Germany, Belgium, Denmark and
Switzerland. On January 1, 1999, eleven participating members of the European
Monetary Union established fixed conversion rates between their existing
currencies and the Euro. Existing currencies will continue to be used as legal
tender through January 1, 2002. Thereafter, those currencies will be canceled
and replaced solely by Euro notes and coinage. At this time the United Kingdom,
the source of most of the Corporation's European sales, is not participating in
this change. The Corporation anticipates that the Euro conversion will not have
a material adverse impact on its financial condition, results of operations or
liquidity.
Recently Issued Accounting Standards
As discussed in Note 1 to the Consolidated Financial Statements, the Corporation
has reviewed Statement of Financial Accounting Standards No. 133, "Accounting
for Derivatives and Hedging Activities". Due to the limited use of derivative
instruments by the Corporation, this statement will not have a material effect
on the Corporation's results of operations or financial condition. The statement
is effective for the Corporation beginning January 1, 2000.
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 20
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF THE CORPORATION
The consolidated financial statements appearing on pages 22 through 37 of this
Annual Report have been prepared by the Corporation in conformity with generally
accepted accounting principles. The financial statements necessarily include
some amounts that are based on the best estimates and judgments of the
Corporation. Other financial information in the Annual Report is consistent with
that in the financial statements.
The Corporation maintains accounting systems, procedures and internal
accounting controls designed to provide reasonable assurance that assets are
safeguarded and that transactions are executed in accordance with the
appropriate corporate authorization and are properly recorded. The accounting
systems and internal accounting controls are augmented by written policies and
procedures; organizational structure providing for a division of
responsibilities; selection and training of qualified personnel and an internal
audit program. The design, monitoring, and revision of internal accounting
control systems involve, among other things, management's judgment with respect
to the relative cost and expected benefits of specific control measures.
PricewaterhouseCoopers LLP, independent certified public accountants, have
examined the Corporation's consolidated financial statements as stated in their
report. Their examination included a study and evaluation of the Corporation's
accounting systems, procedures and internal controls, and tests and other
auditing procedures, all of a scope deemed necessary by them to support their
opinion as to the fairness of the financial statements.
The Audit Committee of the Board of Directors, composed entirely of
Directors from outside the Corporation, among other things, makes
recommendations to the Board as to the nomination of independent auditors for
appointment by stockholders and considers the scope of the independent auditors'
examination, the audit results and the adequacy of internal accounting controls
of the Corporation. The independent auditors have direct access to the Audit
Committee, and they meet with the Committee from time to time with and without
management present, to discuss accounting, auditing, internal control and
financial reporting matters.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Curtiss-Wright Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings and stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of
Curtiss-Wright Corporation and its subsidiaries at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Florham Park, New Jersey
February 1, 1999
- --------------------------------------------------------------------------------
21 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
--------------------------------
(In thousands except per share data) For the years ended December 31, 1998 1997(1) 1996(1)
========------------------------
<S> <C> <C> <C>
Net sales $249,413 $219,395 $170,536
Cost of sales 167,399 143,706 117,067
--------------------------------
Gross profit 82,014 75,689 53,469
Research and development costs 1,346 1,877 997
Selling expenses 11,606 7,979 6,337
General and administrative expenses 34,277 32,694 28,207
Environmental remediation and administrative expenses,
net of recovery (1,562) 3,132 2,397
--------------------------------
Operating income 36,347 30,007 15,531
Investment income, net 3,206 3,432 2,968
Rental income, net 3,299 3,342 2,816
Pension income, net 5,126 3,312 3,651
Other income (expense), net 87 2,193 (450)
Interest expense 485 387 387
--------------------------------
Earnings before income taxes 47,580 41,899 24,129
Provision for income taxes 18,527 14,014 8,020
--------------------------------
Net earnings $ 29,053 $ 27,885 $ 16,109
================================
Net Earnings per Common Share:
Basic earnings per share $ 2.85 $ 2.74 $ 1.59
================================
Diluted earnings per share $ 2.82 $ 2.71 $ 1.58
================================
</TABLE>
(1) Prior year information has been restated to conform to current
presentation.
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 22
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------
(In thousands) December 31, 1998 1997
=========-------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 5,809 $ 6,872
Short-term investments 66,444 61,883
Receivables, net 60,912 41,590
Deferred tax assets 7,841 8,806
Inventories 54,048 49,723
Other current assets 3,519 2,506
----------------------
Total current assets 198,573 171,380
----------------------
Property, plant and equipment, at cost:
Land 4,645 4,486
Buildings and improvements 91,325 89,096
Machinery, equipment and other 141,245 126,005
----------------------
237,215 219,587
Less, accumulated depreciation 162,704 153,704
----------------------
Property, plant and equipment, net 74,511 65,883
Prepaid pension costs 43,822 38,674
Goodwill 30,724 3,797
Other assets 5,110 4,974
----------------------
Total assets $ 352,740 $ 284,708
======================
Liabilities:
Current liabilities:
Current portion of long-term debt $ 20,523 $ --
Accounts payable 13,433 9,900
Accrued expenses 17,254 14,640
Income taxes payable 5,052 4,845
Other current liabilities 11,548 9,244
----------------------
Total current liabilities 67,810 38,629
----------------------
Long-term debt 20,162 10,347
Deferred income taxes 9,714 8,799
Accrued postretirement benefit costs 9,575 9,850
Other liabilities 15,886 12,230
----------------------
Total liabilities 123,147 79,855
----------------------
Contingencies and Commitments (Notes 9 and 14)
Stockholders' Equity:
Preferred stock, $1 par value, 650,000 authorized, none issued
Common stock, $1 par value, 22,500,000 authorized, 15,000,000 shares issued
(outstanding shares 10,190,790 for 1998 and 10,175,140 for 1997) 15,000 15,000
Additional paid in capital 51,669 52,010
Retained earnings 342,218 318,474
Unearned portion of restricted stock (40) (342)
Accumulated other comprehensive income (2,800) (3,289)
----------------------
406,047 381,853
Less, treasury stock at cost (4,809,210 shares for 1998 and 4,824,860
shares for 1997) 176,454 177,000
----------------------
Total stockholders' equity 229,593 204,853
----------------------
Total liabilities and stockholders' equity $ 352,740 $ 284,708
======================
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
23 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-----------------------------------
(In thousands) For the years ended December 31, 1998 1997 1996
=========--------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 29,053 $ 27,885 $ 16,109
-----------------------------------
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 9,661 9,097 8,946
Net (gains) losses on sales and disposals of real estate
and equipment 94 (1,968) 473
Net gains on short-term investments (266) (1,717) (1,014)
Deferred taxes 1,494 76 (168)
Changes in operating assets and liabilities, net of business
acquired:
Proceeds from sales of trading securities 374,802 342,416 333,577
Purchases of trading securities (379,097) (349,500) (323,172)
(Increase) decrease in receivables (7,181) (4,929) 5,500
(Increase) decrease in inventories 734 (3,624) (12,057)
Increase (decrease) in progress payments (1,248) 1,934 (2,622)
Increase (decrease) in accounts payable and
accrued expenses 2,470 (666) 6,810
Increase in income taxes payable 207 1,656 1,189
Increase in other assets (5,446) (3,860) (4,705)
Increase (decrease) in other liabilities (236) (2,458) 4,222
Other, net 881 (879) 143
Total adjustments (3,131) (14,422) 17,122
-----------------------------------
Net cash provided by operating activities 25,922 13,463 33,231
-----------------------------------
Cash flows from investing activities:
Proceeds from sales and disposals of real estate and equipment 950 3,460 96
Additions to property, plant and equipment (10,642) (11,231) (14,156)
Acquisition of new businesses (41,711) (16,640)
-----------------------------------
Net cash used for investing activities (51,403) (7,771) (30,700)
-----------------------------------
Cash flows from financing activities:
Proceeds from short-term borrowing 20,523 -- --
Proceeds from long-term borrowing 9,815 -- --
Common stock repurchase (611) -- --
Dividends paid (5,309) (5,137) (5,079)
-----------------------------------
Net cash (used for) provided by financing activities 24,418 (5,137) (5,079)
-----------------------------------
Net increase (decrease) in cash and cash equivalents (1,063) 555 (2,548)
Cash and cash equivalents at beginning of year 6,872 6,317 8,865
-----------------------------------
Cash and cash equivalents at end of year $ 5,809 $ 6,872 $ 6,317
===================================
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 24
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION> --------------------------------------------------------------------------------------------
Unearned Accumulated
Additional Portion of Other
Common Paid in Retained Restricted Comprehensive Comprehensive Treasury
(In thousands) Stock Capital Earnings Stock Awards Income Income Stock
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995 $10,000 $57,141 $288,710 $(780) $(1,330) $181,562
------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 16,109 $16,109
Translation adjustments, net (176) (176)
------------------------------------------------------------------------------------------
Total comprehensive income $15,933
==========================================================================================
Common dividends (5,079)
Stock awards issued 10 (93) (83)
Stock options exercised, net (24) (89)
Amortization of earned portion of
restricted stock awards 265
------------------------------------------------------------------------------------------
December 31, 1996 10,000 57,127 299,740 (608) (1,506) 181,390
------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 27,885 $27,885
Translation adjustments, net (1,783) (1,783)
------------------------------------------------------------------------------------------
Total comprehensive income $26,102
==========================================================================================
Common dividends (5,137)
Stock options exercised, net (117) (376)
Amortization of earned portion of
restricted stock awards 266
Two-for-one stock split 5,000 (5,000) (4,014) (4,014)
------------------------------------------------------------------------------------------
December 31, 1997 15,000 52,010 318,474 (342) (3,289) 177,000
------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 29,053 $29,053
Translation adjustments, net 489 489
------------------------------------------------------------------------------------------
Total comprehensive income $29,542
==========================================================================================
Common dividends (5,309) 612
Common stock repurchase
Stock options exercised, net (449)
Amortization of earned portion of
restricted stock awards 108 302 (1,158)
------------------------------------------------------------------------------------------
December 31, 1998 $15,000 $51,669 $342,218 $(40) $(2,800) $176,454
==========================================================================================
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
25 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Curtiss-Wright Corporation and its subsidiaries (the "Corporation") is a
diversified multinational manufacturing and service concern that designs,
manufactures and overhauls precision components and systems and provides highly
engineered services to the aerospace, defense, automotive, shipbuilding, oil,
petrochemical, agricultural equipment, power generation, railroad, metalworking,
and fire and rescue industries. Operations are conducted through five
manufacturing facilities, thirty-six metal treatment service facilities and four
component overhaul locations.
A. Principles of Consolidation
The financial statements of the Corporation have been prepared in conformity
with generally accepted accounting principles and such preparation has required
the use of management's estimates in presenting the consolidated accounts of the
Corporation, after elimination of all significant intercompany transactions and
accounts. Management's estimates include assumptions that affect the reported
amount of assets, liabilities, revenue and expenses in the accompanying
financial statements. Actual results may differ from these estimates.
B. Cash Equivalents
Cash equivalents consist of money market funds and commercial paper that are
readily convertible into cash, all with original maturity dates of three months
or less.
C. Progress Payments
Progress payments received under U.S. Government prime contracts and
subcontracts have been deducted from receivables and inventories as disclosed in
the appropriate following notes.
With respect to such contracts, the Government has a lien on all materials
and work-in-process to the extent of progress payments.
D. Revenue Recognition
The Corporation records sales and related profits for the majority of its
operations as units are shipped, services are rendered, or as engineering
milestones are achieved. Sales and estimated profits under long-term valve
contracts are recognized under the percentage-of-completion method of
accounting. Profits are recorded pro rata, based upon current estimates of
direct and indirect manufacturing and engineering costs to complete such
contracts.
Losses on contracts are provided for in the period in which the loss
becomes determinable. Revisions in profit estimates are reflected on a
cumulative basis in the period in which the basis for such revisions become
known.
In accordance with industry practice, inventoried costs contain amounts
relating to contracts and programs with long production cycles, a portion of
which will not be realized within one year.
E. Property, Plant and Equipment
Property, plant and equipment are carried at cost. Major renewals and
betterments are capitalized, while maintenance and repairs that do not improve
or extend the life of the assets are expensed in the period they occur.
Depreciation is computed using the straight-line method based upon the
estimated useful lives of the respective assets.
Average useful lives for property and equipment are as follows:
- --------------------------------------------------------------------------------
Buildings and improvements 10 to 40 years
Machinery and equipment 4 to 15 years
Office furniture and equipment 3 to 10 years
- --------------------------------------------------------------------------------
F. Intangible Assets
Intangible assets consist primarily of the excess purchase price of the
acquisitions over the fair value of net tangible assets acquired. The
Corporation amortizes such costs on a straight-line basis over the estimated
period benefited but not exceeding 30 years.
G. Financial Instruments
The financial instruments with which the Corporation is involved are primarily
of a traditional nature. The Corporation's short-term investments are comprised
of equity and debt securities, all classified as trading securities, which are
carried at their fair value based upon the quoted market prices of those
investments at December 31, 1998 and 1997. Accordingly, net realized and
unrealized gains and losses on trading securities are included in net earnings.
The Corporation also, where circumstances warrant, participates in derivative
financial instruments consisting primarily of commitments to purchase stock.
Derivative financial instruments are included as short-term investments in the
Corporation's balance sheets and are carried at their fair market value,
information on which appears in Note 3.
H. Environmental Costs
The Corporation establishes a reserve for a potential environmental
responsibility when it concludes that a determination of legal liability is
probable, based upon the advice of counsel. Such amounts, if quantifiable,
reflect the Corporation's estimate of the amount of that liability. If only a
range of potential liability can be estimated, a reserve will be established at
the low end of that range. Such reserves represent today's values of anticipated
remediation not recognizing any recovery from insurance carriers, or third-party
legal actions, and are not discounted.
I. Accounting for Stock-Based Compensation
The Corporation follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB No. 25), in
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 26
<PAGE>
- --------------------------------------------------------------------------------
accounting for its employee stock options, rather than the alternative method of
accounting provided under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123). Under APB No. 25, the
Corporation does not recognize compensation expense on stock options granted to
employees because the exercise price of the options is equal to the market price
of the underlying stock on the date of the grant. Further information concerning
options granted under the Corporation's Long-Term Incentive Plan is provided in
Note 10.
J. Capital Stock
On April 11, 1997, the stockholders approved an increase in the number of
authorized common shares from 12,500,000 to 22,500,000. On November 17, 1997,
the Board of Directors declared a two-for-one stock split in the form of a 100%
stock dividend. The split, in the form of 1 share of common stock for each share
outstanding, was payable on December 23,1997. To effectuate the stock split, the
Corporation issued 5,000,000 original shares at $1.00 par value from capital
surplus and the remaining 87,271 shares from its treasury account at cost, with
a corresponding reduction in retained earnings of $4,014,000. Accordingly, all
references throughout this annual report to number of shares, per share amounts,
stock option data and market prices of the Corporation's common stock have been
restated to reflect the effect of the split for all periods presented.
In October 1998 the Corporation initiated a stock repurchase program,
approved by its Board of Directors, under which the Company is authorized to
purchase up to 300,000 shares or approximately 3% of its outstanding common
stock. Purchases were authorized to be made from time to time in the open market
or privately negotiated transactions, depending on market and other conditions,
based upon the view of the Corporation that recent market prices of the stock
did not adequately reflect the true value of the Corporation. Accordingly, it
represented an attractive investment opportunity for the Corporation.
K. Comprehensive Income
Effective January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130).
SFAS No. 130 establishes standards for reporting and displaying changes in
equity from non-owner sources. Total comprehensive income for the years ended
December 31, 1998, 1997 and 1996 is shown in the Statements of Stockholders'
Equity.
L. Earnings per Share
Effective for the fiscal year ended December 31, 1997, the Corporation accounts
for its earnings per share (EPS) in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," (SFAS No. 128). Under SFAS
No. 128, the Corporation is required to report both basic earnings per share as
based on the weighted average number of common shares outstanding and diluted
earnings per share as based on the weighted average number of common shares
outstanding plus all potentially dilutive common shares issuable. In accordance
with SFAS No. 128, all prior period earnings per share data have been restated.
Earnings per share calculations for the years ended December 31, 1998, 1997 and
1996 are as follows:
--------------------------------------
Weighted
Average
Net Shares Per Share
(In thousands, except per share data) Income Outstanding Amount
=======================================
1998
Basic earnings per share $29,053 10,194 $2.85
Effect of dilutive securities:
Stock options 109
Deferred stock compensation 2
--------------------------------------
Diluted earnings per share $29,053 10,305 $2.82
======================================
1997
Basic earnings per share $27,885 10,172 $2.74
Effect of dilutive securities:
Stock options 118
Deferred stock compensation 1
--------------------------------------
Diluted earnings per share $27,885 10,291 $2.71
======================================
1996
Basic earnings per share $16,109 10,158 $1.59
Effect of dilutive securities:
Stock options 59
--------------------------------------
Diluted earnings per share $16,109 10,217 $1.58
======================================
M. Newly Issued Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" (SFAS No. 133). SFAS No. 133 is effective for all fiscal quarters of
all fiscal years beginning after June 15, 1999 (January 1, 2000 for the
Corporation). SFAS No. 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives will be recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Manage-
- --------------------------------------------------------------------------------
27 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
ment of the Corporation anticipates that, due to its limited use of derivative
instruments, the adoption of SFAS No. 133 will not have a significant effect on
its results of operations or its financial position.
2. Acquisitions
The Corporation acquired three companies in 1998 and one company in 1996, as
described below. All companies acquired have been accounted for as purchases
with the excess of the purchase price over the estimated fair value of the net
assets acquired recorded as goodwill. The results of each operation have been
included in the consolidated financial results of the Corporation from the date
of acquisition.
SIG-Antriebstechnik AG
On December 31, 1998, the Corporation completed the acquisition of the shares of
SIG-Antriebstechnik AG, a unit of SIG Swiss Industrial Company Holding Ltd., for
approximately $22.0 million in cash, subject to adjustments as provided in the
agreement. The acquired company, to be renamed Curtiss-Wright Antriebstechnik
GmbH (Curtiss-Wright Drive Technology, Ltd.), is a leading provider of
high-technology drive solutions for three principal markets: military tracked
and wheeled vehicles, high-speed railroad trains, and commercial marine
propulsion. The Company's drive system solutions involve electromechanical and
electrohydraulic actuation components and systems including electronic controls.
Drive Technology's sales were approximately $17 million in 1998 with a year-end
backlog of approximately $53 million. The excess of purchase price over the fair
value of the net assets is approximately $17 million. The fair value of the net
assets acquired was based on preliminary estimates and may be revised at a later
date.
Enertech
On July 31, 1998, the Corporation purchased the assets of Enertech, LLC
(Enertech) which distributes, represents and manufactures a number of products
for sale into commercial nuclear power plants, both domestically and
internationally. Enertech also provides a broad range of overhaul and
maintenance services for such plants from its two principal locations in
California and Georgia. The Corporation acquired the net assets of Enertech for
approximately $15.2 million in cash of which $13.2 million was paid at closing
and $2.0 million deferred to a specific future contract date subject to
adjustments as provided in the agreement. The excess of purchase price over the
fair value of the net assets is approximately $9.0 million and is being
amortized over 30 years. The fair value of the net assets acquired was based on
preliminary estimates and may be revised at a later date.
Alpha Heat Treaters
The Corporation purchased the assets of the Alpha Heat Treaters ("Alpha")
division of Alpha-Beta Industries, Inc. on April 30, 1998. Alpha services a
broad spectrum of customers from its York, Pennsylvania location and provides a
number of metal treating processes including carburizing, surface hardening,
stress relieving, induction hardening and black oxide surface treatment
services. The Corporation acquired the net assets of Alpha for approximately
$6.1 million in cash. The excess of purchase price over the fair value of the
net assets is approximately $1.0 million, which is being amortized over 25
years. The fair value of the net assets acquired was based on preliminary
estimates and may be revised at a later date.
Accessory Services
The Corporation purchased the Miami, Florida-based Accessory Services unit of
Aviall, Inc. ("Accessory Services") on May 20, 1996 acquiring the net assets of
Accessory Services for $16.6 million in cash. The excess of purchase price over
the estimated fair value of the net assets acquired amounted to approximately
$4.0 million and is being amortized on a straight-line basis over 30 years.
The unaudited pro forma consolidated results of operations shown below
have been prepared as if the above acquisitions had occurred at the beginning of
1998 and 1996, respectively:
--------------------------
(In thousands, except per share data) 1998 1996
========------------------
Net sales $277,945 $178,816
Net earnings 30,280 16,437
Diluted earnings per common share 2.94 1.61
--------------------------
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 28
<PAGE>
- --------------------------------------------------------------------------------
3. Short-Term Investments
The composition of short-term investments at December 31 is as follows:
-----------------------------------------------
(In thousands) 1998 1997
====================---------------------------
Cost Fair Value Cost Fair Value
-----------------------------------------------
Money market
preferred stock $54,797 $54,797 $45,697 $45,697
Tax-exempt money
market preferred
stock 2,995 2,995 -- --
Common and
preferred stocks 6,007 6,203 3,090 3,205
Utility common stocks
purchased -- -- 20,268 20,308
Utility common stocks
sold short -- -- (11,033) (11,121)
Options 49 49 -- --
Tax exempt revenue
bonds 2,400 2,400 3,790 3,794
-----------------------------------------------
Total short-term
investments $66,248 $66,444 $61,812 $61,883
===============================================
Investment income for the years ended December 31 consists of:
--------------------------------
(In thousands) 1998 1997 1996
======--------------------------
Net realized gains on the sale of
trading securities $ 141 $1,435 $ 527
Interest and dividend income, net 2,940 1,715 1,954
Net unrealized holding gains 125 282 487
--------------------------------
Investment income, net $3,206 $3,432 $2,968
================================
4. Receivables
Receivables include amounts billed to customers, claims and other receivables
and unbilled charges on long-term contracts consisting of amounts recognized as
sales but not billed. Substantially all amounts of unbilled receivables are
expected to be billed and collected in the subsequent year.
Credit risk is generally diversified due to the large number of entities
comprising the Corporation's customer base and their geographic dispersion. The
largest single customer represented 7% of the total outstanding billed
receivables at December 31, 1998 and 12% of the total outstanding billed
receivables at December 31, 1997. The Corporation performs ongoing credit
evaluations of its customers and establishes appropriate allowances for doubtful
accounts based upon factors surrounding the credit risk of specific customers,
historical trends and other information.
The composition of receivables at December 31 is as follows:
---------------------
(In thousands) 1998 1997
=======--------------
Billed Receivables:
Trade and other receivables $63,412 $49,110
Less: progress payments applied 11,687 10,460
Allowance for doubtful accounts 1,910 1,747
---------------------
Net billed receivables 49,815 36,903
---------------------
Unbilled Receivables:
Recoverable costs and estimated earnings
not billed 17,447 13,022
Less: progress payments applied 6,350 8,335
---------------------
Net unbilled receivables 11,097 4,687
---------------------
Total receivables, net $60,912 $41,590
=====================
5. Inventories
Inventories are valued at the lower of cost (principally average cost) or
market. The composition of inventories at December 31 is as follows:
---------------------
(In thousands) 1998 1997
=======--------------
Raw material $ 8,862 $ 5,514
Work-in-process 22,802 22,686
Finished goods/component parts 23,130 21,782
Inventoried costs related to U.S. Government
and other long-term contracts 4,780 5,547
---------------------
Inventories 59,574 55,529
Less: progress payments applied,
principally related to
long-term contracts 5,526 5,806
---------------------
Net inventories $54,048 $49,723
=====================
6. Accrued Expenses and Other Current Liabilities
Accrued expenses at December 31 consist of the following:
-----------------------
(In thousands) 1998 1997
=======----------------
Accrued compensation $ 5,967 $ 5,878
Accrued taxes other than income taxes 1,108 1,357
Accrued insurance 1,662 1,659
All other 8,517 5,746
-----------------------
Total accrued expenses $17,254 $14,640
=======================
- --------------------------------------------------------------------------------
29 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
Other current liabilities at December 31 consist of the following:
----------------------
(In thousands) 1998 1997
=======---------------
Customer advances $ 4,655 $ 66
Current portion of environmental reserves 1,881 3,036
Anticipated losses on long-term contracts 1,878 1,305
Litigation reserves 298 3,101
All other 2,836 1,736
----------------------
Total other current liabilities $11,548 $9,244
======================
7. Income Taxes
There was no valuation allowance recorded in 1998 because it is more likely than
not that all deferred tax assets will be realized. During 1997, the Corporation
fully utilized its capital loss carry-forward of $3,252,000 that would have
expired on December 31, 1997. In 1997, the valuation allowance that was
established to offset this deferred tax asset was reversed. The net change to
the valuation allowance for deferred tax assets was a decrease of $1,212,000 in
1997 from the utilization of all remaining loss carry-forwards.
Earnings before income taxes for the years ended December 31 are:
-----------------------------------------
(In thousands) 1998 1997 1996
=======----------------------------------
Domestic $33,320 $29,965 $15,195
Foreign 14,260 11,934 8,934
-----------------------------------------
Total $47,580 $41,899 $24,129
=========================================
The provisions (benefits) for taxes on earnings for the years ended December 31
consist of:
--------------------------------------
(In thousands) 1998 1997 1996
=======-------------------------------
Current:
Federal $ 8,835 $ 7,523 $4,041
State 3,045 4,197 3,388
Foreign 5,019 1,910 995
--------------------------------------
16,899 13,630 8,424
======================================
Deferred:
Federal 1,231 332 3
State 397 126 (236)
--------------------------------------
1,628 458 (233)
======================================
Federal income tax on
net capital gains -- 1,135 184
Utilization of capital
loss carry-forwards -- (1,135) (184)
Valuation allowance -- (74) (171)
--------------------------------------
Provision for income tax $18,527 $14,014 $8,020
======================================
The effective tax rate varies from the U.S. Federal statutory tax rate for the
years ended December 31 principally due to the following:
------------------------------
1998 1997 1996
====--------------------------
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
Add (deduct):
Utilization of capital loss
carry-forward -- (2.7) (.8)
Dividends received deduction
and tax exempt income (1.4) (1.2) (2.3)
State and local taxes 4.7 3.3 1.7
Valuation allowance (.2) (.7)
All other .6 (.8) .3
------------------------------
Effective tax rate 38.9% 33.4% 33.2%
==============================
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 30
<PAGE>
- --------------------------------------------------------------------------------
The components of the Corporation's deferred tax assets and liabilities at
December 31 are as follows; however, 1997 figures have been reclassified for
reporting purposes.
------------------------
(In thousands) 1998 1997
=======-----------------
Deferred tax assets:
Environmental cleanup $ 6,428 $ 6,838
Postretirement/employment benefits 4,065 4,177
Inventories 3,805 3,674
Supplemental retirement plans 1,000 869
Vacation pay 932 816
Legal matters 754 1,356
Other 4,002 3,314
------------------------
Total deferred tax assets 20,986 21,044
------------------------
Deferred tax liabilities:
Pension 17,901 15,798
Depreciation 3,773 4,225
Gain on sale of properties 750 753
Other 435 261
------------------------
Total deferred tax liabilities 22,859 21,037
------------------------
Deferred tax asset valuation allowance -- --
------------------------
Net deferred tax assets (liabilities) $(1,873) $ 7
========================
Deferred tax assets and liabilities are reflected on the Corporation's
consolidated balance sheets at December 31 as follows:
-----------------------
(In thousands) 1998 1997
=======----------------
Current deferred tax assets $ 7,841 $ 8,806
Non-current deferred tax liabilities (9,714) (8,799)
-----------------------
Net deferred tax assets (liabilities) $(1,873) $ 7
=======================
Income tax payments of $16,321,000 were made in 1998, $12,432,000 in 1997, and
$8,553,000 in 1996.
8. Long-Term Debt
Long-term debt at December 31 consists of the following:
---------------------
(In thousands) 1998 1997
=======--------------
Short-term credit agreement borrowing,
due 1999. Interest rate is 2.31% for 1998 $20,523 --
Industrial Revenue Bonds, due from 2001
to 2023. Weighted average interest
rate is 2.52% and 3.70% per annum
for 1998 and 1997, respectively $18,747 $10,347
---------------------
Revolving credit agreement borrowing,
due 2001. Interest rate is 2.31% for 1998 1,415 --
---------------------
Total debt 40,685 10,347
=====================
Less: Portion due within one year 20,523 --
=====================
Total long-term debt $20,162 $10,347
=====================
Debts under the Corporation's short-term credit agreement and revolving credit
agreement are denominated in Swiss francs. Actual borrowings at December 31,
1998 total 31,000,000 Swiss francs.
Aggregate maturities of debt are as follows:
(In thousands)
=======
1999 $20,523
2000 --
2001 2,715
2002 4,047
2003 --
2004 and beyond 13,400
=======
Interest payments of approximately $470,394, $347,000 and $383,000 were made in
1998, 1997 and 1996, respectively.
- --------------------------------------------------------------------------------
31 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
9. Credit Agreements
The Corporation has two credit agreements in effect aggregating $45,000,000 with
a group of three banks. The credit agreements allow for borrowings to take place
in certain foreign currencies. The Revolving Credit Agreement commits a maximum
of $22,500,000 to the Corporation for cash borrowings and letters of credit. The
unused credit available under this facility at December 31, 1998 was $1,060,000.
The commitments made under the Revolving Credit Agreement expire October 29,
2001, but may be extended annually for successive one-year periods with the
consent of the bank group. The Corporation also has in effect a Short-Term
Credit Agreement which allows for cash borrowings of $22,500,000, of which
$1,977,000 was available at December 31, 1998. The Short-Term Credit Agreement
expires October 22, 1999. The Short-Term Credit Agreement may be extended, with
the consent of the bank group, for an additional period not to exceed 364 days.
Cash borrowings under the two credit agreements at December 31, 1998 were at a
U.S. Dollar equivalent of $21,938,000. The loans have an interest rate of
2.3125% which will be effective until February 1, 1999. No cash borrowings were
outstanding at December 31, 1997. The Corporation is required under these
Agreements to maintain certain financial ratios, and meet certain net worth and
indebtedness tests for which the Corporation is in compliance. Under the
provisions of the Agreements, retained earnings of $36,498,000 were available
for cash dividends and stock repurchases at December 31, 1998.
At December 31, 1998, substantially all of the industrial revenue bond
issues are collateralized by real estate, machinery and equipment. Certain of
these issues are supported by letters of credit which total approximately
$17,793,000. The Corporation has various other letters of credit outside the
Revolving Credit Agreement totaling approximately $1,010,000.
10. Stock Compensation Plans
Stock-Based Compensation: Pro forma information regarding net earnings and
earnings per share is required by SFAS No. 123 and has been determined as if the
Corporation had accounted for its 1998, 1997 and 1996 employee stock option
grants under the fair value method of that Statement. Information with regards
to the number of options granted, market price of the grants, vesting
requirements and the maximum term of the options granted appears by plan type in
the sections below. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following weighted
average assumptions for 1998, 1997 and 1996, respectively: a risk-free interest
rate of 4.80%, 5.88% and 6.6%; an expected volatility of 18.80%, 18.18% and
24.38%; an expected dividend yield of 1.38%, 1.37% and 2.0%; and a weighted
average expected life of the option of 7 years for 1998 and 1997 and 10 years
for 1996. For purposes of pro forma disclosures, no expense was recognized on
the 1998 options due to the timing of the grant. The estimated fair value of the
1997 and 1996 option grants are presented as amortized to expense over the
options' vesting period beginning January 1, 1996. The Corporation's pro forma
information for the years ended December 31, 1998, 1997 and 1996 are as follows:
----------------------------------
(In thousands, except per share data) 1998 1997 1996
========--------------------------
Net earnings:
As reported $ 29,053 $ 27,885 $ 16,109
Pro forma $ 28,509 $ 27,570 $ 15,954
Net earnings per common share:
As reported:
Basic $ 2.85 $ 2.74 $ 1.59
Diluted $ 2.82 $ 2.71 $ 1.58
Pro forma:
Basic $ 2.80 $ 2.71 $ 1.57
Diluted $ 2.77 $ 2.68 $ 1.56
==================================
Long-Term Incentive Plan: Under a Long-Term Incentive Plan approved by
stockholders in 1995, an aggregate total of 1,000,000 shares of common stock
were reserved for issuance under said Plan. The total number of shares available
for a grant to key employees in each year will be one percent of the shares
outstanding at the beginning of that year, although that number may be increased
by the number of shares available but unused in prior years and by the number of
shares covered by previously terminated or forfeited awards. No more than 50,000
shares of common stock subject to the plan may be awarded in any year to any one
participant in the plan.
Under this plan, the Corporation awarded 1,184,604 performance units in
1998, 997,841 in 1997 and 734,654 in 1996 to certain key employees. The
performance units are denominated in dollars and are contingent upon the
satisfaction of performance objectives keyed to profitable growth over a period
of three fiscal years commencing with the fiscal year following such awards. The
anticipated cost of such awards is expensed over the three-year performance
period. However, the actual cost of the performance units may vary from total
value of the awards depending upon the degree to which the key performance
objectives are met. In addition, the Corporation granted non-qualified stock
options in 1998, 1997 and 1996 to key employees. Stock options granted under
this plan expire ten years after the date of the grant and are exercisable as
follows: up to one-third of the grant after one full year, up to two-thirds of
the grant after two full years and in full three years from the date of grant.
Stock option activity during the periods is indicated as follows:
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 32
<PAGE>
- --------------------------------------------------------------------------------
------------------------------------
Weighted
Average
Exercise Options
Shares Price Exercisable
====================================
Outstanding at January 1, 1996 248,384 $18.98 88,618
Granted 69,298 25.19
Exercised (4,054) 17.19
Forfeited (4,908) 20.07
------------------------------------
Outstanding at December 31, 1996 308,720 20.38 165,360
Granted 89,286 38.00
Exercised (19,302) 17.08
Forfeited (8,878) 22.33
------------------------------------
Outstanding at December 31, 1997 369,826 24.76 216,398
Granted 118,886 37.66
Exercised (31,554) 19.13
Forfeited (20,657) 30.59
------------------------------------
Outstanding at December 31, 1998 436,501 28.63 242,071
====================================
Stock Plan for Non-Employee Directors: The Stock Plan for Non-Employee
Directors, approved by stockholders in 1996, authorized the grant of restricted
stock awards and, at the option of the directors, the payment of regular
stipulated compensation and meeting fees in equivalent shares. In June 1996,
pursuant to the plan 3,612 shares of restricted stock were issued to
non-employee directors, at no cost to them. The shares have been valued at a
price of $25.78 per share, the fair market price on the date of the award. The
cost of the restricted stock awards is being amortized over their five-year
restriction period. At December 31, 1997, the Corporation had deferred an
additional 4,468 shares, at an average market value of $27.45, for its
non-employee directors pursuant to election by directors to receive such shares
in lieu of payment for earned compensation under the plan. Depending on the
extent to which the non-employee directors elect to receive future compensation
in shares, total awards under this plan could reach or exceed 16,000 shares by
April 12, 2006, the termination date of the plan.
11. Environmental Costs
In 1998, the Corporation successfully resolved some environmental issues and
significant progress was achieved in other issues. Included in environmental
expenses in 1998 are costs for the Corporation's lawsuit against a number of its
insurance carriers with respect to the Corporation's environmental liabilities.
The non-current environmental obligation on the books at December 31, 1998 was
$10,469,000 compared to $9,346,000 in December 1997.
In 1998, the Corporation's Wood-Ridge, New Jersey site began operations to
remediate soil and groundwater at the site. Costs to complete construction and
begin the operation and maintenance of the system totaled $854,000 in 1998. The
cost of constructing and operating this site was provided in 1990 as part of a
$21,000,000 reserve established to remediate the property.
The Corporation has been named as a potentially responsible party, as have
many other corporations and municipalities, in a number of environmental
clean-up sites. Significant sites include Sharkey landfill superfund site,
Parsippany, New Jersey; the Chemsol, Inc. superfund site, Piscataway, New
Jersey; Pfohl Brothers landfill site, Cheektowaga, New York and PJP landfill,
Jersey City, New Jersey. The Malta test station and Buffalo Airport sites were
resolved in 1998.
The Corporation believes the outcome for any of the remaining sites will
not have a materially adverse effect on the Corporation's results of operations
or financial condition. The lawsuit by the Corporation against its insurance
carriers is being contested, and no financial future recovery from this lawsuit
has been recorded to reduce the Corporation's environmental costs.
12. Pension and Other Postretirement Benefit Plans
The Corporation maintains a non-contributory defined benefit pension plan
covering substantially all employees. The Curtiss-Wright Retirement Plan
non-union formula is based on years of credited service and the five highest
consecutive years' compensation during the last ten years of service and a "cash
balance" benefit; union employees who have negotiated a benefit under this plan
are entitled to a benefit based on years of service multiplied by a monthly
pension rate. Employees are eligible to participate in this plan after one year
of service and are vested after five years of service. At December 31, 1998 and
December 31, 1997, the Corporation had prepaid pension costs of $43,822,000 and
$38,674,000, respectively, under this plan. The Corporation also maintains a
non-qualified Restoration Plan covering those employees whose compensation or
benefits exceeds the IRS limitation for pension benefits. Benefits under this
plan are not funded and as such, the Corporation had an accrued pension
liability of $2,142,000 and $2,195,000 at December 31, 1998 and 1997,
respectively. Disclosures made below are aggregated in accordance with Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits."
- --------------------------------------------------------------------------------
33 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-----------------------------------------------------
1998 1997 1998 1997
========-----------------------=======---------------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year $113,718 $112,722 $ 4,125 $ 6,516
Service cost 3,770 3,738 177 146
Interest cost 7,399 7,680 335 295
Plan participants' contributions
Amendments (1,742)
Actuarial gain (1,805) 3,521 999 (576)
Benefits paid (13,595) (13,943) (449) (514)
-----------------------------------------------------
Benefit obligation at end of year 109,487 113,718 5,187 4,125
=====================================================
Change in Plan Assets:
Fair value of plan assets at beginning of year 230,743 192,599
Actual return on plan assets (343) 52,011
Employer contribution 77 76 449 514
Plan participants' contribution
Benefits paid (13,595) (13,943) (449) (514)
-----------------------------------------------------
Fair value of plan assets at end of year 216,882 230,743
=====================================================
Funded status 107,395 117,025 (5,187) (4,125)
Unrecognized net actuarial loss (gain) (59,314) (72,951) (2,560) (3,703)
Unrecognized transition obligation (6,582) (7,739)
Unrecognized prior service costs 181 144 (1,828) (2,022)
-----------------------------------------------------
Prepaid (accrued) benefit cost $41,680 $36,479 $(9,575) $(9,850)
=====================================================
Weighted-average assumptions as of December 31:
Discount rate 6.75% 7.00% 6.75% 7.00%
Expected return on plan assets 8.50% 8.50%
Rate of compensation increase 4.50% 4.50%
=====================================================
</TABLE>
For measurement purposes, an 8.18% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1998. The rate was assumed
to decrease gradually to 5.5% for 2007 and remain at that level thereafter.
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 34
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------------------------------
1998 1997 1998 1997
=======-----------------------====--------------
<S> <C> <C> <C> <C>
Components of Net Periodic Benefit Cost (Revenue):
Service cost $ 3,770 $ 3,738 $177 $146
Interest cost 7,399 7,679 335 296
Expected return on plan assets (14,562) (13,681)
Amortization of prior service cost (37) 3 (193) (167)
Amortization of transition obligation (1,157) (1,157)
Recognized net actuarial loss (539) 106 (145) (213)
------------------------------------------------
Net periodic benefit cost (revenue) $(5,126) $ (3,312) $174 $ 62
================================================
1% 1%
Increase Decrease
================================================
Effect on total of services and interest cost components $ 68 $ (57)
Effect on postretirement benefit obligation $556 $(476)
================================================
</TABLE>
The Corporation had foreign pension costs in 1998, 1997 and 1996 under
retirement plans of $367,000, $312,000 and $249,000, respectively. At December
31, 1998, approximately 33% of the plan's assets are invested in debt
securities, including a portion in U.S. Government issues. Approximately 67% of
plan assets are invested in equity securities.
13. Leases
Buildings and Improvements Leased to Others. The Corporation leases certain of
its buildings and related improvements to outside parties under noncancelable
operating leases. Cost and accumulated depreciation of the leased buildings and
improvements at December 31, 1998, were $50,816,000 and $44,559,000,
respectively, and at December 31, 1997, were $50,572,000 and $43,692,000,
respectively.
At December 31, 1998, the approximate future minimum rental income and
commitment under operating leases that have initial or remaining noncancelable
lease terms in excess of one year are as follows:
Rental Rental
(In thousands) Income Commitment
================================================================================
1999 $ 4,781 $2,729
2000 4,459 1,914
2001 4,218 1,470
2002 2,558 1,287
2003 1,379 1,154
2004 and beyond 11,571 1,866
================================================================================
Facilities Leased from Others. The Corporation conducts a portion of its
operations from leased facilities, which include manufacturing and service
facilities, administrative offices and warehouses. In addition, the Corporation
leases automobiles, machinery and office equipment under operating leases.
Rental expenses for all operating leases amounted to approximately $2,586,000 in
1998, $2,239,000 in 1997 and $2,283,000 in 1996.
14. Industry Segments
The Corporation has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS No.
131). SFAS No. 131 establishes new standards for reporting information about
operating segments
- --------------------------------------------------------------------------------
35 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
and related disclosures about products and services and geographic areas.
Operating segments are defined as components of an enterprise about which
separate financial information is available, such that it is evaluated regularly
by the chief operating decision maker in assessing performance and allocating
resources. The Corporation's chief operating decision maker is its Chairman and
President. The operating segments are managed separately because each offers
different products and serves different markets. The principle products and
major markets of the three operating segments are described in the At a Glance
section of this Annual Report.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. Interest income is
not reported on an operating segment basis because short-term investments and
returns on those investments are aggregated and evaluated separately from
business operations.
The Corporation had one customer in the Actuation and Control Products &
Services ("ACPS") segment which accounted for 16% of consolidated revenue in
1998 and 15% in 1997, but no customers which provided more than 10% of total
sales in 1996.
CONSOLIDATED INDUSTRY SEGMENT INFORMATION
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Actuation
Precision Mfg. and Control Flow Control
Products & Products & Products & Segment Corporate Consolidated
Services Services Services Total & Other Total
=====================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1998:
Revenue from external customers $105,999 $105,400 $38,014 $249,413 $249,413
Intersegment revenues 554 554 554
Interest expense 78 148 253 479 $ 6 485
Depreciation and amortization expense 3,792 3,608 1,246 8,646 1,015 9,661
Income tax expense (benefit) 11,671 (240) 1,997 13,428 5,099 18,527
Segment net income (loss) 18,213 (1,033) 3,010 20,190 8,863 29,053
Segment assets 68,198 119,351 40,080 227,629 125,111 352,740
Expenditures for long-lived assets 6,053 2,111 2,180 10,344 298 10,642
=====================================================================================
Year Ended December 31, 1997:
Revenue from external customers 95,362 97,369 26,664 219,395 219,395
Intersegment revenues 691 691 691
Interest expense 78 138 171 387 387
Depreciation and amortization expense 3,656 3,455 1,005 8,116 981 9,097
Income tax expense 9,328 805 1,409 11,542 2,472 14,014
Segment net income 14,932 2,116 2,161 19,209 8,676 27,885
Segment assets 56,254 94,473 15,986 166,713 117,995 284,708
Expenditures for long-lived assets 4,838 4,675 1,244 10,757 474 11,231
=====================================================================================
Year Ended December 31, 1996:
Revenue from external customers 82,615 64,623 23,298 170,536 170,536
Intersegment revenues 477 477 477
Interest expense 78 134 167 379 8 387
Depreciation and amortization expense 3,533 2,956 1,037 7,526 1,420 8,946
Income tax expense (benefit) 5,586 (565) 1,254 6,275 1,745 8,020
Segment net income (loss) 8,958 (982) 2,234 10,210 5,899 16,109
Segment assets 54,340 86,575 17,977 158,892 108,272 267,164
Expenditures for long-lived assets 3,573 7,571 382 11,526 2,630 14,156
=====================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Curtiss-Wright Corporation and Subsidiaries 36
<PAGE>
- --------------------------------------------------------------------------------
Reconciliations: December 31,
-----------------------------------
1998 1997 1996
========---------------------------
Revenues:
Total segment revenue $249,413 $219,395 $170,536
Intersegment revenue 554 691 477
Elimination of intersegment revenue (554) (691) (477)
-----------------------------------
Total consolidated revenues $249,413 $219,395 $170,536
===================================
Net Income:
Total segment net income $20,190 $ 19,209 $ 10,210
Rental income, net 1,873 2,634 1,393
Investment income 2,581 3,181 2,712
Pension income 3,131 2,164 2,333
Corporate and other 1,278 697 (539)
-----------------------------------
Total consolidated profit or loss $ 29,053 $ 27,885 $ 16,109
-----------------------------------
Assets:
Total assets for reportable segments $227,629 $166,713 $158,892
Short-term investments 66,444 61,883 55,674
Pension assets 43,822 38,674 35,016
Other assets 14,914 17,528 17,682
Elimination of intersegment receivables (69) (90) (100)
-----------------------------------
Total consolidated assets $352,740 $284,708 $267,164
===================================
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
-------------------------------------------------------------------------------
Long-Lived Long-Lived Long-Lived
Revenues(1) Assets Revenues(1) Assets Revenues(1) Assets
=======================--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Geographic Information:
United States $165,567 $217,668 $155,279 $201,718 $124,198 $192,405
United Kingdom 32,320 11,454 22,842 7,405 17,631 7,654
Other foreign countries 51,526 8,093 41,274 10,464 28,707 10,171
-------------------------------------------------------------------------------
Consolidated total $249,413 $237,215 $219,395 $219,587 $170,536 $210,230
===============================================================================
</TABLE>
(1) Revenues are attributed to countries based on the location of the customer.
- --------------------------------------------------------------------------------
37 Curtiss-Wright Corporation and Subsidiaries
<PAGE>
- --------------------------------------------------------------------------------
QUARTERLY RESULTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
--------------------------------------------
(In thousands except per share amounts) First Second Third Fourth
============================================
<S> <C> <C> <C> <C>
1998 Quarters:
Sales $ 60,846 $ 59,405 $ 62,603 $ 66,559
Gross profit 18,122 21,749 20,851 21,292
Net earnings 6,605 7,701 6,758 7,989
Earnings per share:
Basic earnings per common share $ .65 $ .76 $ .66 $ .78
Dividends per common share $ .13 $ .13 $ .13 $ .13
--------------------------------------------
1997 Quarters:
Sales $ 53,148 $ 54,412 $ 52,677 $ 59,158
Gross profit 16,644 19,125 19,002 20,918
Net earnings 4,955 7,050 8,076 7,804
Earnings per share:
Basic earnings per common share $ .49 $ .69 $ .79 $ .77
Dividends per common share $ .125 $ .125 $ .125 $ .13
============================================
</TABLE>
CONSOLIDATED SELECTED FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------
(In thousands except per share data) 1998 1997 1996 1995 1994
========-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $249,413 $219,395 $170,536 $154,446 $155,001
Earnings before changes in accounting
principles 29,053 27,885 16,109 18,169 19,547
Net earnings 29,053 27,885 16,109 18,169 19,303
Total assets 354,449 284,708 267,164 246,201 238,694
Long-term debt 20,162 10,347 10,347 10,347 9,047
Basic earnings per common share:
Earnings before changes in accounting
principles $ 2.85 $ 2.74 $ 1.59 $ 1.79 $ 1.93
Net earnings $ 2.85 $ 2.74 $ 1.59 $ 1.79 $ 1.91
Cash dividends $ .52 $ .505 $ .50 $ .50 $ .50
=========================================================
</TABLE>
See notes to consolidated financial statements for additional financial
information.
<PAGE>
CORPORATE DIRECTORY
Directors
Thomas R. Berner
Partner
Law firm of
Berner & Berner, P.C.
Admiral James B. Busey IV
Admiral, U.S. Navy (Ret.)
Former President and
Chief Executive Officer
AFCEA International
David Lasky
Chairman and President
William B. Mitchell
Former Vice Chairman
Texas Instruments Inc.
John R. Myers
Management Consultant
Former Chairman of the Board
Garrett Aviation Services
Dr. William W. Sihler
Ronald E. Trzcinski Professor
of Business Administration
Darden Graduate School of
Business Administration
University of Virginia
J. McLain Stewart
Director
McKinsey & Co.
Management Consultants
Officers
David Lasky
Chairman and President
Gerald Nachman
Executive Vice President
Martin R. Benante
Vice President
George J. Yohrling
Vice President
Robert A. Bosi
Vice President--Finance
Dana M. Taylor
General Counsel and Secretary
Kenneth P. Slezak
Controller
Gary J. Benschip
Treasurer
Curtiss-Wright Corporation and Subsidiaries | 38
<PAGE>
- ---------------------
CORPORATE INFORMATION
- ---------------------
Corporate Headquarters
1200 Wall Street West
Lyndhurst, New Jersey 07071
Tel. (201) 896-8400
Fax (201) 438-5680
Annual Meeting
The 1999 Annual Meeting of Stockholders will be held on April 23, 1999 at 2:00
p.m. at the Novotel Meadowlands Hotel, One Polito Avenue, Lyndhurst, New Jersey
07071.
Stock Exchange Listing
The Corporation's common stock is listed and traded on the New York Stock
Exchange. The stock transfer symbol is CW.
Common Stockholders
As of December 31, 1998, the approximate number of holders of record of common
stock, par value $1.00 per share, of the Corporation was 3,926.
Stock Transfer Agent and Registrar
For services such as changes of address, replacement of lost certificates or
dividend checks, and changes in registered ownership, or for inquiries as to
account status, write to ChaseMellon Shareholder Services, L.L.C. at the
following addresses:
Stockholder Inquiries/Address Changes/Consolidations
P.O. Box 3315, South Hackensack, NJ 07606
Duplicate Mailings
If you receive duplicate mailings because of slight differences in the
registration of your accounts and wish to eliminate the duplication,
please call ChaseMellon's toll free number, (800) 416-3743, or write to
ChaseMellon Shareholder Services, L.L.C., 85 Challenger Road, Ridgefield
Park, NJ 07660 for instructions on combining your accounts.
Direct Stock Purchase Plan
A plan administered by the Chase Manhattan Bank is available to purchase
or sell shares of Curtiss-Wright which provides a low cost alternative to
the traditional methods of buying, holding and selling stock. The plan
also provides for the automatic reinvestment of Curtiss-Wright dividends.
For more information contact our transfer agent, ChaseMellon Shareholder
Services, L.L.C. toll free at (888) 266-6793.
Lost Certificates/Certificate Replacement
Estoppel Department, P.O. Box 3317,
South Hackensack, NJ 07606
Certificate Transfers
Stock Transfer Department, P. O. Box 3312,
South Hackensack, NJ 07606
Please include your name, address, and telephone number with all correspondence.
Telephone inquiries may be made to (800) 416-3743. Foreign (201) 329-8660.
Hearing impaired (800) 231-5469. Internet inquiries should be addressed to
http://www.chasemellon.com
Investor Information
Investors, stockbrokers, security analysts, and others seeking information about
Curtiss-Wright Corporation should contact Robert A. Bosi, Vice
President--Finance, or Gary J. Benschip, Treasurer, at the Corporate
Headquarters, telephone (201) 896-1751.
Internet Address
Use http://www.curtisswright.com to reach the Curtiss-Wright home page for
information about Curtiss-Wright on the World Wide Web.
Financial Reports
This Annual Report includes most of the periodic financial information required
to be on file with the Securities and Exchange Commission. The company also
files an Annual Report on Form 10-K, a copy of which may be obtained free of
charge. These reports, as well as additional financial documents such as
quarterly shareholder reports, proxy statements, and quarterly reports on Form
10-Q, may be obtained by written request to Gary J. Benschip, Treasurer, at
Corporate Headquarters.
Common Stock Price Range
--------------------------------------------------
1998 1997
==================================================
High Low High Low
--------------------------------------------------
First Quarter $39.1875 $33.8125 $28.1875 $24.7500
Second Quarter 41.8750 38.1250 31.1250 26.7500
Third Quarter 48.3750 39.1875 39.8750 29.0938
Fourth Quarter 39.5000 33.0625 39.2500 36.1250
--------------------------------------------------
Dividends
--------------------------------------------------
1998 1997
==================================================
First Quarter $ 0.130 $ 0.125
Second Quarter $ 0.130 $ 0.125
Third Quarter $ 0.130 $ 0.125
Fourth Quarter $ 0.130 $ 0.130
--------------------------------------------------
Design: Waters Design Associates, Inc. New York City
<PAGE>
[LOGO]
CURTISS-WRIGHT CORPORATION
1200 Wall Street West
Lyndhurst, New Jersey 07071
CW
Listed
NYSE
THE NEW YORK STOCK EXCHANGE
Exhibit 21
Subsidiaries of the Registrant
The information below is provided, as of March 29, 1999, with respect
to the subsidiaries of Registrant. The names of certain inactive subsidiaries
and other consolidated subsidiaries of Registrant have been omitted because all
such subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
<TABLE>
<CAPTION>
Percentage of Voting
Organized Under Securities Owned by
Name the Laws of Immediate Parent
<S> <C> <C>
Curtiss-Wright Flight Systems, Inc. Delaware 100%
Metal Improvement Company, Inc. Delaware 100%
Curtiss-Wright Flow Control Corporation New York 100%
Curtiss-Wright Flow Control Service Corporation Delaware 100%
Curtiss-Wright Flight Systems Europe A/S Denmark 100%
Curtiss-Wright Foreign Sales Corp. Barbados 100%
Curtiss-Wright Antriebstechnik GmbH Switzerland 100%
</TABLE>
EXHIBIT 23
PRICEWATERHOUSECOOPERS LLP [LOGO]
PricewaterhouseCoopers LLP
400 Campus Drive
P.O. Box 988
Florham Park, NJ 07932
Telephone (973) 236 4000
Facsimile (973) 236 5000
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 and S-3 (No. 33-95562329) and in the Registration
Statements on Forms S-8 (Nos. 33-95602114 and 33-96583181) of Curtiss-Wright
Corporation of our report dated February 1, 1999 appearing on page 21 of the
Curtiss-Wright Corporation 1998 Annual Report which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report on the Financial Statement Schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,809
<SECURITIES> 66,444
<RECEIVABLES> 62,822
<ALLOWANCES> 1,910
<INVENTORY> 54,048
<CURRENT-ASSETS> 198,573
<PP&E> 237,215
<DEPRECIATION> 162,704
<TOTAL-ASSETS> 352,740
<CURRENT-LIABILITIES> 67,810
<BONDS> 20,162
0
0
<COMMON> 15,000
<OTHER-SE> 214,593
<TOTAL-LIABILITY-AND-EQUITY> 352,740
<SALES> 249,413
<TOTAL-REVENUES> 261,131
<CGS> 167,399
<TOTAL-COSTS> 213,066
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 352
<INTEREST-EXPENSE> 485
<INCOME-PRETAX> 47,580
<INCOME-TAX> 18,527
<INCOME-CONTINUING> 29,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,053
<EPS-PRIMARY> 2.85
<EPS-DILUTED> 2.82
</TABLE>
