SECURITIES and EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
FOR THE QUARTER ENDED JUNE 30, 2000
Commission File Number 1-134
CURTISS-WRIGHT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-0612970
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Wall Street West
Lyndhurst, New Jersey 07071
(Address of principal executive offices) (Zip Code)
(201) 896-8400
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $1.00 per share: 10,010,527 shares (as of July 31, 2000)
Page 1 of 29
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
TABLE of CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Stockholders' Equity 6
Notes to Consolidated Financial Statements 7 - 11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 16
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 18
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 19
Item 6 - Exhibits and Reports on Form 8-K 19
Signatures 20
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
2000 1999
------------------- -----------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 8,945 $ 9,547
Short-term investments 37,166 25,560
Receivables, net 67,394 70,729
Deferred tax assets 7,556 8,688
Inventories, net 58,650 60,584
Other current assets 3,674 5,262
------------------- -----------------------
Total current assets 183,385 180,370
------------------- -----------------------
Property, plant and equipment, at cost 243,899 242,000
Accumulated depreciation 152,494 147,422
------------------- -----------------------
Property, plant and equipment, net 91,405 94,578
Prepaid pension costs 55,316 50,447
Goodwill 50,135 50,357
Other assets 10,013 11,374
------------------- -----------------------
Total Assets $ 390,254 $387,126
=================== =======================
Liabilities
Current Liabilities:
Current portion of long-term debt $ 4,047 $ 4,047
Account payable and accrued expenses 32,520 32,767
Dividends payable 1,304
0
Income taxes payable 3,024 5,203
Other current liabilities 9,626 13,915
------------------- -----------------------
Total current liabilities 50,521 55,932
Long-term debt 27,565 34,171
Deferred income taxes 17,061 14,113
Accrued postretirement benefit costs 5,550 8,515
Other liabilities 15,593 16,040
------------------- -----------------------
Total Liabilities 116,290 128,771
------------------- -----------------------
Stockholders' Equity
Common stock, $1 par value 15,000 15,000
Capital surplus 51,466 51,599
Retained earnings 393,270 376,006
Unearned portion of restricted stock (30) (24)
Accumulated other comprehensive income (2,978) (2,622)
-------------------- -----------------------
456,728 439,959
Less: cost of treasury stock 182,764 181,604
------------------- -----------------------
Total Stockholders' Equity 273,964 258,355
------------------- -----------------------
Total Liabilities and Stockholders' Equity $ 390,254 $387,126
=================== =======================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 (1) 2000 1999 ( 1)
-------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $83,050 $70,195 $165,287 $140,545
Cost of sales 52,579 45,457 105,887 90,789
------------ ------------------ ----------------- --------------
Gross profit 30,471 24,738 59,400 49,756
Research & development costs 1,486 592 2,874 1,740
Selling expenses 4,932 3,721 9,688 7,752
General and administrative expenses 11,923 9,937 22,502 19,070
Environmental (recoveries) exp., net (1,899) 340 (1,782) 554
--------------- ----------------- ----------------- --------------
Operating income 14,029 10,148 26,118 20,640
Investment income, net 514 753 1,019 1,458
Rental income, net 890 1,476 2,050 2,302
Pension income, net 2,341 1,282 4,085 2,563
Other expenses, net (75) (252) (107) (337)
Interest expense (396) (327) (772) (630)
------------- ----------------- ----------------- --------------
Earnings before income taxes 17,303 13,080 32,393 25,996
Provision for income taxes 6,659 4,801 12,520 9,735
------------ ------------------ ----------------- --------------
Net earnings $ 10,644 $ 8,279 $ 19,873 $ 16,261
============ ================== ================= ==============
Basic earnings per common share $1.06 $0.82 $1.98 $1.60
============ ================== ================= ==============
Diluted earnings per common share
$1.05 $0.79 $1.96 $1.57
============ ================== ================= ==============
Dividends per common share $0.13 $0.13 $0.13 $0.13
============ ================== ================= ==============
Weighted average shares outstanding:
Basic 10,017 10,143 10,017 10,143
============ ================== ================= ==============
Diluted 10,114 10,326 10,114 10,326
============ ================== ================= ==============
See notes to consolidated financial statements.
<FN>
(1) Certain prior year information restated to conform to current presentation.
</FN>
</TABLE>
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months Ended
<TABLE>
<CAPTION>
June 30,
------------------------------------
<S> <C> <C>
2000 1999 (1)
Cash flows from operating activities:
Net earnings $ 19,873 $ 16,261
----------------- ---------------
Adjustments to reconcile net earnings to
net cash provided by operating activities
(net of businesses acquired):
Depreciation and amortization 7,114 5,744
Net gains on short-term investments (66) (81)
Non-cash pension income (4,085) (2,563)
Increase in deferred taxes 4,080 632
Changes in operating assets and liabilities:
Proceeds from sales of trading securities 80,946 190,132
Purchases of trading securities (92,543) (174,188)
Decrease (increase) in receivables 3,596 12,257
Decrease (increase) in inventory 976 (476)
Increase (decrease) in progress payments 696 (13,086)
Decrease in accounts payable and accrued expenses (247) (2,979)
(Decrease) increase in income taxes payable (2,179) 1,364
Decrease (increase) in other assets 1,113 (186)
Decrease in other liabilities (7,701) (2,532)
Other, net (947) (557)
------------------ ---------------
Total adjustments (9,247) 13,481
------------------ --------------
Net cash provided by operating activities 10,626 29,742
----------------- ---------------
Cash flows from investing activities:
Proceeds from sales of real estate and equipment 613 106
Additions to property, plant and equipment (3,265) (11,573)
Acquisition of new business 0 (5,953)
----------------- ---------------
Net cash used in investing activities (2,652) (17,420)
------------------ --------------
Cash flows from financing activities:
Debt repayments (5,782) 0
Dividends Paid (1,305) (1,319)
Common stock repurchases (1,489) (3,433)
------------------ --------------
Net cash used in financing activities (8,576) (4,752)
------------------ --------------
Net (decrease) increase in cash and cash equivalents (602) 7,570
Cash and cash equivalents at beginning of period 9,547 5,809
----------------- --------------
Cash and cash equivalents at end of period $ 8,945 $ 13,379
================= ==============
See notes to consolidated financial statements.
<FN>
(1) Certain prior year information restated to conform to current presentation.
</FN>
</TABLE>
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Unearned Accumulated
Common Capital Retained Portion of Other Treasury
Stock Surplus Earnings Restricted Comprehensive Stock
Stock Income
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998 $15,000 $51,669 $342,218 ($40) ($2,800) $176,454
Net earnings 39,045
Common dividends (5,257)
Common stock repurchased 5,440
Stock options exercised, net (70) (290)
Amortization of earned portion
of restricted stock 16
Translation adjustments, net 178
============ ============== ============ =============== =================== =============
December 31, 1999 15,000 51,599 376,006 (24) (2,622) 181,604
============ ============== ============ =============== =================== =============
Net earnings 19,873
Common dividends (2,609)
Common stock issued (15)
Common stock repurchased 1,489
Stock options exercised, net (133) (329)
Amortization of earned 9
portion
of restricted stock
Translation adjustments, net (356)
============ ============== ============ =============== =================== =============
June 30, 2000 $ 15,000 $ 51,466 $393,270 ($30) ($2,978) $182,764
============ ============== ============ =============== =================== =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS of PRESENTATION
Curtiss-Wright Corporation and its subsidiaries (the "Corporation") is
a diversified multi-national manufacturing and service concern that
designs, manufactures and repairs precision components and systems and
provides highly engineered services to the aerospace and ground
defense, automotive, shipbuilding, oil, petrochemical, agricultural
equipment, railroad, power generation, metalworking and fire and rescue
industries. Operations are conducted through six manufacturing
facilities, thirty-seven metal treatment service facilities and three
component repairs locations.
The information furnished in this report has been prepared in
conformity with generally accepted accounting principles and as such
reflects all adjustments, consisting primarily of normal recurring
accruals, which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. The
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Corporation's 1999 Annual Report on Form 10-K.
The results of operations for these interim periods are not necessarily
indicative of the operating results for a full year. Certain
reclassifications of prior year amounts have been made in order to
conform to the current presentation.
2. RECEIVABLES
Receivables, at June 30, 2000 and December 31, 1999, include amounts
billed to customers and unbilled charges on long-term contracts
consisting of amounts recognized as sales but not billed as of the
dates presented. Substantially all amounts of unbilled receivables are
expected to be billed and collected within a year. The composition
of receivables for these periods is as follows:
<TABLE>
<CAPTION>
(In thousands)
June 30, December 31,
2000 1999
--------- ------
<S> <C> <C>
Accounts receivable, billed $58,526 $66,652
Less: progress payments applied 1,498 1,922
------- -------
57,028 64,730
------- -------
Unbilled charges on long-term contracts 20,371 16,473
Less: progress payments applied 7,406 7,244
------- -------
12,965 9,229
------- -------
Allowance for doubtful accounts (2,599) (3,230)
------- -------
Receivables, net $67,394 $70,729
======= =======
</TABLE>
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
3. INVENTORIES
Inventories are valued at the lower of cost (principally average cost)
or market. The composition of inventories at June 30, 2000 and December
31, 1999 is as follows:
<TABLE>
<CAPTION>
(In thousands)
June 30, December 31,
2000 1999
------- -------
<S> <C> <C>
Raw materials $12,818 $12,952
Work-in-process 19,299 23,207
Finished goods 38,710 36,276
------- -------
Total inventories 70,827 72,435
Less: progress payments applied 2,298 1,340
------- -------
68,529 71,095
Less: reserves 9,879 10,511
------- -------
Inventories, net $58,650 $60,584
======= =======
</TABLE>
4. ENVIRONMENTAL MATTERS
The Corporation establishes a reserve for a potential environmental
responsibility when it concludes that a determination of legal
liability is probable, based upon the advice of counsel. Such amounts,
if quantified, reflect the Corporation's estimate of the amount of that
liability. If only a range of potential liability can be estimated, a
reserve will be established at the low end of that range. Such reserves
represent today's values of anticipated remediation not reduced by any
potential recovery from insurance carriers or through contested
third-party legal actions, and are not discounted for the time value of
money.
The Corporation is joined with many other corporations and
municipalities as potentially responsible parties (PRPs) in a number of
environmental cleanup sites, which include but are not limited to the
Sharkey landfill superfund site, Parsippany, New Jersey; Caldwell
Trucking Company superfund site, Fairfield, New Jersey; Pfohl Brothers
landfill site, Cheektowaga, New York; Chemsol, Inc. superfund site,
Piscataway, New Jersey; and PJP Landfill, Jersey City, New Jersey.
The Corporation believes that the outcome of any of these matters would
not have a material adverse effect on the Corporation's results of
operations or financial condition.
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
5. SEGMENT INFORMATION
The Corporation conducts its business operations through three
segments: Motion Control (formerly Actuation and Control Products &
Services); Metal Treatment (formerly Precision Manufacturing Products &
Services); and Flow Control (formerly Flow Control Products &
Services).
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended June 30, 2000
Motion Metal Flow Segment Corporate Consolidated
Control Treatment Control Total & Other (1) Total
<S> <C> <C> <C> <C> <C> <C>
Revenue from external customers $32,306 $26,477 $24,267 $83,050 $ 0 $83,050
Intersegment revenues 0 143 0 143 0 143
Segment oper. income (1) 5,109 5,391 1,900 12,400 1,629 14,029
<FN>
(1) Operating income for corporate and other includes environmental recoveries
of $1.9 million, net of expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended June 30, 1999
Motion Metal Flow Segment Corporate Consolidated
Control Treatment Control Total & Other Total
<S> <C> <C> <C> <C> <C> <C>
Revenue from external customers $30,529 $26,016 $13,650 $70,195 $ 0 $70,195
Intersegment revenues 0 53 0 53 0 53
Segment oper. Income (2) 1,796 5,990 1,318 9,104 1,044 10,148
<FN>
(2) Motion Control includes consolidation costs for the relocation of operations
in the amount of $1.3 Million.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Reconciliation: (In thousands)
Three months ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Total operating income $14,029 $10,148
Investment income, net 514 753
Rental income, net 890 1,476
Pension income, net 2,341 1,282
Other expense, net (75) (252)
Interest expense (396) (327)
------- -------
Earnings before income taxes $17,303 $13,080
======= =======
</TABLE>
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
Motion Metal Flow Segment Corporate Consolidated
Control Treatment Control Total & Other (1) Total
<S> <C> <C> <C> <C> <C> <C>
Revenue from external customers $59,650 $54,701 $50,936 $165,287 $ 0 $165,287
Intersegment revenues 0 301 0 301 0 301
Segment operating income(1) 6,518 12,223 4,445 23,186 2,932 26,118
Segment assets 109,703 82,544 84,107 276,354 113,900 390,254
<FN>
(1) Operating income includes a $2.8 million gain for the curtailment of
postretirement benefits associated with the closing of the Fairfield, NJ
facility partially offset by accrued postemployment costs of $.7 million.
</FN>
</TABLE>
<TABLE>
<CAPTION>
(In thousands)
Six Months Ended June 30, 1999
Motion Metal Flow Segment Corporate Consolidated
Control Treatment Control Total & Other Total
<S> <C> <C> <C> <C> <C> <C>
Revenue from external customers $60,838 $52,018 $27,689 $140,545 $ 0 $140,545
Intersegment revenues 0 172 0 172 0 172
Segment oper. Income (2) 3,832 12,191 3,235 19,258 1,382 20,640
Segment assets 116,104 80,773 42,596 239,473 122,109 361,582
<FN>
(2) Motion Control includes consolidation costs for the relocation of operations
in the amount of $1.8 Million.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Reconciliation: (In thousands)
Six months ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Total operating income $26,118 $20,640
Investment income, net 1,019 1,458
Rental income, net 2,050 2,302
Pension income, net 4,085 2,563
Other expense, net (107) (337)
Interest expense (772) (630)
------- -------
Earnings before income taxes $32,393 $25,996
======= =======
</TABLE>
6. COMPREHENSIVE INCOME
Total comprehensive income for the three months and six months ended
June 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended Six Months Ended
--------------------------------- ---------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
<S> <C> <C> <C> <C>
------------- ------------- ------------- -------------
Net earnings $10,644 $8,279 $19,873 $16,261
Foreign currency translations (479) 861 (356) (285)
------- ------ ------- -------
Total comprehensive income $10,165 $9,140 $19,517 $15,976
======= ====== ======= =======
</TABLE>
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
7. EARNINGS PER SHARE
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). Diluted earnings per share were computed based
on the weighted average number of shares outstanding plus all
potentially dilutive common shares issuable for the periods. Dilutive
common shares for the three and six months ended June 30, 2000 were
97,000, and for the three and six months ended June 30, 1999 were
183,000.
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued Statement
No. 137 deferring the effective date of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" (SFAS No. 133). SFAS No. 133 is now effective for fiscal
years beginning after June 15, 2000 (January 1, 2001 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 are 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. Management 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.
<PAGE>
PART I - ITEM 2
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
RESULTS of OPERATIONS
Sales for the current quarter increased 18% from the prior year to
$83.1 million and operating income of $14.0 million was 38% over that for the
same period in 1999. New orders in the second quarter of 2000 also increased to
$92.2 million, 51% above the second quarter of 1999, and backlog was 11% higher,
at $210.4 million. Net earnings for the Corporation rose 29% in the second
quarter of 2000, to $10.6 million, or $1.05 per diluted share, from $8.3
million, or $0.79 per diluted share for the second quarter of 1999.
During the second quarter of 2000, the Corporation achieved final
settlements in its environmental recovery suit against insurance carriers with
all but one of the remaining defendants. The settlements, net of associated
litigation expenses and amounts recognized for additional related environment
costs, added $1.2 million, or $0.12 per diluted share, to net earnings.
Excluding the effects of these items, normalized earnings amounted to $9.5
million, or $0.94 per diluted share, for the second quarter of 2000. These
results compared to normalized earnings from the first quarter of this year of
$8.0 million, or $0.79 per diluted share, generated a 19% increase on a sales
increase of 1%.
Sales for the first half of 2000 rose 18% to $165.3 million, from
$140.5 million a year ago. Operating income was 27% higher at $26.1 million and
new orders totaled $162.8 million, 24% above the same six-month period of last
year. Net earnings for the first six months of 2000 increased 22% to $19.9
million, or $1.96 per diluted share, from $16.3 million, or $1.57 per share, for
the first six months of 1999.
Operating results for the first six months of 2000 also benefited from
the net effect of non-recurring items recorded in the first quarter of this
year. Those items, discussed in the "Other Revenue and Costs" section later in
this report, along with the items recorded in the second quarter of 2000
mentioned above, favorably impacted pre-tax earnings by $3.9 million and
after-tax earnings by $2.4 million. Excluding the non-recurring items, net
earnings for the first half of 2000 would have been $17.5 million, or $1.72 per
diluted share.
The improvement in financial results year-to-year largely reflects the
acquisitions made by the Corporation in 1999 of Farris Engineering, Sprague
Products and Metallurgical Processing Inc. Sales from these companies, in the
aggregate, accounted for increases of $11.9 million and $24.9 million when
comparing the second quarter and first six months of 2000 to those same
respective periods of the prior year.
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
Operating Performance
Motion Control
Sales for the Corporation's Motion Control segment improved to $32.3
million in the second quarter of 2000, from $30.5 million in the second quarter
of 1999. Sales improvements for the quarter were largely a result of improved
Drive Technology business in Europe which showed continued growth in the ground
defense aiming and stabilization markets as compared to the prior year quarter.
Sales of aerospace repair and overhaul services for the second quarter 2000
improved over both the second quarter 1999 and the first quarter 2000. Sales of
commercial actuation products to Boeing improved slightly in the second quarter
but were offset by lower OEM military sales as compared to the same period last
year. Sales of Motion Control products for the first half of 2000 remain
slightly below 1999 levels.
Operating income for the Motion Control segment showed improvements
from both the second quarter and first half of last year as well as the first
quarter of 2000. Prior year periods reflected the consolidation costs of the
Fairfield, NJ operation into Motion Control's low-cost, state-of-the-art
facility in North Carolina. Expenses related to the consolidation activities
totaled approximately$1.3 million during the second quarter and $1.8 million for
the first six months of 1999. The Corporation is realizing the cost savings from
its investment in the consolidation.
Metal Treatment
Sales for the Corporation's Metal Treatment segment totaled $26.5
million and $54.7 million for the second quarter and first six months of 2000,
improving slightly when compared with sales of $26.0 million and $52.0 million
for those same respective periods of 1999. Sales improvements over the prior
year largely reflect an acquisition which occurred in mid-1999. Sales of
shot-peening services declined slightly due to a softness in domestic aerospace
markets and the negative effect of the strong dollar on currency translation
when comparing 2000 results to 1999.
Operating income for the Metal Treatment segment showed a slight
decline when comparing the second quarter of 2000 with the same prior year
period but remained on par when comparing results for the six month period of
2000 with that of 1999. For the six months ended June 30, 2000, improvements in
heat-treating operations were largely offset by lower income at both European
and North American shot-peening operations. As with sales, income from our
European shot-peening operations were adversely effected by currency
translation.
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
Flow Control
The Corporation's Flow Control segment posted sales of $24.3 million
for the second quarter and $50.9 million for the first half of 2000, compared
with sales of $13.7 million and $27.7 million reported in those same respective
periods of 1999. Operating income for the second quarter and first six-month
periods of 2000 were also significantly higher than 1999. The significant
improvements in both sales and operating income were largely the result of the
acquisition of the Farris and Sprague product lines, which occurred in August of
last year.
In the second quarter of 2000, sales and earnings from the traditional
product lines in the Flow Control segment exceeded the levels achieved in the
second quarter of 1999. Sales of marine product lines to the U.S. Navy continued
to perform well, as did sales from retrofit and service programs for domestic
nuclear utilities, and the sale of valves for new off-shore nuclear power plant
construction. Industrial valve sales continued to perform well notwithstanding
general softness in two primary markets-petrochemical and chemical process
industries.
Other Revenue and Costs
During the second quarter of 2000 the Corporation settled litigation to
recover environmental remediation costs against all but one remaining insurance
carrier. These settlements, net of associated litigation expenses and amounts
recognized for additional related environmental costs, provided additional
earnings for the period, as previously detailed. The settled litigation had been
pending for a number of years. By virtue of these settlements, in addition to
amounts received in 1999 and 1998, the Corporation has recouped a significant
portion of its historical remediation costs.
Results for the first half of 2000 reflect the recognition of a $2.8
million reduction to general and administrative expenses from the curtailment of
postretirement benefits associated with the closing of the Fairfield, New Jersey
facility. This benefit was partially offset by non-recurring postemployment
expenses. Results for the first half of 1999 had included a $1.0 million expense
reduction for the curtailment of postretirement benefits associated with the
closing of the Corporation's Buffalo, New York facility.
For the second quarter of 2000, the Corporation recorded other
non-operating revenue netting to $3.7 million, compared with $3.3 million for
the second quarter of 1999. The increase primarily reflects higher pension
income, due to reflecting the higher overfunded status of the Corporation's
pension plan. Net rental income declined due to expenses relating to the
Fairfield property, which is available for sale. For the first half of 2000,
other non-operating net revenue totaling $7.0 million compared with $6.0
million for the 1999 period as higher pension income was partially offset by
lower net rental and investment income.
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
CHANGES IN FINANCIAL CONDITION:
Liquidity and Capital Resources:
The Corporation's working capital was $132.9 million at June 30, 2000,
7% above working capital at December 31, 1999 of $124.4 million. The ratio of
current assets to current liabilities was 3.63 to 1 at June 30, 2000, compared
with a current ratio of 3.22 to 1 at December 31, 1999.
Cash, cash equivalents and short-term investments totaled $46.1 million
in aggregate at June 30, 2000, a 31% increase from $35.1 million at the prior
year-end. Also contributing to the working capital increase at June 30, 2000,
from December 31, 1999, was a substantial decrease in other current liabilities
caused by the reimbursement to tenants of a portion of a real estate tax appeal
and payment of other accrued liabilities.
Cash flow for the Corporation benefited from declines in receivables
and inventories as the Corporation has made concentrated efforts in reducing its
days sales outstanding and improve its inventory turnover. Days sales
outstanding at June 30, 2000 has been reduced to 60 days from 77 at December 31,
1999 and inventory turnover improved to 3.60 from 3.20 at the prior year-end.
The Corporation has two credit agreements, a Revolving Credit Agreement
and a Short-Term Credit Agreement, in effect aggregating $100.0 million with a
group of five banks. The credit agreements allow for borrowings to take place in
U. S. or certain foreign currencies. The Revolving Credit Agreement commits a
maximum of $60.0 million to the Corporation for cash borrowings and letters of
credit. The unused credit available under this facility at June 30, 2000 was
$25.4 million. The commitments made under the Revolving Credit Agreement expire
December 17, 2004, 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 $40.0 million,
all of which was available at June 30, 2000. The Short-Term Credit Agreement
expires on December 17, 2000. 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 (excluding letters of credit) under the two credit
agreements at June 30, 2000 were at a US Dollar equivalent of $12.6 million,
compared with cash borrowing of $21.9 million at June 30, 1999.
On May 30, 2000, the Corporation repaid 10.0 million Swiss francs of
the initial 31.0 million Swiss franc borrowings used to finance the Drive
Technology acquisition in December 1998. The debt repayment equated to US $5.8
million. The loans had variable interest rates averaging 3.20% for the first six
months of 2000 and variable interest rates averaging 2.03% for the first six
months of 1999.
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
During the first half of 2000, internally available funds were adequate
to meet capital expenditures of $3.3 million. Expenditures incurred during the
first half were generally for new and replacement machinery and equipment needed
for operations. Expenditures amounted to $1.6 million, $0.8 million and $0.7
million for the Metal Treatment, Motion Control and Flow Control segments,
respectively. During the first half of 2000, the Corporation also repurchased
41,270 shares of its common stock at a total cost of approximately $1.5
million.
The Corporation is expected to make capital expenditures of an
additional $9.5 million during the balance of the year, primarily for machinery
and equipment for the business segments. Funds from internal sources are
expected to be adequate to meet planned capital expenditures, environmental and
other obligations for the remainder of the year.
RECENTLY ISSUED ACCOUNTING STANDARDS
As discussed in Note 8 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,
2001.
FORWARD-LOOKING INFORMATION
Except for historical information contained herein, this Quarterly Report on
Form 10-Q does contain "forward looking" information within the meaning of
Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act
of 1934. 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 are outside our
control that could cause actual results to differ materially from future results
expressed or implied by such forward looking information. Readers are cautioned
not to put undue reliance on such forward-looking information. Such statements
in this Report include, without limitation, those
<PAGE>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
contained in Part I, Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations and 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.
<PAGE>
PART I - ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Corporation's market risk during the
six months ended June 30, 2000. Information regarding market risk and market
risk management policies is more fully described in item 7A. "Quantitative and
Qualitative Disclosures about Market Risk" of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The information required herein is incorporated by reference to the information
appearing under the caption "Other Revenue and Costs" in Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Item 6. EXHIBITS and REPORTS on FORM 8-K
(a) Exhibits
Exhibit 10 - Standard Supplemental Retirement Agreement
dated April 27, 1999 between the
Registrant and Officers of the Registrant.
(Page 21)
Exhibit 27 - Financial Data Schedules (Page 29)
(b) Reports on Form 8-K
The Registrant did not file any report on Form 8-K during the
quarter ended June 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CURTISS-WRIGHT CORPORATION
(Registrant)
By:/s/ Robert A. Bosi
-------------------
Robert A. Bosi
Vice President - Finance
(Chief Financial Officer)
By:/s/ Glenn E. Tynan
------------------
Glenn E. Tynan
Corporate Controller
(Chief Accounting Officer)
Dated: August 14, 2000
