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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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
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.)
4 Becker Farm Road
Roseland, New Jersey 07068
(Address of principal executive offices) (Zip Code)
(973) 597-4700
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $1.00 per share: 5,973,508 shares (as of October 31,
2003). Class B Common Stock, par value $1.00 per share: 4,382,123 shares (as of
October 31, 2003).
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
TABLE of CONTENTS
PAGE
-------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Earnings 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Stockholders' Equity 6
Notes to Consolidated Financial Statements 7 - 23
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 24 - 34
Item 3. Quantitative and Qualitative Disclosures about Market Risk 35
Item 4. Controls and Procedures 35
Forward-Looking Information 35 - 36
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 36
Item 2. Changes in Securities and Use of Proceeds 36
Item 6. Exhibits and Reports on Form 8-K 37
Signature 38
Page 2 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net sales $189,618 $119,641 $552,408 $339,205
Cost of sales 132,601 78,442 379,677 218,152
-------- -------- -------- --------
Gross profit 57,017 41,199 172,731 121,053
Research and development expenses 5,417 3,579 16,494 7,604
Selling expenses 9,612 8,245 28,887 21,131
General and administrative expenses 20,740 15,825 65,320 50,529
Environmental remediation and
administrative expenses 380 999 380 1,246
-------- -------- -------- --------
Operating income 20,868 12,551 61,650 40,543
Pension income, net 527 2,254 1,580 6,762
Other (expense) income, net (91) 3,808 182 4,328
Interest expense (1,113) (380) (2,906) (1,039)
-------- -------- -------- --------
Earnings before income taxes 20,191 18,233 60,506 50,594
Provision for income taxes 7,672 6,921 22,992 19,150
-------- -------- -------- --------
Net earnings $ 12,519 $ 11,312 $ 37,514 $ 31,444
======== ======== ======== ========
Basic earnings per share $ 1.21 $ 1.10 $ 3.64 $ 3.09
======== ======== ======== ========
Diluted earnings per share $ 1.20 $ 1.08 $ 3.60 $ 3.01
======== ======== ======== ========
Dividends per share $ 0.15 $ 0.15 $ 0.45 $ 0.45
======== ======== ======== ========
Weighted average shares outstanding:
Basic 10,328 10,238 10,304 10,188
Diluted 10,468 10,470 10,428 10,430
See notes to consolidated financial statements
Page 3 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
------------- ------------
2003 2002
------------- ------------
Assets
Current Assets:
Cash and cash equivalents $ 116,046 $ 47,717
Receivables, net 138,317 138,210
Inventories, net 86,566 84,914
Deferred tax assets, net 21,935 21,840
Other current assets 7,796 9,005
--------- ---------
Total current assets 370,660 301,686
--------- ---------
Property, plant and equipment, net 231,485 219,049
Prepaid pension costs 77,647 76,072
Goodwill 211,855 181,101
Other intangible assets, net 21,137 21,982
Other assets 12,612 13,034
--------- ---------
Total Assets $ 925,396 $ 812,924
========= =========
Liabilities
Current Liabilities:
Short-term debt $ 907 $ 32,837
Dividends payable 1,545 --
Accounts payable 42,386 41,344
Accrued expenses 36,867 32,446
Income taxes payable 10,861 4,528
Other current liabilities 35,276 53,294
--------- ---------
Total current liabilities 127,842 164,449
--------- ---------
Long-term debt 222,704 119,041
Deferred tax liabilities, net 5,399 6,605
Accrued pension and other postretirement benefit costs 77,435 77,438
Long-term portion of environmental reserves 21,779 22,585
Other liabilities 16,101 11,578
--------- ---------
Total Liabilities 471,260 401,696
--------- ---------
Stockholders' Equity
Common stock, $1 par value 10,618 10,618
Class B common stock, $1 par value 4,382 4,382
Additional paid-in capital 52,251 52,200
Retained earnings 541,174 508,298
Unearned portion of restricted stock (61) (60)
Accumulated other comprehensive income 13,968 6,482
--------- ---------
622,332 581,920
Less: Cost of treasury stock (168,196) (170,692)
--------- ---------
Total Stockholders' Equity 454,136 411,228
--------- ---------
Total Liabilities and Stockholders' Equity $ 925,396 $ 812,924
========= =========
See notes to consolidated financial statements
Page 4 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended
September 30,
--------------------
2003 2002
--------- --------
Cash flows from operating activities:
Net earnings $ 37,514 $ 31,444
--------- --------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 22,963 12,802
Net loss (gain) on sales of real estate and equipment 64 (661)
Non-cash director stock compensation expense 120 --
Non-cash pension income (1,580) (4,701)
Deferred income taxes (811) 3,470
Changes in operating assets and liabilities, net of
businesses acquired:
Proceeds from sales of short-term investments -- 77,050
Purchases of short-term investments -- (35,600)
Decrease in receivables 2,442 141
Decrease in inventories 1,789 1,244
Increase in accounts payable and accrued
expenses 4,192 340
Decrease in deferred revenue (12,508) --
Increase (decrease) in income taxes payable 6,260 (10,356)
Decrease (increase) in other assets 2,887 (2,603)
Decrease in other liabilities (5,151) (7,035)
--------- --------
Total adjustments 20,667 34,091
--------- --------
Net cash provided by operating activities 58,181 65,535
--------- --------
Cash flows from investing activities:
Proceeds from sales of real estate and equipment 1,078 2,492
Additions to property, plant and equipment (24,540) (22,605)
Acquisition of new businesses, net of cash acquired (37,485) (62,122)
--------- --------
Net cash used for investing activities (60,947) (82,235)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of debt 384,612 77,899
Principal payments on debt (314,220) (54,036)
Proceeds from exercise of stock options 2,352 5,387
Dividends paid (3,093) (3,062)
Common stock repurchases -- (50)
--------- --------
Net cash provided by financing activities 69,651 26,138
--------- --------
Effect of foreign currency 1,444 2,553
--------- --------
Net increase in cash and cash equivalents 68,329 11,991
Cash and cash equivalents at beginning of period 47,717 25,495
--------- --------
Cash and cash equivalents at end of period $ 116,046 $ 37,486
========= ========
Supplemental disclosure of non-cash investing activities:
Fair value of assets acquired $ 41,287 $ 73,729
Liabilities assumed (3,802) (10,866)
Less: Cash acquired -- (741)
--------- --------
Net cash paid for acquisitions $ 37,485 $ 62,122
========= ========
See notes to consolidated financial statements
Page 5 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
Unearned
Portion of Accumulated
Class B Additional Restricted Other
Common Common Paid in Retained Stock Comprehensive Treasury
Stock Stock Capital Earnings Awards Income Stock
------- ------- ---------- -------- ---------- ------------- ---------
December 31, 2001 $10,618 $4,382 $52,532 $469,303 $(78) $(6,831) $(179,972)
Net earnings -- -- -- 45,136 -- -- --
Dividends -- -- -- -- -- 13,313 --
Stock options exercised, net -- -- -- (6,141) -- -- --
-- -- (332) -- -- -- 9,280
Amortization of earned portion of
restricted stock awards -- -- -- -- 18 -- --
------- ------ ------- -------- ---- ------- ---------
December 31, 2002 10,618 4,382 52,200 508,298 (60) 6,482 (170,692)
------- ------ ------- -------- ---- ------- ---------
Net earnings -- -- -- 37,514 -- -- --
Translation adjustments, net -- -- -- -- -- 7,486 --
Dividends -- -- -- (4,638) -- -- --
Stock options exercised, net -- -- (6) -- -- -- 2,358
Other -- -- 57 -- (16) -- 138
Amortization of earned portion of
restricted stock awards -- -- -- -- 15 -- --
------- ------ ------- -------- ---- ------- ---------
September 30, 2003 $10,618 $4,382 $52,251 $541,174 $(61) $13,968 $(168,196)
======= ====== ======= ======== ==== ======= =========
See notes to consolidated financial statements
Page 6 of 38
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 multinational manufacturing and service company that designs,
manufactures, and overhauls highly engineered components and systems and
provides services to the defense, aerospace, power generation, automotive,
shipbuilding, processing, petrochemical, agricultural equipment, railroad,
security, and metalworking industries. Operations are conducted through
twenty-one manufacturing facilities, fifty-one metal treatment facilities,
and two aerospace component overhaul and repair locations.
The unaudited consolidated financial statements include the accounts of
Curtiss-Wright and its majority-owned subsidiaries. All material
intercompany transactions and accounts have been eliminated.
The unaudited consolidated financial statements of the Corporation have
been prepared in conformity with accounting principles generally accepted
in the United States of America and such preparation requires management to
make estimates and judgments that affect the reported amount of assets,
liabilities, revenue, and expenses and disclosure of contingent assets and
liabilities in the accompanying financial statements. The most significant
of these estimates include the costs to complete long-term contracts under
the percentage of completion accounting method, the useful lives for
property, plant, and equipment, cash flows used for testing the
recoverability of assets, pension plan and postretirement obligation
assumptions, amount of inventory obsolescence, valuation of intangible
assets, warranty reserves, and future environmental costs. Actual results
may differ from these estimates. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
reflected in these financial statements.
The unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Corporation's 2002 Annual Report on Form 10-K. The
results of operations for interim periods are not necessarily indicative of
trends or of the operating results for a full year.
Certain prior year information has been reclassified to conform to current
presentation.
Page 7 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
2. ACQUISITIONS
The Corporation has made four acquisitions during the nine months ended
September 30, 2003, as described in more detail below. The Corporation does
not consider the 2003 acquisitions to be material, individually or in
aggregate, to its financial position, liquidity, or results of operations.
Motion Control Segment
Peritek Corporation
On August 1, 2003, the Corporation acquired the assets and liabilities of
Peritek Corporation ("Peritek"). The purchase price of the acquisition,
subject to adjustment as provided in the Asset Purchase Agreement, was $3.0
million in cash and the assumption of certain liabilities. The Corporation
paid $1.5 million at closing, which was funded from cash available from
operations, and will pay the remaining purchase price in the form of a
promissory note of $1.2 million and settlement of a holdback provision of
$0.3 million. The holdback amount is held as security for potential
indemnification claims. Any amount of holdback remaining after claims for
indemnification have been settled will be paid nineteen months after the
acquisition date. The purchase price of the acquisition approximates the
fair value of the net assets acquired, which includes developed technology
of approximately $2.4 million. The fair value of the net assets acquired
was based on current estimates. The Corporation may adjust these estimates
based upon analysis of third party appraisals and the final determination
of fair value. Revenues of the purchased business for the fiscal year
ending March 31, 2003 were approximately $2.7 million.
Peritek is a leading supplier of video and graphic display boards for the
embedded computing industry and supplies a variety of industries including
aviation, defense, and medical. In addition, Peritek supplies products for
bomb detection, industrial automation, and medical imaging application.
Peritek's operations are located in Oakland, California.
Collins Technologies
On February 28, 2003, the Corporation acquired the assets of Collins
Technologies ("Collins") from G.L. Collins Corporation. The purchase price
of the acquisition, subject to adjustment as provided for in the Asset
Purchase Agreement, was $12.0 million in cash and the assumption of certain
liabilities. Included in the purchase price is $0.5 million held as
security for potential indemnification claims. Any amount of holdback
remaining after claims for indemnification have been settled will be paid
one year after the acquisition date. Management funded the purchase price
from credit available under the Corporation's Short-Term Credit Agreement.
The excess of the purchase price, excluding the holdback, over the fair
value of the net assets acquired is approximately $9.2 million. The fair
value of the net assets acquired was based on current estimates. The
Corporation may adjust these estimates based upon
Page 8 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
analysis of third party appraisals and the final determination of fair
value. Revenues of the purchased business were approximately $8.3 million
for the year ended March 31, 2002.
Collins designs and manufactures Linear Variable Displacement Transducers
("LVDTs"), primarily for aerospace flight and engine control applications.
Industrial LVDTs are used mostly in industrial automation and test
applications. Collins' operations are located in Long Beach, California.
Metal Treatment Segment
E/M Engineered Coatings Solutions
On April 2, 2003, the Corporation purchased selected assets of E/M
Engineered Coatings Solutions ("E/M Coatings"). The purchase price of the
acquisition, subject to adjustment as provided in the Asset Purchase
Agreement, was $16.7 million in cash and the assumption of certain
liabilities. The purchase price was funded from credit available under the
Corporation's Short-Term Credit Agreement. The excess of the purchase price
over the fair value of the net assets acquired is approximately $10.7
million. The fair value of the net assets acquired was based on current
estimates. The Corporation may adjust these estimates based upon analysis
of third party appraisals and the final determination of fair value.
Revenues of the purchased business were approximately $26.0 million for the
year ended December 31, 2002.
The Corporation acquired six E/M Coatings facilities operating in Chicago,
IL; Detroit, MI; Minneapolis, MN; Hartford, CT; and North Hollywood and
Chatsworth, CA. Combined, these facilities are one of the leading providers
of solid film lubricant coatings in the United States. The E/M Coatings
facilities have the capability of applying over 1,100 different coatings to
impart lubrication, corrosion resistance, and certain cosmetic and
dielectric properties to selected components.
Advanced Material Process
On March 11, 2003, the Corporation acquired selected assets of Advanced
Material Process Corp. ("AMP"), a private company with operations located
in Wayne, Michigan. The purchase price of the acquisition, subject to
adjustment as provided for in the Asset Purchase Agreement, was $5.7
million in cash and the assumption of certain liabilities. Included in the
purchase price is $0.2 million held as security for potential
indemnification claims. Any amount of holdback remaining after claims for
indemnification have been settled will be paid one year after the
acquisition date. There are provisions in the agreement for additional
payments upon the achievement of certain financial performance criteria
over the next five years up to a maximum additional payment of $1.0
million. Management funded the purchase from credit available under the
Corporation's Short-Term Credit Agreement. The excess of the purchase price
over the fair value of the net assets acquired is approximately $2.8
million. The fair value of
Page 9 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
the net assets acquired was based on current estimates. The Corporation may
adjust these estimates based upon analysis of third party appraisals and
the final determination of fair value. Revenues of the purchased business
were approximately $5.1 million for the year ended December 31, 2002.
AMP is a supplier of commercial shot-peening services primarily to the
automotive market in the Detroit area.
Brenner Tool & Die
On November 14, 2002, the Corporation acquired selected assets and
liabilities of Brenner Tool and Die, Inc. ("Brenner") relating to Brenner's
metal finishing operations in Bensalem, Pennsylvania. Brenner provides
non-destructive testing, chemical milling, chromic and phosphoric
anodizing, and painting services.
The purchase price of the acquisition, subject to adjustment as provided
for in the Asset Purchase Agreement, was $10.0 million in cash, which
approximated the fair value of the net assets acquired. There are
provisions in the agreement for additional payments upon the achievement of
certain financial performance criteria over the next five years up to a
maximum additional payment of $10.0 million. The fair value of the net
assets acquired was based on management estimates in conjunction with
analysis of third party appraisals. The Corporation does not consider this
acquisition to be material to its financial position, liquidity or results
of operations.
Page 10 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
3. RECEIVABLES
Receivables at September 30, 2003 and December 31, 2002 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 those
periods is as follows:
(In thousands)
September 30, December 31,
2003 2002
------------- ------------
Billed Receivables:
Trade and other receivables $112,017 $109,784
Less: Progress payments applied (319) (2,838)
Allowance for doubtful accounts (3,948) (3,244)
-------- --------
Net billed receivables 107,750 103,702
-------- --------
Unbilled Receivables:
Recoverable costs and estimated earnings
not billed 35,615 40,183
Less: Progress payments applied (5,048) (5,675)
-------- --------
Net unbilled receivables 30,567 34,508
-------- --------
Receivables, net $138,317 $138,210
======== ========
The net receivable balance at September 30, 2003 included $7.8 million
related to the Corporation's 2003 acquisitions.
4. INVENTORIES
Inventories are valued at the lower of cost (principally average cost) or
market. The composition of inventories at September 30, 2003 and December
31, 2002 is as follows:
(In thousands)
September 30, December 31,
2003 2002
------------- ------------
Raw material $ 37,188 $ 42,513
Work-in-process 27,450 22,161
Finished goods and component parts 43,130 43,216
Inventoried costs related to US Government
and other long-term contracts 19,578 22,031
-------- --------
Gross inventories 127,346 129,921
Less: Inventory reserves (22,319) (23,745)
Progress payments applied, principally
related to long-term contracts (18,461) (21,262)
-------- --------
Inventories, net $ 86,566 $ 84,914
======== ========
Page 11 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
The net inventory balance at September 30, 2003 included $2.4 million
related to the Corporation's 2003 acquisitions.
5. GOODWILL
The Corporation accounts for acquisitions by assigning the purchase price
to tangible and intangible assets and liabilities. Assets acquired and
liabilities assumed are recorded at their fair values, and the excess of
the purchase price over the amounts assigned is recorded as goodwill.
The changes in the carrying amount of goodwill for the nine months ended
September 30, 2003 are as follows:
(In thousands)
Flow Motion Metal
Control Control Treatment Consolidated
------- ------- --------- ------------
December 31, 2002 $95,409 $78,727 $ 6,965 $181,101
Goodwill from 2003 acquisitions -- 9,153 13,449 22,602
Change in previous estimates of fair
value of net assets acquired 2,482 2,524 13 5,019
Currency translation adjustment 1,328 1,681 124 3,133
------- ------- ------- --------
September 30, 2003 $99,219 $92,085 $20,551 $211,855
======= ======= ======= ========
The purchase price allocations relating to businesses acquired during the
twelve months ended September 30, 2003 are based on estimates and have not
yet been finalized.
The Corporation completed its required annual goodwill impairment testing
during the third quarter of 2003. The testing indicated that the recorded
carrying value of the Corporation's goodwill is not impaired.
Page 12 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
6. OTHER INTANGIBLE ASSETS, net
Other intangible assets consist primarily of purchased technology, backlog
and technology licenses. The following tables present the cumulative
composition of the Corporation's intangible assets as of September 30, 2003
and December 31, 2002.
(In thousands)
Accumulated
September 30, 2003 Gross Amortization Net
------------------ ------- -------------- -------
Technology $22,080 $(2,396) $19,684
Other intangible assets 3,447 (1,994) 1,453
------- ------- -------
Total $25,527 $(4,390) $21,137
======= ======= =======
(In thousands)
Accumulated
December 31, 2002 Gross Amortization Net
----------------- ------- -------------- -------
Technology $21,371 $(1,452) $19,919
Other intangible assets 3,411 (1,348) 2,063
------- ------- -------
Total $24,782 $(2,800) $21,982
======= ======= =======
The following table presents the changes in the net balance of other
intangibles assets during the nine months ended September 30, 2003.
(In thousands)
Other
Intangible
Technology Assets, net Total
---------- -------------- -------
December 31, 2002 $19,919 $2,063 $21,982
Acquired during 2003 2,367 -- 2,367
Amortization expense (915) (639) (1,554)
Change in estimate of fair value related
to purchase price allocations (1,771) -- (1,771)
Net currency translation adjustment 84 29 113
------- ------ -------
September 30, 2003 $19,684 $1,453 $21,137
======= ====== =======
Page 13 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
Total estimated future amortization expense of purchased intangible assets
is as follows:
(In thousands)
--------------
FY 2004 $ 1,907
FY 2005 1,687
FY 2006 1,640
FY 2007 1,640
FY 2008 1,640
Thereafter 12,623
7. WARRANTY RESERVES
The Corporation provides its customers with warranties on certain
commercial and governmental products. Estimated warranty costs are charged
to expense in the period the related revenue is recognized based on
quantitative historical experience. Estimated warranty costs are reduced as
these costs are incurred and as the warranty period expires and may be
otherwise modified as specific product performance issues are identified
and resolved. Warranty reserves are included within accrued expenses on the
Corporation's Consolidated Balance Sheet. In accordance with Financial
Accounting Standards Board ("FASB") Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements
No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34", the
following table presents the changes in the Corporation's warranty
reserves:
(In thousands)
--------------
Warranty reserves at December 31, 2002 $ 9,504
Provision for current year sales 1,211
Change in estimates to pre-existing warranties (703)
Current year claims (1,395)
Translation adjustment 177
-------
Warranty reserves at September 30, 2003 $ 8,794
=======
Page 14 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
8. DEBT
Debt at September 30, 2003 and December 31, 2002 consists of the following:
(In thousands)
----------------------------
September 30, December 31,
2003 2002
------------- ------------
Industrial Revenue Bonds, due from
2007 to 2028. Weighted average interest
rate is 1.24% and 1.51% per annum for
the nine months ended September 30,
2003 and the year ended December 31,
2002, respectively $ 14,351 $ 13,400
Revolving Credit Agreement Borrowing, due
2007. Weighted average interest rate is
2.00% and 2.55% per annum for the nine
months ended September 30, 2003 and the
year ended December 31, 2002,
respectively 8,349 105,463
Short-Term Credit Agreement Borrowing due
2003. Weighted average interest rate is
2.27% and 3.21% per annum for the nine
months ended September 30, 2003 and
the year ended December 31, 2002,
respectively -- 32,000
5.13% Senior Notes due 2010 75,000 --
5.74% Senior Notes due 2013 125,000 --
Other debt 911 1,015
-------- --------
Total debt 223,611 151,878
Less: Short-term debt 907 32,837
-------- --------
Total Long-term debt $222,704 $119,041
======== ========
On May 1, 2003, the Corporation entered into an agreement with the bank
group to extend the expiration date of its Short-Term Credit Agreement from
May 9, 2003 to May 7, 2004.
On September 25, 2003, the Corporation issued $200.0 million of Senior
Notes (the "Notes"). The Notes consist of $75.0 million of 5.13% Senior
Notes that mature on September 25, 2010 and $125.0 million of 5.74% Senior
Notes that mature on September 25, 2013. The Corporation used the net
proceeds of the Notes to repay the majority of the outstanding indebtedness
under the existing revolving credit facilities. The Notes are senior
unsecured obligations and are equal in right of payment to the
Corporation's current existing senior indebtedness. The Corporation, at its
option, can prepay at any time, all or from time to time any part of, the
Notes, subject to a Make-Whole Amount in accordance with the Note Purchase
Agreement. The Corporation paid
Page 15 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
customary transaction fees that have been deferred and will be amortized
over the term of the Notes. The Corporation is required under the Note
Purchase Agreement to maintain certain financial ratios and meet certain
net worth and indebtedness tests.
The outstanding debt as of September 30, 2003 under the Corporation's
revolving credit agreement is denominated in Swiss francs. Actual
borrowings under this portion were 11.0 million Swiss francs ($8.3 million)
at September 30, 2003 and 11.0 million Swiss francs ($8.0 million) at
December 31, 2002.
The carrying amount of long-term debt approximates fair value.
Aggregate maturities of debt are as follows:
(In thousands)
--------------
FY 2004 $ 907
FY 2005 105
FY 2006 58
FY 2007 13,409
FY 2008 61
FY 2009 and beyond 209,071
9. EARNINGS PER SHARE
Diluted earnings per share were computed based on the weighted average
number of shares outstanding plus all potentially dilutive common shares. A
reconciliation of basic to diluted shares used in the earnings per share
calculation is as follows:
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
------ ------ ------ ------
Basic weighted average
shares outstanding 10,328 10,238 10,304 10,188
Dilutive effect of stock options and
deferred stock compensation 140 232 124 242
------ ------ ------ ------
Diluted weighted average shares
outstanding 10,468 10,470 10,428 10,430
====== ====== ====== ======
There were no antidilutive shares for the three months ended September 30,
2003 and September 30, 2002. For the nine months ended September 30, 2003
and September 30, 2002, the antidilutive shares were 80,000 and zero,
respectively.
Page 16 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
10. STOCK COMPENSATION PLANS
In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Corporation has elected to account for its stock-based compensation
under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." As such, the Corporation does not recognize
compensation expense for stock options granted to employees when the
exercise price of the options is equal to the market price of the
underlying stock on the date of the grant.
Pro forma information regarding net earnings and earnings per share is
required by SFAS No. 123, as amended, and has been determined as if the
Corporation had accounted for its employee stock option grants under the
fair value method prescribed by that Statement. Information regarding the
number of options granted, market price of the grants, vesting
requirements, and the maximum term of the options granted by plan type is
included in the Corporation's 2002 Annual Report on Form 10-K.
The Corporation's pro forma results are as follows:
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
------- ------- ------- -------
Net earnings, as reported $12,519 $11,312 $37,514 $31,444
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects (315) (381) (945) (1,143)
------- ------- ------- -------
Pro forma net earnings $12,204 $10,931 $36,569 $30,301
======= ======= ======= =======
Net earnings per share:
As reported:
Basic $ 1.21 $ 1.10 $ 3.64 $ 3.09
Diluted $ 1.20 $ 1.08 $ 3.60 $ 3.01
Pro forma:
Basic $ 1.18 $ 1.07 $ 3.55 $ 2.97
Diluted $ 1.17 $ 1.04 $ 3.51 $ 2.90
11. ENVIRONMENTAL MATTERS
The Corporation establishes a reserve for a potential environmental
liability when it concludes that a determination of legal liability is
probable based upon the advice of counsel. Such amounts reflect the
Corporation's estimate of the
Page 17 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
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 current 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 has continued the operation of the ground water and soil
remediation activities at a previously owned facility located in
Wood-Ridge, New Jersey, which was sold in December 2001. The Corporation
remains responsible for this remediation in accordance with the sale
agreement.
The Corporation is joined with many other corporations and municipalities
as potentially responsible parties in a number of environmental cleanup
sites, which include but are not limited to the Caldwell Trucking landfill
superfund site, Fairfield, New Jersey; Sharkey landfill superfund site,
Parsippany, New Jersey; Pfohl Brothers landfill site, Cheektowaga, New
York; Amenia landfill site, Amenia, New York; and Chemsol, Inc. superfund
site, Piscataway, New Jersey.
In October 2002, the Corporation acquired the Electro-Mechanical Division
("EMD") facility from Westinghouse Government Services LLC ("Seller").
Included in the purchase was the assumption of several Nuclear Regulatory
Commission ("NRC") licenses necessary for the continued operation of the
business. In connection with these licenses, the NRC required financial
assurance from the Corporation (in the form of a parent company guarantee)
for the settlement of estimated environmental decommissioning and
remediation costs associated with the commercial operations covered by the
licenses. In addition, the Corporation has established reserves for
additional potential environmental remediation costs. Remediation and
investigation of the EMD facility are ongoing. The Corporation obtained
partial environmental insurance coverage specifically for the EMD facility.
The policy provides coverage for losses due to on or off-site pollution
conditions that were pre-existing but unknown at the time of acquisition.
The Corporation believes that the outcome of any of the above mentioned
matters would not have a material adverse effect on the Corporation's
results of operations or financial condition.
12. SEGMENT INFORMATION
The Corporation manages and evaluates its operations based on the products
and services it offers and the different markets it serves. Based on this
approach, the Corporation has three reportable segments: Flow Control,
Motion Control, and Metal Treatment.
Page 18 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
(In thousands)
Three Months Ended September 30, 2003
-------------------------------------------------------------------
Flow Motion Metal Segment Corporate Consolidated
Control Control Treatment Totals & Other Totals
------- ------- --------- -------- --------- ------------
Revenue from external customers $84,167 $70,157 $35,294 $189,618 $ -- $189,618
Intersegment revenues -- -- 151 151 (151) --
Operating income 7,110 9,537 4,321 20,968 (100) 20,868
(In thousands)
Three Months Ended September 30, 2002
---------------------------------------------------------------------
Flow Motion Metal Segment Corporate Consolidated
Control Control Treatment Totals & Other (1) Totals
------- ------- --------- -------- ----------- ------------
Revenue from external customers $30,679 $61,895 $27,067 $119,641 $ -- $119,641
Intersegment revenues -- -- 136 136 (136) --
Operating income 3,267 6,325 4,234 13,826 (1,275) 12,551
(In thousands)
Identifiable Assets
---------------------------------------------------------------------
Flow Motion Metal Segment Corporate Consolidated
Control Control Treatment Totals & Other Totals
-------- -------- --------- -------- --------- ------------
September 30, 2003 $309,719 $271,668 $165,411 $746,798 $178,598 $925,396
December 31, 2002 319,272 260,984 125,642 705,898 107,026 812,924
(In thousands)
Nine Months Ended September 30, 2003
---------------------------------------------------------------------
Flow Motion Metal Segment Corporate Consolidated
Control Control Treatment Totals & Other Totals
-------- -------- --------- -------- --------- ------------
Revenue from external customers $263,125 $188,181 $101,102 $552,408 $ -- $552,408
Intersegment revenues -- -- 419 419 (419) --
Operating income 30,176 18,734 13,102 62,012 (362) 61,650
(In thousands)
Nine Months Ended September 30, 2002
---------------------------------------------------------------------------
Flow Motion Metal Segment Corporate Consolidated
Control Control Treatment (2) Totals & Other (3) Totals
-------- -------- ------------- -------- ----------- ------------
Revenue from external customers $95,549 $163,918 $79,738 $339,205 $ -- $339,205
Intersegment revenues -- -- 364 364 (364) --
Operating income 11,557 20,439 10,570 42,566 (2,023) 40,543
(1) 2002 operating income for Corporate includes $1,000 of environmental
remediation and administrative expenses.
(2) 2002 operating income for Metal Treatment includes non-recurring costs of
$451 associated with the relocation of a shot-peening facility.
(3) 2002 operating income for Corporate includes $1,247 of net environmental
remediation and administrative expenses.
Page 19 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
Reconciliation:
(In thousands)
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
------------- ------------- ------------- -------------
Total segment operating income $20,968 $13,826 $62,012 $42,566
Corporate and other (100) (1,275) (362) (2,023)
Pension income, net 527 2,254 1,580 6,762
Other (expense) income, net (91) 3,808 182 4,328
Interest expense (1,113) (380) (2,906) (1,039)
------- ------- ------- -------
Earnings before income taxes $20,191 $18,233 $60,506 $50,594
======= ======= ======= =======
13. COMPREHENSIVE INCOME
Total comprehensive income for the three months and nine months ended
September 30, 2003 and 2002 are as follows:
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
------- ------- ------- -------
Net earnings $12,519 $11,312 $37,514 $31,444
Equity adjustment from
foreign currency translations 1,485 1,125 7,486 9,157
------- ------- ------- -------
Total comprehensive income $14,004 $12,437 $45,000 $40,601
======= ======= ======= =======
The equity adjustment from foreign currency translation represents the
effect of translating the assets and liabilities of the Corporation's
non-U.S. entities. This amount is impacted year-over-year by foreign
currency fluctuations and by the acquisitions of foreign entities.
14. CONTINGENCIES AND COMMITMENTS
The Corporation's subsidiary located in Switzerland entered into sales
agreements with two European defense organizations which contain offset
obligations to purchase approximately 43.0 million Swiss francs
(approximately $32.6 million) of product from suppliers located in the two
European countries over multi-year periods which began in 1999 and 2001 and
expire in 2005 and 2007, respectively. The agreements contain a penalty of
5-10% of the unfulfilled obligation at the end of the term of the
agreements. As of September 30, 2003, the Corporation has accrued 0.6
million Swiss francs (approximately $0.5 million) included in other
liabilities as a contingency against not achieving compliance with these
agreements.
The Corporation, through its subsidiary located in Switzerland, entered
into a credit agreement in 2001, as amended in 2002, with UBS AG ("UBS")
for a credit
Page 20 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
facility in the amount of 6.0 million Swiss francs (approximately $4.6
million) for the issue of performance guarantees related to a long-term
contract. As of September 30, 2003, the amount of restricted cash under
this facility was 2.4 million Swiss francs (approximately $1.8 million),
all of which is expected to be released from restriction within one year.
The restricted cash is included in cash and cash equivalents in the
Corporation's Consolidated Balance Sheet in this quarterly report.
In October 2002, the Corporation acquired EMD. Included in the purchase was
the assumption of several NRC licenses necessary for the continued
operation of the business. In connection with these licenses the NRC
required financial assurance from the Corporation (in the form of a parent
company guarantee) for the settlement of estimated environmental
decommissioning and remediation costs associated with the commercial
operations covered by the licenses. The guarantee for the decommissioning
costs of the nuclear facility is $2.8 million, which is scheduled for
completion in 2017.
Consistent with other entities its size, the Corporation is party to
several legal actions and claims, none of which individually or in the
aggregate, in the opinion of management, are expected to have a material
adverse effect on the Corporation's results of operations or financial
position.
15. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting
obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. The statement requires the
Corporation to recognize the fair value of a liability for an asset
retirement obligation in the period in which it is incurred, if a
reasonable estimate can be made. Upon initial recognition of such a
liability, if any, the Corporation would capitalize the asset retirement
cost as an asset equal to the fair value of the liability and allocate such
cost to expense systematically over the useful life of the underlying
asset. The estimated future liability would be subject to change, with the
effects of such change affecting the asset retirement cost and the related
expense as appropriate. The provisions of this statement are effective for
fiscal years beginning after June 15, 2002. The adoption of this statement
did not have a material impact on the Corporation's results of operation or
financial condition.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities." This statement applies to costs
associated with exit or disposal activities and requires that liabilities
for costs associated with these activities be recognized and measured
initially at its fair value in the period in which the liability is
incurred. The provisions of this statement are effective for exit or
disposal activities initiated after December 31, 2002. The adoption of this
Page 21 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
statement did not have a material impact on the Corporation's results of
operation or financial condition.
In November 2002, the FASB issued Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." This interpretation relates to a
guarantor's accounting for, and disclosure of, the issuance of certain
types of guarantees. This interpretation requires the issuer of a guarantee
to recognize a liability at the inception of that guarantee. The
Corporation is required to apply the interpretation to all guarantees
issued or modified after December 31, 2002. The disclosure requirements of
this interpretation are effective for financial statements of interim and
annual periods ending after December 15, 2002. The adoption of this
statement did not have a material impact on the Corporation's results of
operation or financial condition.
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure." This statement provides
alternate methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In
addition, the statement requires additional disclosures about the methods
of accounting for stock-based employee compensation and the effect of the
method used on reported results. The provisions of this statement are
effective for fiscal years beginning after December 15, 2002. The
Corporation intends on continuing to account for its stock options under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and thus the adoption of the new standard did not have a
material impact on the Corporation's results of operation or financial
condition.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities ("VIE"s)" ("FIN 46"). This interpretation of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
addresses when a company should include in its financial statements the
assets and liabilities of unconsolidated VIEs. FIN 46 was effective for
VIEs created or acquired after January 31, 2003. As of October 9, 2003, the
FASB deferred compliance under FIN 46 from July 1, 2003 to the first period
ending after December 15, 2003 for VIEs created prior to February 1, 2003.
The adoption of this statement did not have a material impact on the
Corporation's results of operation or financial condition.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). The Statement is effective for financial instruments
entered into or modified after May 31, 2003. It applies in the first
Page 22 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
interim period beginning after June 15, 2003, to entities with financial
instruments acquired before May 31, 2003. The adoption of this statement
did not have a material impact on the Corporation's results of operation or
financial condition.
16. SUBSEQUENT EVENTS
On November 10, 2003, the Corporation entered into two interest rate swap
agreements with notional amounts of $20.0 million and $60.0 million to
effectively convert the fixed interest on the $75.0 million 5.13% Senior
Notes and $125 million 5.74% Senior Notes, respectively, to variable rates
based on market conditions. In the short-term, the swaps are expected to
provide the Corporation with a lower level of interest expense related to
the Notes.
Page 23 of 38
PART I - ITEM 2
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
RESULTS of OPERATIONS
Three months ended September 30, 2003
Sales for the third quarter of 2003 totaled $189.6 million, an increase of 58%
from sales of $119.6 million for the third quarter of 2002. New orders received
for the current quarter of $126.8 million were down 3% over the orders of $130.6
million for the third quarter of 2002. Backlog decreased 6% to $448.6 million at
September 30, 2003 from $478.5 million at December 31, 2002. Approximately 69%
of our backlog is from military business.
Sales for the third quarter of 2003 as compared to the same period last year
benefited from the acquisitions completed in the fourth quarter of 2002 and the
first nine months of 2003, which contributed $60.7 million incremental sales in
the quarter. Higher sales of flow control products to the non-nuclear naval
program and the nuclear power generation market, higher sales from our domestic
aerospace and ground defense businesses, and higher sales from our shot peening
services, all contributed to the organic growth of 8% in the quarter as compared
to the prior year period. Sales to the domestic commercial aerospace OEM and
overhaul and repair markets were down for the quarter. Foreign exchange
translation also had a favorable impact on sales, contributing approximately
$2.3 million to the sales increase from the prior year.
Operating income for the third quarter of 2003 totaled $20.9 million, an
increase of 66% from operating income of $12.6 million for the same period last
year. The increase is primarily attributable to the contributions of
acquisitions completed in the fourth quarter of 2002 and the first nine months
of 2003, which amounted to $6.6 million in incremental operating income.
Operating income from our base business increased 14% over the same period last
year. Operating margins from the segments increased in the third quarter of 2003
as compared to the same period last year mainly due to higher volume and
favorable sales mix within the Motion Control segment, partially offset by one
time cost overruns and one-time inventory adjustments within our Flow Control
segment, and an unfavorable sales mix and the effect of a customer bankruptcy
in the finishing division of the Metal Treatment segment. Foreign exchange
translation also had a favorable impact on operating income.
Net earnings for the third quarter of 2003 totaled $12.5 million, or $1.20 per
diluted share, which represents an increase of 11% over the net earnings for the
third quarter of 2002 of $11.3 million, or $1.08 per diluted share. Higher
business segment operating income in the third quarter of 2003 more than offset
the decrease in the Corporation's pension income, non-recurring other income,
and higher interest expense as compared to the third quarter of 2002.
Page 24 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
RESULTS of OPERATIONS
Nine months ended September 30, 2003
Sales for the first nine months of 2003 increased 63% to $552.4 million, as
compared to $339.2 million for the same period last year. Acquisitions made
during the last eighteen months contributed $195.5 million in incremental sales
during the first nine months of 2003. New orders of $517.8 million were 50%
higher than the first nine months of 2002, mainly due to the above-mentioned
acquisitions as well as a ramp up in military programs, which represent 45% of
new orders for the first nine months of 2003.
Higher sales of flow control products for the commercial nuclear power
generation, non-nuclear naval program, and European valve markets, higher sales
from our domestic aerospace and ground defense businesses, and higher metal
treatment related services mostly offset declines in aerospace component
overhaul and repair services, sales of domestic commercial aerospace OEM
products and European ground defense business. In addition, foreign currency
translation had a favorable impact on sales of approximately $9.7 million for
the year.
Operating income for the first nine months of 2003 totaled $61.7 million, an
increase of 52% from operating income of $40.5 million for the same period last
year. The increase is primarily attributed to the contributions of acquisitions
made during the last eighteen months, which amounted to $22.7 million in
incremental operating income, organic growth in our metal treatment businesses,
and a favorable foreign currency translation impact. These improvements were
offset by lower margins as a result of lower volume in the commercial aerospace
and overhaul and repair businesses, lower margins attributable to unfavorable
sales mix within the European ground defense business, and cost overruns and
one-time inventory adjustments within our Flow Control segment.
Net earnings for the first nine months of 2003 totaled $37.5 million, or $3.60
per diluted share, an increase of 19% from net earnings for the first nine
months of 2002 of $31.4 million, or $3.01 per diluted share. This increase
reflects the higher business segment operating income in 2003, which offset the
decrease in the non-operating income and higher interest expense.
Operating Performance:
Flow Control
The Corporation's Flow Control segment posted sales of $84.2 million for the
third quarter of 2003, an increase of 174% from $30.7 million in the third
quarter of 2002. Acquisitions completed in the fourth quarter of 2002
contributed $50.2 million of this increase, while the balance of the segment's
businesses increased $3.3 million, or 11%, as compared to the third quarter of
2002. The organic growth was due to stronger sales of ball valves and JP-5 fuel
valve systems for the non-nuclear Navy and higher sales
Page 25 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
related to expedited outage requirements by the commercial nuclear power
generation plants. In addition, foreign currency translation favorably impacted
sales for the third quarter of 2003 by approximately $0.5 million.
Operating income for the third quarter of 2003 was $7.1 million, an increase of
118% as compared to $3.3 million for the same period last year. Acquisitions
made in the fourth quarter of 2002 generated operating income of $5.7 million,
while the balance of the segment businesses declined from the comparable period
last year. The lower operating margins were due to one-time cost overruns on a
safety relief valve project and one-time inventory adjustments totaling
approximately $2.7 million, unfavorable sales mix, and higher research and
development costs for new product development.
Sales for the first nine months of 2003 were $263.1 million, an increase of 175%
over the same period last year of $95.5 million. The improvement was largely due
to the acquisitions made during the last twelve months and solid sales in most
of the base businesses, including non-nuclear products for the Navy, commercial
nuclear power generation, and higher sales to the international oil and gas
markets. Foreign currency translation also favorably impacted sales for the
period.
Operating income for the first nine months of 2003 was $30.2 million, an
increase of 161% over the same period last year of $11.6 million. The
improvement resulted from the higher sales volumes and improved margins on flow
control products for commercial nuclear power applications and electronics
products to the Navy, partially offset by one-time cost overruns and inventory
adjustments of approximately $2.7 million. Operating income from our base
businesses decreased 11% for the first nine months of 2003 as compared to the
prior year period.
New orders received for the Flow Control segment totaled $45.1 million in the
third quarter of 2003 and $237.4 million for the first nine months of 2003,
representing an increase of 30% and 123%, respectively from the same periods in
2002. New orders from the acquisitions made during the last twelve months
amounted to $12.0 million and $135.8 million for the three and nine months ended
September 30, 2003, respectively. Backlog decreased 8% to $278.6 million at
September 30, 2003 from $304.3 million at December 31, 2002.
Motion Control
Sales for the Corporation's Motion Control segment improved 13% to $70.2 million
in the third quarter of 2003 from $61.9 million in the third quarter of 2002,
primarily due to the contribution of the acquisition of Collins Technologies in
February 2003. Excluding the acquisitions, the organic sales growth was 9% in
the third quarter of 2003 mainly due to stronger domestic ground defense sales
primarily related to the expedited deliveries of the Bradley fighting vehicle,
an increase in sales of military aerospace products, primarily F-16 spare parts
and the Joint Strike Fighter development, and higher sales of military
electronics. These higher sales were partially offset by the reduction in
commercial aerospace OEM sales, lower sales associated with the
Page 26 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
overhaul and repair services provided to the global airline industry, and a
slight drop in the European ground defense business. In addition, foreign
currency translation favorably impacted sales for the third quarter of 2003 by
approximately $1.0 million.
Operating income for the third quarter of 2003 was $9.5 million, an increase of
51% from the same period last year of $6.3 million. Stronger margins were driven
by higher sales volume as mentioned above, and favorable sales mix. These
improvements were partially offset by lower margins at the overhaul and repair
business due to lower volume and an unfavorable sales mix at the European
defense business. The business segment also benefited from favorable foreign
currency translation as compared to the third quarter of 2002.
Sales for the first nine months of 2003 were $188.2 million, an increase of 15%
over the same period last year of $163.9 million. The improvement was largely
due to the acquisitions made during the last eighteen months and the strong
sales of defense related products, partially offset by lower aerospace component
overhaul and repair services and commercial aerospace OEM products. Foreign
currency translation also favorably impacted the sales growth.
Operating income for the first nine months of 2003 was $18.7 million, a decrease
of 8% over the same period last year of $20.4 million. The lower operating
income was due to an unfavorable sales mix and lower sales volume, partially
offset by the contributions from acquisitions made during the last eighteen
months and the favorable impact of foreign currency translation.
New orders received for the Motion Control segment totaled $46.3 million in the
third quarter of 2003 and $178.7 million for the first nine months of 2003, a
decrease of 33% and an increase of 13%, respectively, from the same periods in
2002. New orders from acquisitions made in the last eighteen months amounted to
$16.9 million and $62.0 million for the three and nine months ended September
30, 2003, respectively. Backlog decreased 3% to $168.5 million at September 30,
2003 from $173.2 million at December 31, 2002.
Metal Treatment
Sales for the Corporation's Metal Treatment segment totaled $35.3 million for
the third quarter of 2003, up 30% when compared with $27.1 million in the third
quarter of 2002. The improvement was mainly due to contributions from 2002 and
2003 acquisitions, which contributed $7.6 million of incremental sales in the
third quarter of 2003. The main contributor to this increase was the E/M
Coatings business, which was acquired on April 2, 2003. Higher sales of shot
peening services for the aerospace and automotive industries in Europe and sales
from our new laser peening technology also contributed to the higher sales for
the quarter. In addition, foreign currency translation favorably impacted sales
for the third quarter of 2003 by approximately $0.9 million.
Page 27 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
Operating income for the third quarter of 2003 increased 2% to $4.3 million from
$4.2 million for the same period last year. The increase was due to higher sales
volume, cost reduction programs, and favorable foreign currency translation. The
continued impact of a customer bankruptcy in the finishing division and facility
start-up costs partially offset the above mentioned margin improvements.
Sales for the first nine months of 2003 were $101.1 million, an increase of 27%
over the same period last year of $79.7 million. The increase was mainly due to
the contribution from the acquisition of E/M Coatings, higher sales of shot
peening and laser peening services, and the favorable impact from foreign
currency translation.
Operating income for the first nine months of 2003 was $13.1 million, an
increase of 24% over the same period last year of $10.6 million. The increase
was due to the higher sales volume, cost reduction programs, and favorable
foreign currency translation. These improvements were partially offset by the
above mentioned bankruptcy and start-up costs.
New orders received for the Metal Treatment segment totaled $35.5 million in the
third quarter of 2003 and $102.1 million for the first nine months of 2003
representing increases of 30% and 27%, respectively, from the same periods in
2002. Backlog increased 50% to $1.5 million at September 30 2003 from $1.0
million at December 31, 2002.
Corporate and Other Expenses
The Corporation had a non-segment operating loss of $0.1 million in the third
quarter of 2003 as compared to an operating loss of $1.3 million in the same
period last year. The reduction in 2003 was due to lower environmental
remediation and administrative costs and the collection of a settlement from a
2002 lawsuit, whereby the Corporation was awarded damages associated with our
former Wood-Ridge Business Complex facility.
The non-segment operating loss for the first nine months of 2003 was $0.4
million as compared with an operating loss $2.0 million for the same period last
year. The decrease was due to lower environmental remediation and administrative
costs and the collection of the settlement mentioned above. In addition, in 2002
the Corporation also had non-recurring commitment fee expenses related to the
Corporation's revolving credit agreements.
Non-Operating Revenues/Expense
For the third quarter of 2003, the Corporation recorded other non-operating net
revenues (excluding interest expense) totaling $0.4 million, compared with $6.1
million for the third quarter of 2002. The decrease was primarily caused by
lower pension income, which was due to lower investment returns on the
Corporation's pension assets, and lower non-recurring other income. In the third
quarter of 2002, the Corporation recorded $3.5 million of non-recurring income,
primarily a net gain relating
Page 28 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
to the reallocation of postretirement medical benefits and the release of a
reserve associated with an indemnification provided to the purchaser of the
Corporation's Wood-Ridge business complex, which was no longer required. The
increase in interest expense for the third quarter of 2003 was due to higher
debt levels.
The Corporation recorded other non-operating net revenues for the first nine
months of 2003 totaling $1.8 million, compared with other non-operating net
revenues of $11.1 million for the same period last year. The decrease was
related to the above-mentioned lower pension income and lower non-recurring
other income. The increase in interest expense for the first nine months of 2003
was due to higher debt levels.
CHANGES IN FINANCIAL CONDITION
Liquidity and Capital Resources
The Corporation's working capital was $242.8 million at September 30, 2003, an
increase of $105.6 million from the working capital at December 31, 2002 of
$137.2 million. The ratio of current assets to current liabilities was 2.9 to 1
at September 30, 2003 versus 1.8 to 1 at December 31, 2002.
Cash and cash equivalents totaled $116.0 million in the aggregate at September
30, 2003, up 143% from $47.7 million at December 31, 2002. The increase is due
to net proceeds from the note offering completed in September 2003. Days sales
outstanding at September 30, 2003 was 50 days as compared to 54 days at December
31, 2002. Inventory turns were 6.1 for the nine months ended September 30, 2003
as compared to 5.0 at December 31, 2002.
At September 30, 2003, the Corporation had two credit agreements aggregating
$225.0 million with a group of eight banks. The Revolving Credit Agreement
offers a maximum of $135.0 million over five years to the Corporation for cash
borrowings and letters of credit. The Revolving Credit Agreement expires May 13,
2007, 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 up to $90.0 million. The
Short-Term Credit Agreement expires May 7, 2004, and may be extended, with the
consent of the bank group, for additional periods not to exceed 364 days each.
Borrowings under these agreements bear interest at a floating rate based on
market conditions. In addition, the Corporation's rate of interest and level of
facility fees are dependent on maintenance of certain financial ratios, as
defined in the agreements. The Corporation is subject to annual facility fees on
the commitments under the Revolving Credit Agreement and Short-Term Credit
Agreement. The Corporation is required under these agreements to maintain
certain financial ratios and meet certain other financial tests. Cash borrowings
(excluding letters of credit) under the two credit agreements at September 30,
2003 were $8.4 million compared with cash borrowings of $137.5 million at
December 31, 2002. The unused credit available under these agreements at
September 30, 2003 was $197.8 million.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
On September 25, 2003, the Corporation issued $200.0 million of Senior Notes
(the "Notes"). The Notes consist of $75.0 million of 5.13% Senior Notes that
mature on September 25, 2010 and $125.0 million of 5.74% Senior Notes that
mature on September 25, 2013. The Corporation used the net proceeds of the Notes
to repay the majority of the outstanding indebtedness under the existing
revolving credit facilities as of that date. The Notes are senior unsecured
obligations and are equal in right of payment to the Corporation's current
existing senior indebtedness. The Corporation, at its option, can prepay at any
time all, or from time to time any part of, the Notes, subject to a Make-Whole
Amount in accordance with the Note Purchase Agreement. The corporation incurred
customary fees in connection with the transaction that have been deferred and
will be amortized over the term of the Notes. The Corporation is required under
the Note Purchase Agreement to maintain certain financial ratios and meet
certain net worth and indebtedness tests.
Industrial revenue bonds, which are collateralized by real estate, machinery,
and equipment, were $14.4 million at September 30, 2003 and $13.4 million at
December 31, 2002. The loans outstanding under the Notes, Revolving Credit
Agreement, and Industrial Revenue Bonds had variable interest rates averaging
2.1% and 2.4% for the third quarter of 2003 and 2002, respectively.
During the nine months ended September 30, 2003, internally available funds were
adequate to meet capital expenditures of $24.5 million. Capital expenditures
incurred during the period were for new and replacement machinery and equipment
within the business segments and for the expansion of new product lines. The
Corporation is expected to make additional capital expenditures of approximately
$14.6 million during the fourth quarter on machinery and equipment for ongoing
operations at the business segments, expansion of existing facilities, and
investments in new product lines and facilities. Included in the capital
expenditures during the nine months ended September 30, 2003 was $5.4 million
from the businesses acquired in 2003 and 2002.
Cash generated from operations is considered adequate to meet the Corporation's
cash requirements for the upcoming year, including anticipated debt repayments,
planned capital expenditures, dividends, satisfying environmental obligations,
and working capital requirements. Undistributed earnings from the Corporation's
foreign subsidiaries are considered to be permanently reinvested.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States of
America. Preparing consolidated financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses. These estimates and assumptions are
affected by the application of our accounting policies. Critical accounting
policies are those that require application of management's most difficult,
subjective, or complex judgments, often as a result of the need to make
estimates about the effects of matters that are inherently uncertain and
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
may change in subsequent periods. We believe that the following are some of the
more critical judgment areas in the application of our accounting policies that
affect our financial condition and results of operations:
Revenue recognition: The realization of revenue refers to the timing of its
recognition in the accounts of the Corporation and is generally considered
realized or realizable and earned when the earnings process is substantially
complete and all of the following criteria are met: 1) persuasive evidence of an
arrangement exists; 2) delivery has occurred or services have been rendered; 3)
the Corporation's price to its customer is fixed or determinable; and 4)
collectibility is reasonably assured.
The Corporation records sales and related profits on production and service type
contracts as units are shipped and title and risk of loss have transferred or as
services are rendered. This method is used in our Metal Treatment segment and in
some of the business units within the Motion Control and Flow Control segments
that serve commercial markets.
For certain contracts that require substantial performance over an extended
period before deliveries begin, sales and estimated profits are recorded by
applying the percentage-of-completion method of accounting. The
percentage-of-completion method of accounting is used primarily for the
Corporation's defense contracts and certain long-term commercial contracts. This
method recognizes revenue and profit as the contracts progress towards
completion. For certain contracts that contain a significant number of
performance milestones, as defined by the customer, sales are recorded based
upon achievement of these performance milestones. The performance milestone
method is an output measure of progress towards completion made in terms of
results achieved. For certain fixed price contracts, where none or a limited
number of milestones exist, the cost-to-cost method of accounting is used. Under
the cost-to-cost input method, sales and profits are recorded based on the ratio
of costs incurred to an estimate of total costs at completion.
Application of percentage-of-completion methods of revenue recognition requires
the use of reasonable and dependable estimates of the future material, direct
labor, and overhead costs that will be incurred. The percentage-of-completion
method of accounting for long-term contracts requires a disciplined cost
estimating system in which all functions of the business are integrally
involved. These estimates are determined based upon the industry knowledge and
experience of the Corporation's engineers, project managers, and financial
staff. These estimates are significant and reflect changes in cost and operating
performance throughout the contract and could have a significant impact on
operating performance.
Under contracts that take less than a year to complete the completed contract
method is utilized. Under the completed contract method, revenue and costs are
recognized when the Corporation substantially completes work under the contract.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
Under the percentage-of-completion and completed contract methods, provisions
for estimated losses on uncompleted contracts are recognized in the period in
which the likelihood of such losses is determined. Certain contracts contain
provisions for the redetermination of price and, as such, management defers a
portion of the revenue from those contracts until such time as the price has
been finalized.
Some of the Corporation's customers withhold certain amounts from the billings
they receive. These retainages are generally not due until the project has been
completed and accepted by the customer.
Inventory: Inventory costs include materials, direct labor, and overhead costs,
which are stated at the lower of cost or market, where market is limited to the
net realizable value. The Corporation estimates the net realizable value of its
inventories and establishes reserves to reduce the carrying amount of these
inventories to net realizable value, as necessary. The stated inventory costs
are also reflective of the estimates used in applying the
percentage-of-completion revenue recognition method.
The Corporation purchases materials for the manufacture of components for sale.
The decision to purchase a set quantity of a particular item is influenced by
several factors including: current and projected price, future estimated
availability, existing and projected contracts to produce certain items, and the
estimated needs for its businesses.
For certain of its long-term contracts, the Corporation utilizes progress
billings, which represent amounts billed to customers prior to the delivery of
goods and services and are a reduction to inventory and receivables. Progress
billings are generally based on costs incurred, including direct costs,
overhead, and general and administrative costs and are a reduction to inventory.
Pension and other postretirement benefits: The Corporation, in consultation with
its actuary, determines the appropriate assumptions for use in determining the
liability for future pension and other postretirement benefits. The most
significant of these assumptions include the number of employees who will
receive benefits along with the tenure and salary level of those employees, the
expected return on plan assets, the discount rates used on plan obligations, and
the trends in health care costs. Changes in these assumptions in future years
will have an effect on the Corporation's pension and postretirement costs.
For the nine months ended September 30, 2003, the Corporation recognized
non-cash pension income from the Curtiss-Wright Pension Plan of approximately
$1.6 million because the excess of amounts funded for the pension plan in prior
years yields returns that exceed the calculated costs associated with the
liability in the current year. As of September 30, 2003, the Corporation had a
prepaid pension asset of approximately $77.6 million and accrued pension and
other postretirement costs of $2.0 million relating to the Curtiss-Wright
Retirement Plan and the Curtiss-Wright Restoration Plan. As a result of the
acquisition of EMD in October 2002, the Corporation assumed underfunded
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
pension and postretirement liabilities of $73.7 million. Expenses incurred
during the nine months ended September 30, 2003 related to the EMD plans were
approximately $5.5 million. Additionally, the Corporation has made approximately
$5.7 million in cash contributions to the EMD Pension Plan during the nine
months ended September 30, 2003.
The timing and amount of future pension income or expense to be recognized each
year is dependent on the demographics and expected earnings of the plan
participants, the expected interest rates in effect in future years, and the
actual and expected investment returns of the assets in the pension trust.
Additionally, the Corporation will experience additional pension and
postretirement costs in the future due to the acquisition of EMD and the
assumption of its pension plan.
Environmental reserves: The Corporation provides for environmental reserves
when, in conjunction with internal and external legal counsel, it is determined
that a liability is both probable and estimable. In many cases, the liability is
not fixed or capped when the Corporation first records a liability for a
particular site. In estimating the future liability and continually evaluating
the sufficiency of such liabilities, the Corporation weighs certain factors
including the Corporation's participation percentage due to a settlement by or
bankruptcy of other potentially responsible parties, a change in the
environmental laws requiring more stringent requirements, a change in the
estimate of future costs that will be incurred to remediate the site, and
changes in technology related to environmental remediation.
Purchase Accounting: The Corporation applies the purchase method of accounting
to its acquisitions. Under this method, the purchase price, including any
capitalized acquisition costs, is allocated to the underlying tangible and
intangible assets acquired and liabilities assumed based on their respective
fair market values, with any excess recorded as goodwill. The Corporation,
usually in consultation with third-party valuation advisors, determines the fair
values of such assets and liabilities. During 2003, the fair value of assets
acquired and liabilities assumed through acquisitions were estimated to be $41.3
million and $3.8 million, respectively. The assigned initial fair value to these
acquisitions are tentative and may be revised prior to finalization, which is to
be completed within a reasonable period, generally within one year of
acquisition.
Goodwill: The Corporation has approximately $211.9 million in goodwill as of
September 30, 2003. The recoverability of goodwill is subject to an annual
impairment test based on the estimated fair value of the underlying businesses.
Additionally, goodwill is tested for impairment when an event occurs or if
circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. These estimated fair values are based
on estimates of future cash flows of the businesses. Factors affecting these
future cash flows include the continued market acceptance of the products and
services offered by the businesses, the development of new products and services
by the businesses and the underlying cost of development, the future cost
structure of the businesses, and future technological changes. Estimates are
also used for the Corporation's cost of capital in discounting the projected
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS, continued
future cash flows. If it has been determined that an impairment has occurred,
the Corporation may be required to recognize an impairment of its asset, which
would be limited to the difference between the book value of the asset and its
fair value. Any such impairment would be recognized in full in the reporting
period that it has been identified.
Other intangible assets: Other intangible assets are the result of acquisitions
and consist primarily of purchased technology, backlog, and technology licenses.
Intangible assets are recorded at their fair values as determined through
purchase accounting and are amortized ratably to match their cash flow streams
over their estimated useful lives, which range from 1 to 20 years. The
Corporation reviews the recoverability of intangible assets, including the
related useful lives, whenever events or changes in circumstances indicate that
the carrying amount might not be recoverable. Any impairment would be recorded
in the period in which it has been identified.
Recent Developments
Please refer to Note 16 of the Corporation's Consolidated Financial Statements
in Part 1, Item 1 of this quarterly report.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a result of the September 25, 2003 Senior Notes issue, the Corporation
shifted its interest rate exposure from 91% variable debt at December 31, 2002
to approximately 90% fixed as of September 30, 2003. The net proceeds of the
Senior Notes offering allowed the Corporation to pay down the majority of its
outstanding debt under its revolving credit facilities. On November 10, 2003,
the Corporation entered into an interest rate swap agreement that shifted its
interest rate exposure to 55% fixed and 45% variable, as of that date. The
variable rate on both the revolving credit agreements and the interest rate swap
agreements are based on market rates. See Note 16, Subsequent Events for further
information regarding the Corporation's Interest Rate Swap transactions.
The Corporation continues to maintain the ability to borrow funds under its two
Revolving Credit Facilities and currently has outstanding variable rate debt
borrowings of 11 million Swiss Francs as of September 30, 2003. The
Corporation's market risk for a change in interest rates relates primarily to
the debt obligations.
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, 2002.
Item 4. CONTROLS AND PROCEDURES
As of September 30, 2003, the Corporation's management, including the
Corporation's Chief Executive Officer and Chief Financial Officer, conducted an
evaluation of the Corporation's disclosure controls and procedures; as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Based on such evaluation, the
Corporation's Chief Executive Officer and Chief Financial Officer concluded that
the Corporation's disclosure controls and procedures are effective, in all
material respects, to ensure that information required to be disclosed in the
reports the Corporation files and submits under the Exchange Act is recorded,
processed, summarized, and reported as and when required.
There have not been any changes in the Corporation's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal quarter ended September 30, 2003 that
have materially affected, or are reasonably likely to materially affect, the
Corporation's internal control over financial reporting.
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,
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
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 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) change
in governmental spending, (iii) an economic downturn, (iv) unanticipated
environmental remediation expenses or claims, (v) changes in the need for
additional machinery and equipment and/or in the cost for the expansion of the
Corporation's operations, (vi) changes in the competitive marketplace and/or
customer requirements, (vii) an inability to perform customer contracts at
anticipated cost levels, and (viii) other factors that generally affect the
business of companies operating in the Corporation's Segments.
PART II - OTHER INFORMATION
Item 1. 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(b) On September 25, 2003, the Corporation sold $200 million of Senior Notes
consisting of $75.0 million of 5.13% Senior Notes that mature on September
25, 2010 and $125.0 million of 5.74% Senior Notes that mature on September
25, 2013. The sections of this Form 10-Q entitled "Part I-Item 1-Note
(8)-Debt" "Management Discussion and Analysis - Changes in Financial
Condition" and "Part I-Item 3. Quantitative and Qualitative Disclosures
about Market Risk" are incorporated by reference into Part II-Item 2(b) of
this Form 10-Q.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
Item 6. EXHIBITS and REPORTS on FORM 8-K
(a) Exhibits
Exhibit 10.1 Form of Note Purchase Agreement between
Curtiss-Wright Corporation and its Subsidiaries
and various Investors, dated September 25, 2003
(incorporated by reference to Exhibit 10.1 of the
Registrant's Form 8-K filed with the Securities
and Exchange Commission on October 3, 2003.)
Exhibit 10.2 Restrictive Legend on Notes (incorporated by
reference to Exhibit 10.2 of the Registrant's
Form 8-K filed with the Securities and Exchange
Commission on October 3, 2003.)
Exhibit 31.1 Certification of Martin R. Benante, Chairman and CEO,
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith
Exhibit 31.2 Certification of Glenn E. Tynan, Chief Financial
Officer, Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, filed herewith
Exhibit 32 Certification of Martin R. Benante, Chairman and CEO,
and Glenn E. Tynan, Chief Financial Officer, Pursuant
to 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith
Exhibit 99.1 Press Release Dated September 25, 2003
(incorporated by reference to Exhibit 10.2 of the
Registrant's Form 8-K filed with the Securities
and Exchange Commission on October 3, 2003.)
(b) Reports on Form 8-K
1. On October 3, 2003 filed a Current Report on Form 8-K, dated
September 25, 2003, (a) reporting under Item 5 thereof the
completion of an offering of $200 million Senior Notes, and (b)
filing under Item 7 thereof the related press release.
Page 37 of 38
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
SIGNATURE
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/ Glenn E. Tynan
-----------------------------------
Glenn E. Tynan
Vice President Finance / C.F.O.
Dated: November 14, 2003
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