-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T2yiAlX4i/pjpU31Z4qxVm+KA/9+aII1bIQlY9+V3kIhqihbvJ+z17YH0oO8VJ1O KOSQcE9Bq2MTNEyxxFBasA== 0000026324-99-000004.txt : 19990805 0000026324-99-000004.hdr.sgml : 19990805 ACCESSION NUMBER: 0000026324-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CURTISS WRIGHT CORP CENTRAL INDEX KEY: 0000026324 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 130612970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00134 FILM NUMBER: 99677308 BUSINESS ADDRESS: STREET 1: 1200 WALL ST W CITY: LYNDHURST STATE: NJ ZIP: 07071 BUSINESS PHONE: 2018968400 MAIL ADDRESS: STREET 1: 1200 WALL ST W CITY: LYNDHURST STATE: NJ ZIP: 07071 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 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 JUNE 30, 1999 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: 10,099,611 shares (as of July 30, 1999) Page 1 of 18 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 - 15 Forward-Looking Statements 16 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 17 2 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) June 30, December 31, 1999 1998 Assets: Cash and cash equivalents $ 13,379 $ 5,809 Short-term investments 50,581 66,444 Receivables, net 61,432 60,912 Deferred tax asset 7,796 7,841 Inventories 55,953 54,048 Other current assets 2,482 3,519 --------- --------- Total current assets 191,623 198,573 --------- --------- Property, plant and equipment, at cost 251,878 237,215 Less, accumulated depreciation 165,342 162,704 --------- --------- Property, plant and equipment, net 86,536 74,511 Prepaid pension costs 46,555 43,822 Goodwill 31,875 30,724 Other assets 4,993 5,110 --------- --------- Total assets $361,582 $352,740 ========= ========= Liabilities: Current portion of long-term debt $ 20,523 $ 20,523 Accounts payable and accrued expenses 27,938 30,687 Dividends payable 1,327 Income taxes payable 6,416 5,052 Other current liabilities 11,067 11,548 --------- ---------- Total current liabilities 67,271 67,810 --------- ---------- Long-term debt 20,162 20,162 Deferred income taxes 10,301 9,714 Other liabilities 24,630 25,461 --------- ---------- Total liabilities 122,364 123,147 --------- ---------- Stockholders' equity: Common stock, $1 par value 15,000 15,000 Capital surplus 51,655 51,669 Retained earnings 355,833 342,218 Unearned portion of restricted stock (32) (40) Accumulated other comprehensive income (3,388) (2,800) ---------- ---------- 419,068 406,047 Less, cost of treasury stock 179,850 176,454 ---------- ---------- Total stockholders' equity 239,218 229,593 ---------- ---------- Total liabilities and stockholders' equity $361,582 $352,740 ========== ========== See notes to consolidated financial statements. 3 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS of EARNINGS (UNAUDITED) (In thousands except per share data) Six Months Ended Three Months Ended June 30, June 30, ------------------ ------------------ 1999 1998 1999 1998 ---- ---- ---- ---- Net sales $140,545 $120,251 $70,195 $59,405 Cost of sales 90,847 80,380 45,515 37,656 --------- --------- -------- -------- Gross margin 49,698 39,871 24,680 21,749 Research and development costs 1,740 591 592 286 Selling expenses 7,752 4,856 3,721 1,738 General and administrative 19,511 16,403 10,164 9,535 --------- --------- -------- -------- Operating income 20,695 18,021 10,203 10,190 Investment income, net 1,458 1,581 753 502 Rental income, net 2,247 1,763 1,421 850 Pension income 2,563 1,689 1,282 876 Other income (expense), net (337) 79 (252) (20) Interest expense 630 185 327 96 --------- --------- -------- -------- Earnings before taxes 25,996 22,948 13,080 12,302 Provision for taxes 9,735 8,642 4,801 4,601 --------- --------- -------- -------- Net earnings $ 16,261 $ 14,306 $ 8,279 $ 7,701 ========= ========= ======== ======== Weight average number of shares outstanding 10,143 10,187 10,143 10,187 ====== ====== ====== ====== Basic earnings per common share $1.60 $1.40 $0.82 $0.76 ===== ===== ===== ===== Diluted earnings per common share $1.57 $1.38 $0.79 $0.75 ===== ===== ===== ===== Dividends per common share $0.13 $0.13 $0.13 $0.13 ===== ===== ===== ===== See notes to consolidated financial statements. 4 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED) (In thousands) Six Months Ended June 30, 1999 1998 Cash flows from operating activities: Net earnings $ 16,261 $ 14,306 --------- --------- Adjustments to reconcile net earnings to net cash provided by operating activities (net of businesses acquired) Depreciation and amortization 5,744 4,881 Net gains on short-term investments (81) (170) Increase in deferred taxes 632 1,221 Changes in operating assets and liabilities: Proceeds from sales of trading securities 190,132 197,151 Purchases of trading securities (174,188) (197,895) (Increase) decrease in receivables 12,257 (2,218) (Increase) decrease in inventory (476) 86 Decrease in progress payments (13,086) (2,220) Increase (decease) in accounts payable and accrued expenses (2,979) 599 Increase in income taxes payable 1,364 71 Increase in other assets (2,749) (3,027) Decrease in other liabilities (2,532) (1,812) Other, net (557) 1,381 ---------- --------- Total adjustments 13,481 (1,952) ---------- --------- Net cash provided by operating activities 29,742 12,354 ---------- --------- Cash flows from investing activities: Proceeds from sales of real estate and equipment 106 280 Additions to property, plant and equipment (11,573) (2,581) Acquisitions (5,953) (6,106) ---------- --------- Net cash used by investing activities (17,420) (8,407) ---------- --------- Cash flows from financing activities: Dividends paid (1,319) (1,324) Common stock repurchased (3,433) ---------- --------- Net cash used by financing activities (4,752) (1,324) ---------- --------- Net increase in cash and cash equivalents 7,570 2,623 Cash and cash equivalents at beginning of period 5,809 6,873 ---------- --------- Cash and cash equivalents at end of period $ 13,379 $ 9,495 ========== ========= See notes to consolidated financial statements. 5 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS of STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands)
Unearned Accumulated Portion of Other Common Capital Retained Restricted Comprehensive Treasury Stock Surplus Earnings Stock Awards Income Stock December 31, 1997 $15,000 $52,010 $318,474 $(342) $(3,289) $177,000 Net earnings 29,053 Common dividends (5,309) Common stock repurchased 612 Stock options exercised, net (449) Amortization of earnings portion of restricted stock 108 302 (1,158) Translation adjustments, net 489 -------- -------- --------- ------ -------- --------- December 31, 1998 15,000 51,669 342,218 (40) (2,800) 176,454 Net earnings 16,261 Common dividends (2,646) Common stock repurchased 3,433 Stock options exercised, net (14) (37) Amortization of earned portion of restricted stock 8 Translation adjustment, net (588) -------- ------- --------- ------ --------- --------- June 30, 1999 $15,000 $51,655 $355,833 $ (32) $(3,388) $179,850 ======== ======== ========= ====== ========= =========
See notes to consolidated financial statements. 6 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS of PRESENTATION Curtiss-Wright Corporation (the "Corporation") is a diversified multi-national manufacturing and service concern that designs, manufactures and overhauls precision components and systems and provides highly engineered services to the aerospace, defense, automotive, shipbuilding, oil, petrochemical, agricultural equipment, power generation, railroad, metal working and fire & rescue industries. The Corporation's principal operations include, five manufacturing facilities (four domestic and one in Switzerland), thirty-seven metal treatment service facilities located in North America and Europe, and four component overhaul facilities. 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 1998 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. ACQUISITIONS On June 30, 1999, the Corporation acquired Metallurgical Processing, Inc. (MPI), a midwest supplier of commercial heat-treating services, primarily to the automotive and industrial markets. MPI provides a number of metal-treating processes including carburizing, hardening, and carbonitriding and services a broad spectrum of customers from its Fort Wayne, Indiana location. The Corporation acquired the stock of MPI for approximately $7.0 million in cash (of which $1.0 million has been deferred for one year) and has accounted for the acquisition as a purchase in the second quarter of 1999. The excess of purchase price over the fair value of the net assets acquired is not expected to be material, based on preliminary estimates. 7 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued (UNAUDITED) 3. RECEIVABLES Receivables, at June 30, 1999 and December 31, 1998, include amounts billed to customers and unbilled charges on long-term contracts consisting of amounts recognized as sales but not billed at the dates presented. Substantially all amounts of unbilled receivables are expected to be billed and collected within a year. The composition of receivables for those periods is as follows: (In thousands) June 30, December 31, 1999 1998 --------- ----------- Accounts receivable, billed $54,605 $63,412 Less: progress payments applied 1,102 11,687 --------- --------- 53,503 51,725 --------- --------- Unbilled charges on long-term contracts 15,835 17,447 Less: progress payments applied 5,960 6,350 --------- --------- 9,875 11,097 --------- --------- Allowance for doubtful accounts (1,946) (1,910) --------- --------- Receivables, net $61,432 $60,912 ========= ========= 4. INVENTORIES Inventories are valued at the lower of cost (principally average cost) or market. The composition of inventories at June 30, 1999 and December 31, 1998 is as follows: (In thousands) June 30, December 31, 1999 1998 --------- ----------- Raw materials $ 9,500 $ 8,862 Work-in-process 23,422 27,582 Finished goods 26,445 23,130 -------- -------- Total inventories 59,367 59,574 Less: progress payments applied 3,414 5,526 -------- -------- Net inventories $55,953 $54,048 ======== ======== 8 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued (UNAUDITED) 5. 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 the Sharkey Landfill Superfund Site, Parsippany, New Jersey, Caldwell Trucking Company Superfund Site, Fairfield, New Jersey, Pfohl Brothers Landfill Site, Cheektowaga, New York, and PJP Landfill, Jersey City, New Jersey identified to date as the most significant sites. 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. 6. SEGMENT INFORMATION The Corporation conducts its business operations through three manufacturing segments, Precision Manufacturing Products & Services (PMPS), Actuation and Control Products & Services (ACPS), and Flow Control Products & Services (FCPS).
(In thousands) Three Months Ended June 30, 1999 Three Months Ended June 30, 1998 -------------------------------- -------------------------------- PMPS ACPS (1) FCPS PMPS ACPS FCPS ---- -------- ---- ---- ---- ---- Revenue from external $26,016 $30,529 $13,650 $27,263 $25,957 $ 6,185 customers Intersegment revenues 53 0 0 151 0 0 Segment net income 3,702 1,129 746 5,212 670 466 Segment assets 80,773 116,104 42,596 65,457 89,277 15,721 Six Months Ended June 30, 1999 Six Months Ended June 30, 1998 ------------------------------ ------------------------------ PMPS ACPS (1) FCPS PMPS ACPS FCPS ---- -------- ---- ---- ---- ---- Revenue from external $52,018 $60,838 $27,689 $53,131 $54,319 $12,801 customers Intersegment revenues 172 306 Segment net income 7,533 2,052 1,878 9,822 (181) 1,348 (1) Includes consolidation costs, net of tax benefits for the relocation of operations in the amounts of $.8 million and $1.1 million for the second quarter and first half of 1999, respectively.
9 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued (UNAUDITED) Reconciliation Three months ended Six months ended June 30, June 30, June 30, June 30, 1999 1998 1999 1998 -------- -------- -------- -------- Total segment net income $5,577 $6,348 $11,463 $10,989 Rental income, net 738 415 1,182 838 Investment income, net 744 483 1,219 1,325 Pension income 758 548 1,516 1,036 Corporate and other 462 (93) 881 118 ------ ------- ------- ------- Consolidated net income $8,279 $7,701 $16,261 $14,306 ====== ======= ======= ======= 7. COMPREHENSIVE INCOME Effective January 1, 1998, the Corporation adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130). SFAS No. 130 establishes standards for reporting and displaying changes in equity from non-owner sources. Total comprehensive income for the second quarter and first six-month periods ended June 30, 1999 and 1998 are as follows: (In thousands) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- Net earnings $8,279 $7,701 $16,261 $14,306 Equity adjustment from Foreign currency translations 861 (279) (285) (88) ------ ------- -------- -------- Total comprehensive income $9,140 $7,422 $15,976 $14,218 ====== ======= ======== ======= 8. 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, 1999 were 65,000 and 183,000, respectively and 14,000 and 148,000 for the three and six months ended June 30, 1998. 9. SUBSEQUENT EVENT On July 28, 1999, Curtiss-Wright Corporation announced that it had entered into an agreement to acquire the Pressure Relief Valve (PRV) and Vehicle Control Valve and Pump (VCP) businesses of Teledyne Fluid Systems, an Allegheny Teledyne Incorporated company. 10 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued (UNAUDITED) PRV operates under the "Farris Engineering" trade name and is one of the world's leading manufacturers of spring loaded and pilot-operated pressure-relief valves for use in processing industries that include refineries, petrochemical/chemical plants and pharmaceutical manufacturing. The VCP business being acquired provides specialty hydraulic and pneumatic valves and air-driven pumps and gas boosters sold under the "Sprague" and "PowerStar" trade names for general industrial applications. VCP also manufactures certain directional control valve products for truck transmissions and car transport carriers. The products of the businesses to be acquired are manufactured in Brecksville, Ohio and Brantford, Ontario. A service and distribution center is located in Edmonton, Alberta. The Corporation plans to continue the PRV and VCP businesses in their current locations with the current team of employees. The combined sales of the businesses being acquired were approximately $42.8 million in 1998. Curtiss-Wright has contracted to purchase the assets of the businesses for approximately $44 million in cash. The consummation of the transaction is subject to customary government approvals pursuant to the Hart-Scott-Rodino Act, completion of a review of the businesses of PRV and VCP, and certain closing conditions being met by the parties including the execution of a Transition Services Agreement. The transaction is expected to be completed in the third quarter of 1999. 10. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1999, the Financial Accounting Standards Board issued Statement No. 137 deferring the effective date of Statement No. 133, "Accounting for Derivatives and Hedging Activities" (SFAS No. 133). SFAS No. 133 is now effective for all fiscal quarters of all 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. 11 PART I - ITEM 2 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS RESULTS of OPERATIONS Net earnings for the Corporation rose 8% to $8.3 million, or $.79 per diluted share, from $7.7 million or $.75 per diluted share for the second quarter of 1998. Sales increased 18% to $70.2 million from $59.4 million a year ago. Operating earnings of $10.2 million were essentially the same as they were for the same quarter of last year. While new orders for the second quarter increased only slightly to $60.9 million, backlog was 30% higher, at $189.4 million. Net earnings for the first six months of 1999 increased 14% to $16.3 million, or $1.57 per diluted share, from $14.3 million, or $1.38 per share, for the first six months of 1998. Sales for the 1999 first half rose 17% to $140.5 million, from $120.3 million a year ago. Operating income was 15% higher at $20.7 million for the first half of 1999, compared with the first half of 1998. New orders in the 1999 first half totaled $131.7 million, 13% above their year-ago level. These increases in sales, earnings and orders largely reflect the three acquisitions made in 1998: Alpha Heat Treaters, Enertech and Curtiss-Wright Drive Technology. Operating Performance The Corporation's Precision Manufacturing Products & Services (PMPS) segment reported slightly lower sales in the second quarter and first six months of 1999 than in the same periods of 1998. PMPS had record sales for metal-treatment services in 1998, but so far in 1999 has felt several of its primary markets soften: Services for oil tool, agricultural and certain aerospace customers have declined in comparison with the prior year. Net earnings for the 1999 periods were significantly below those of 1998, reflecting lower margins on slightly lower sales and increased operating expenses. Operating expenses for 1999 included costs for facility expansions, taking place both domestically and in Europe. The Corporation's Actuation and Control Products & Services (ACPS) segment, for both the second quarter and first six months of 1999, had higher sales and earnings largely reflecting the acquisition ofCurtiss-Wright Drive Technology on December 31, 1998. Sales of commercial aircraft actuation products also improved period to period largely as a result of orders under the contract extension with Boeing signed in the first quarter of 1999. Earnings also benefited from cost and performance enhancements for these programs. In the second quarter, the sales of aircraft component overhaul and repair services were slightly higher in comparison with the last year period, while sales of military aircraft actuation products continued to decline. 12 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS, Continued The ACPS segment continues to incur substantial one-time costs associated with the consolidation of its manufacturing operations into its expanded Shelby, NC, facility and with the move of certain overhaul and repair services to a new location in Gastonia, NC. Expenses related to the consolidation activities, including costs related to the previously announced shut-down of the Fairfield, NJ, facility, totaled approximately $1.3 million during the second quarter and $1.8 million for the first six months of 1999. Additional expenses associated with the consolidation activities are expected to be incurred during the second half of 1999. The Corporation's Flow Control Products & Services (FCPS) segment produced substantially higher sales and improved earnings in the second quarter and first half of 1999. Sales improvements for both 1999 periods were driven largely by the acquisition of Enertech in July 1998 and by additional U.S. Navy business. Other Developments As discussed in Note 2 to the Consolidated Financial Statements of this Form 10-Q Report, the Corporation acquired Metallurgical Processing, Inc. (MPI) on June 30, 1999. The purchase of MPI supports the Corporation's strategy of growing the heat-treating business of the PMPS segment into new geographic markets through acquisition. MPI adds an established market presence in an attractive industrial area. As discussed in Note 9 to the Consolidated Financial Statements of this Form 10-Q Report, the Corporation entered into an agreement on July 28, 1999, to acquire the Pressure Relief Valve (PRV) and Vehicle Control Valve and Pump (VCP) businesses of Teledyne Fluid Systems. CHANGES IN FINANCIAL CONDITION Liquidity and Capital Resources The Corporation's working capital was $124.4 million at June 30, 1999, 5% below working capital at December 31, 1998 of $130.8 million. The ratio of current assets to current liabilities was 2.85 to 1 at June 30, 1999, compared with a current ratio of 2.93 to 1 at December 31, 1998. Cash, cash equivalents and short-term investments totaled $63.9 million in aggregate at June 30, 1999, also decreasing slightly from $72.3 million at the prior year-end. The decline in cash and short-term investments largely reflects the MPI acquisition of June 30, 1999. Changes in working capital reflect slight increases in net receivables and net inventories at June 30, 1999, from December 31, 1998. Working capital also benefited from reduced accounts payable and accrued expenses, which was largely offset by an increase in income taxes payable at June 30, 1999 and accrued dividends payable for the second quarter of 1999. 13 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS, Continued The Corporation has two credit agreements, a Revolving Credit Agreement and a Short-Term Credit Agreement, in effect aggregating $45.0 million with a group of three banks. The credit agreements allow for borrowings to take place in US or certain foreign currencies. The Revolving Credit Agreement commits a maximum of $22.5 million to the Corporation for cash borrowings and letters of credit. The unused credit available under this facility at June 30, 1999 was $1.1 million. The commitments made under the Revolving Credit Agreement expire October 29, 2001, but may be extended annually for successive one-year periods with the consent of the bank group. The Corporation also has in effect a Short-Term Credit Agreement which allows for cash borrowings of $22.5 million, of which $2.0 million was available at June 30, 1999. The Short-Term Credit Agreement expires October 22, 1999, and it is anticipated that it will be extended, with the consent of the bank group, for an additional period not to exceed 364 days. Cash borrowings under the two credit agreements at June 30, 1999 were at a US Dollar equivalent of $21.9 million. The loans had variable interest rates averaging 2.03% for the first half of 1999. No cash borrowings were outstanding at June 30, 1998. During the first half of 1999, internally generated funds were adequate to meet the investing and financing needs of the Corporation. Capital expenditures totaled $11.6 million during the first half and were primarily for machinery and equipment needed for the PMPS segment. Internally generated funds were also used for the June 30, 1999 acquisition of Metallurgical Processing Inc and the purchase of a 53,000-square-foot building in Gastonia, North Carolina for a portion of its commercial aircraft component repair and overhaul operations, made during the first quarter of 1999. Additional funds generated by the Corporation were used to repurchase 94,750 shares of its common stock, at a cost of $3.4 million during the first half of 1999. Cash and short-term investment holdings of the Corporation are expected to be adequate to cover the cost of the acquisition of the Pressure Relief Valve and Vehicle Control Valve and Pump business units of Teledyne Fluid Systems, as discussed in Note 9 to Consolidated Financial Statements. The cost of the acquisition is approximately $44.0 million. An additional $8.5 million of capital expenditures is anticipated for the balance of the year, primarily for capital equipment and facility expansions. It is anticipated that these expenditures will be met without further borrowings. YEAR 2000 As is more fully described under the subheading "Year 2000" under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," as referenced in the Corporation's annual report on Form 10-K for the fiscal year ended December 31, 1998, the Corporation is modifying or replacing portions of its software as well as certain hardware to permit 14 CURTISS-WRIGHT CORPORATION and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS, Continued continued operations beyond December 31, 1999 without systems failures or processing errors that might arise as a result of the so-called Year 2000 (Y2K) issue. Each operating entity of the Corporation is at a different stage of readiness. Identification of the internal business systems of the Corporation that are susceptible to system failures or processing errors as a result of the Y2K issue is substantially complete. The Corporation is using both internal and external resources for its remediation efforts, including the modification of code and test of the resulting modifications. Based on the current schedule, the Corporation expects its internal business systems to be functioning properly with respect to the Y2K issue before January 1, 2000. Additionally, significant service providers, vendors, suppliers and customers that are believed to be critical to on-going business operations have been identified and contacted in an attempt to ascertain their stage of readiness. Where necessary, the Corporation intends to seek alternative suppliers, service providers or contractors who have demonstrated Y2K readiness. Concurrently, with the Y2K readiness measures described above, the Corporation and its operating units are developing contingency plans intended to mitigate the possible disruption in business operations that may result from the Y2K issue and are developing cost estimates for such plans. Based on the current schedule, the Corporation expects such plans to be in place by the end of the third quarter of 1999. It is currently estimated that the incremental costs of the Corporation's Y2K remediation efforts will be approximately $.5 million of which approximately $.3 million has been spent. Remediation costs are being expensed as they are incurred. The costs associated with the replacement of computerized systems and hardware are currently estimated to be $.3 million, which amount is being capitalized. These amounts do not include any costs associated with the implementation of contingency plans that are in the process of being developed. The Corporation's Y2K readiness program is an on-going process and the estimates of costs and completion dates are subject to change. 15 FORWARD-LOOKING INFORMATION Except for historical information, this Quarterly Report on Form 10-Q may be deemed to contain "forward looking" information. Examples of forward looking information include, but are not limited to, (a) projections of or statements regarding return on investment, future earnings, interest income, other income, earnings or loss per share, investment mix and quality, growth prospects, capital structure and other financial terms, (b) statements of plans and objectives of management, (c) statements of future economic performance, and (d) statements of assumptions, such as economic conditions underlying other statements. Such forward looking information can be identified by the use of forward looking terminology such as "believes," "expects," "may," "will," "should," "anticipates," or the negative of any of the foregoing or other variations thereon or comparable terminology, or by discussion of strategy. No assurance can be given that the future results described by the forward looking information will be achieved. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward looking information. Such statements in this Report include, without limitation, those contained in 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. 16 PART II - OTHER INFORMATION Item 6. EXHIBITS and REPORTS on FORM 8-K (a) Exhibits Exhibit 27 - Financial Data Schedules (Page 18) (b) Reports on Form 8-K The Registrant did not file any report on Form 8-K during the quarter ended June 30, 1999. On August 2, 1999, the Registrant filed a Form 8-K regarding the signing of a definitive asset purchase agreement to acquire the Pressure Relief Valve (PRV) and Vehicle Control Valve and Pump (VCP) business units of Teledyne Fluid Systems, an Allegheny Teledyne Incorporated company, for a purchase price of approximately $44 million. 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 By: /s/ Kenneth P.Slezak -------------------------- Kenneth P. Slezak Controller Dated: August 4, 1999 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 1000 6-MOS DEC-31-1999 JUN-30-1999 13,379 50,557 63,378 1,946 55,953 191,623 251,878 165,342 361,582 67,271 20,162 0 0 15,000 224,218 361,582 140,545 146,813 90,847 119,850 337 0 630 25,996 9,735 16,261 0 0 0 16,261 1.60 1.57
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