UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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FORM
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CURRENT
REPORT
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(State or Other
Jurisdiction of
Incorporation)
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(Commission File
Number)
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(IRS Employer
Identification No.)
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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CURTISS-WRIGHT CORPORATION
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By:
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/s/ K. Christopher Farkas
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K. Christopher Farkas
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Vice-President and Chief Financial Officer
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Exhibit
Number |
Description
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99.2 | Presentation shown during investor and securities analyst webcast on August 4, 2020 |
Q2 Results Reflect Solid Defense Market Sales Growth and Benefits of Cost Containment Actions
Expect Strong FY’20 Free Cash Flow Generation
Maintain Healthy Balance Sheet with Ample Liquidity
DAVIDSON, N.C.--(BUSINESS WIRE)--August 3, 2020--Curtiss-Wright Corporation (NYSE: CW) reports financial results for the second quarter ended June 30, 2020.
Second Quarter 2020 Highlights:
“Our second quarter performance reflects our team’s ability to take swift action and effectively manage the business in this exceptionally challenging environment,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “Across Curtiss-Wright, we continue to take the necessary steps to protect the health and safety of our employees and ensure the continuity of our operations. Our results reflect solid sales growth in our defense markets, the benefits of our ongoing cost containment initiatives and strong free cash flow which produced a robust free cash flow conversion of 247% in the quarter.
“Looking ahead to the remainder of 2020, we expect continued overall growth in our defense markets, which remain strong, along with sequential improvement in our commercial markets, as we slowly rebound from lower second quarter demand resulting from the COVID-19 pandemic. We are increasing and accelerating difficult, but essential, restructuring actions aimed at mitigating the challenging conditions within our commercial end markets. As a result, we now anticipate $35 million in restructuring costs in 2020 to generate $40 million in annualized savings, which is expected to benefit our performance for the remainder of 2020 and in 2021.
“Our balanced portfolio, along with the anticipated cost savings generated by these actions, provides the necessary confidence to reinitiate our full-year 2020 guidance. Further, it supports our ability to generate strong Adjusted free cash flow of $350 to $380 million. Overall, we remain focused on executing on our long-term strategy to deliver significant value for our shareholders.”
Full-Year 2020 Adjusted Guidance (compared to Full-Year 2019 Adjusted Actuals):
Financing of $300 Million in Senior Notes:
Second Quarter 2020 Operating Results
(In millions) |
2Q-2020 |
2Q-2019 |
Change |
||
Sales |
$ |
550.0 |
$ |
639.0 |
(14%) |
Reported operating income |
$ |
55.3 |
$ |
105.7 |
(48%) |
Adjustments (1) |
|
23.2 |
|
2.0 |
|
Adjusted operating income (1) |
$ |
78.5 |
$ |
107.7 |
(27%) |
Adjusted operating margin (1) |
|
14.3% |
|
16.8% |
(250 bps) |
(1) |
Adjusted results exclude $15 million in restructuring costs, a non-cash impairment of capitalized development costs related to a commercial aerospace program, one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions, and one-time transition and IT security costs associated with the relocation of our DRG business. |
Net Earnings and Diluted EPS
(In millions, except EPS) |
2Q-2020 |
2Q-2019 |
Change |
||
Reported net earnings |
$ |
31.0 |
$ |
80.1 |
(61%) |
Adjustments, net of tax (1) |
|
23.9 |
|
1.5 |
|
Adjusted net earnings (1) |
$ |
54.9 |
$ |
81.6 |
(33%) |
Reported diluted EPS |
$ |
0.74 |
$ |
1.86 |
(60%) |
Adjustments, net of tax (1) |
|
0.57 |
|
0.04 |
|
Adjusted diluted EPS (1) |
$ |
1.31 |
$ |
1.90 |
(31%) |
(1) |
Adjusted results exclude $15 million in restructuring costs, a non-cash impairment of capitalized development costs related to a commercial aerospace program, one-time inventory step-up, backlog amortization and transaction costs for current and prior year acquisitions, one-time transition and IT security costs associated with the relocation of our DRG business, and a $10 million non-cash currency translation loss (within non-operating income) related to the liquidation of a foreign legal entity. |
Free Cash Flow
(In millions) |
2Q-2020 |
2Q-2019 |
Change |
||
Net cash provided by operating activities |
$ |
140.4 |
$ |
92.2 |
52% |
Capital expenditures |
|
(10.7) |
|
(16.4) |
35% |
Reported free cash flow |
$ |
129.7 |
$ |
75.8 |
71% |
Adjustment to capital expenditures (DRG facility investment) (1) |
|
2.0 |
|
4.0 |
(50%) |
Restructuring (1) |
|
4.1 |
|
- |
- |
Adjusted free cash flow (1) |
$ |
135.8 |
$ |
79.8 |
70% |
(1) |
Adjusted free cash flow excludes a capital investment related to the new, state-of-the-art naval facility principally for DRG which impacted both periods, and the cash impact from restructuring in the current period. |
New Orders and Backlog
Share Repurchase and Dividends
Second Quarter 2020 Segment Performance
Commercial/Industrial
(In millions) |
2Q-2020 |
2Q-2019 |
Change |
||
Sales |
$ |
213.6 |
$ |
292.9 |
(27%) |
Reported operating income |
$ |
14.4 |
$ |
51.4 |
(72%) |
Adjustments (1) |
|
7.7 |
|
- |
|
Adjusted operating income (1) |
$ |
22.1 |
$ |
51.4 |
(57%) |
Adjusted operating margin (1) |
|
10.3% |
|
17.5% |
(720 bps) |
(1) |
Adjusted results exclude restructuring costs and one-time backlog amortization and transaction costs for current year acquisition. |
Defense
(In millions) |
2Q-2020 |
2Q-2019 |
Change |
||
Sales |
$ |
170.0 |
$ |
158.5 |
7% |
Reported operating income |
$ |
27.9 |
$ |
32.6 |
(15%) |
Adjustments (1) |
|
8.9 |
|
0.9 |
|
Adjusted operating income (1) |
$ |
36.8 |
$ |
33.5 |
10% |
Adjusted operating margin (1) |
|
21.6% |
|
21.0% |
60 bps |
(1) |
Adjusted results exclude restructuring costs, a non-cash impairment of capitalized development costs related to a commercial aerospace program, and one-time backlog amortization and transaction costs for current and prior year acquisitions. |
Power
(In millions) |
2Q-2020 |
2Q-2019 |
Change |
||
Sales |
$ |
166.4 |
$ |
187.6 |
(11%) |
Reported operating income |
$ |
21.3 |
$ |
32.0 |
(34%) |
Adjustments (1) |
|
6.5 |
|
1.2 |
|
Adjusted operating income (1) |
$ |
27.8 |
$ |
33.2 |
(16%) |
Adjusted operating margin (1) |
|
16.7% |
|
17.7% |
(100 bps) |
(1) |
Adjusted results exclude restructuring costs and one-time transition and IT security costs associated with the relocation of our DRG business. |
**********
A more detailed breakdown of the Company’s 2020 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted non-GAAP amounts can be found in the accompanying schedules.
Conference Call & Webcast Information
The Company will host a conference call to discuss its second quarter financial results and business outlook at 10:00 a.m. ET on Tuesday, August 4, 2020. A live webcast of the call and the accompanying financial presentation, as well as a replay of the call, will be made available on the internet by visiting the Investor Relations section of the Company’s website at www.curtisswright.com.
(Tables to Follow)
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) |
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($'s in thousands, except per share data) |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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Change |
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June 30, |
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Change |
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2020 |
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2019 |
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$ |
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% |
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2020 |
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2019 |
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$ |
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% |
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Product sales |
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$ |
466,445 |
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|
$ |
532,253 |
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|
$ |
(65,808) |
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(12 |
%) |
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$ |
964,374 |
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$ |
1,003,852 |
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|
$ |
(39,478) |
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|
(4 |
%) |
Service sales |
|
83,602 |
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|
106,743 |
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|
(23,141) |
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(22 |
%) |
|
186,904 |
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|
213,458 |
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(26,554) |
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(12 |
%) |
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Total net sales |
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550,047 |
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|
638,996 |
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(88,949) |
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(14 |
%) |
|
1,151,278 |
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|
1,217,310 |
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|
(66,032) |
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(5 |
%) |
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Cost of product sales |
|
309,152 |
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|
342,726 |
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(33,574) |
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|
(10 |
%) |
|
639,965 |
|
|
654,682 |
|
|
(14,717) |
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|
(2 |
%) |
||||||
Cost of service sales |
|
54,869 |
|
|
66,226 |
|
|
(11,357) |
|
|
(17 |
%) |
|
124,708 |
|
|
135,711 |
|
|
(11,003) |
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|
(8 |
%) |
||||||
Total cost of sales |
|
364,021 |
|
|
408,952 |
|
|
(44,931) |
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|
(11 |
%) |
|
764,673 |
|
|
790,393 |
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|
(25,720) |
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|
(3 |
%) |
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Gross profit |
|
186,026 |
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|
230,044 |
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|
(44,018) |
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|
(19 |
%) |
|
386,605 |
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|
426,917 |
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|
(40,312) |
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|
(9 |
%) |
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Research and development expenses |
|
18,269 |
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|
18,900 |
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|
(631) |
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|
(3 |
%) |
|
36,576 |
|
|
36,141 |
|
|
435 |
|
|
1 |
% |
||||||
Selling expenses |
|
25,193 |
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|
30,693 |
|
|
(5,500) |
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|
(18 |
%) |
|
56,781 |
|
|
62,170 |
|
|
(5,389) |
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|
(9 |
%) |
||||||
General and administrative expenses |
|
76,606 |
|
|
74,766 |
|
|
1,840 |
|
|
2 |
% |
|
153,264 |
|
|
150,876 |
|
|
2,388 |
|
|
2 |
% |
||||||
Restructuring expenses |
|
10,609 |
|
|
— |
|
|
10,609 |
|
|
NM |
|
12,189 |
|
|
— |
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|
12,189 |
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|
NM |
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Operating income |
|
55,349 |
|
|
105,685 |
|
|
(50,336) |
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|
(48 |
%) |
|
127,795 |
|
|
177,730 |
|
|
(49,935) |
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|
(28 |
%) |
||||||
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Interest expense |
|
8,515 |
|
|
7,960 |
|
|
555 |
|
|
7 |
% |
|
16,004 |
|
|
15,232 |
|
|
772 |
|
|
5 |
% |
||||||
Other income, net |
|
(4,105) |
|
|
5,871 |
|
|
(9,976) |
|
|
(170 |
%) |
|
1,427 |
|
|
11,349 |
|
|
(9,922) |
|
|
(87 |
%) |
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|
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|
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Earnings before income taxes |
|
42,729 |
|
|
103,596 |
|
|
(60,867) |
|
|
(59 |
%) |
|
113,218 |
|
|
173,847 |
|
|
(60,629) |
|
|
(35 |
%) |
||||||
Provision for income taxes |
|
(11,711) |
|
|
(23,524) |
|
|
11,813 |
|
|
(50 |
%) |
|
(30,439) |
|
|
(38,182) |
|
|
7,743 |
|
|
(20 |
%) |
||||||
Net earnings |
|
$ |
31,018 |
|
|
$ |
80,072 |
|
|
$ |
(49,054) |
|
|
(61 |
%) |
|
$ |
82,779 |
|
|
$ |
135,665 |
|
|
$ |
(52,886) |
|
|
(39 |
%) |
|
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Net earnings per share: |
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Basic earnings per share |
|
$ |
0.75 |
|
|
$ |
1.87 |
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|
|
|
|
$ |
1.97 |
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|
$ |
3.17 |
|
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|
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Diluted earnings per share |
|
$ |
0.74 |
|
|
$ |
1.86 |
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|
|
|
|
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$ |
1.95 |
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$ |
3.15 |
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Dividends per share |
|
$ |
0.17 |
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|
$ |
0.17 |
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$ |
0.34 |
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|
$ |
0.32 |
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Weighted average shares outstanding: |
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|
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|
||||||||||||||
Basic |
|
41,629 |
|
|
42,758 |
|
|
|
|
|
|
42,092 |
|
|
42,776 |
|
|
|
|
|
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Diluted |
|
41,855 |
|
|
43,024 |
|
|
|
|
|
|
42,362 |
|
|
43,038 |
|
|
|
|
|
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NM - not meaningful |
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES |
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||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|
||||||||||||
($'s in thousands, except par value) |
|
||||||||||||
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|
|||||
|
|
|
June 30, |
|
December 31, |
|
Change |
|
|||||
|
|
|
2020 |
|
2019 |
|
% |
|
|||||
Assets |
|
|
|
|
|
|
|
||||||
Current assets: |
|
|
|
|
|
|
|
||||||
|
Cash and cash equivalents |
|
$ |
155,383 |
|
|
$ |
391,033 |
|
|
(60) |
% |
|
|
Receivables, net |
|
598,340 |
|
|
632,194 |
|
|
(5) |
% |
|
||
|
Inventories, net |
|
461,902 |
|
|
424,835 |
|
|
9 |
% |
|
||
|
Other current assets |
|
51,584 |
|
|
81,729 |
|
|
(37) |
% |
|
||
|
Total current assets |
|
1,267,209 |
|
|
1,529,791 |
|
|
(17) |
% |
|
||
Property, plant, and equipment, net |
|
381,226 |
|
|
385,593 |
|
|
(1) |
% |
|
|||
Goodwill |
|
1,197,194 |
|
|
1,166,680 |
|
|
3 |
% |
|
|||
Other intangible assets, net |
|
489,208 |
|
|
479,907 |
|
|
2 |
% |
|
|||
Operating lease right-of-use assets, net |
|
157,526 |
|
|
165,490 |
|
|
(5) |
% |
|
|||
Prepaid pension asset |
|
123,695 |
|
|
— |
|
|
NM |
|||||
Other assets |
|
26,613 |
|
|
36,800 |
|
|
(28) |
% |
|
|||
|
Total assets |
|
$ |
3,642,671 |
|
|
$ |
3,764,261 |
|
|
(3) |
% |
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
||||||
Current liabilities: |
|
|
|
|
|
|
|
||||||
|
Accounts payable |
|
171,842 |
|
|
222,000 |
|
|
(23) |
% |
|
||
|
Accrued expenses |
|
128,800 |
|
|
164,744 |
|
|
(22) |
% |
|
||
|
Income taxes payable |
|
7,177 |
|
|
7,670 |
|
|
(6) |
% |
|
||
|
Deferred revenue |
|
263,110 |
|
|
276,115 |
|
|
(5) |
% |
|
||
|
Other current liabilities |
|
91,049 |
|
|
74,202 |
|
|
23 |
% |
|
||
|
Total current liabilities |
|
661,978 |
|
|
744,731 |
|
|
(11) |
% |
|
||
Long-term debt |
|
834,802 |
|
|
760,639 |
|
|
10 |
% |
|
|||
Deferred tax liabilities, net |
|
92,941 |
|
|
80,159 |
|
|
16 |
% |
|
|||
Accrued pension and other postretirement benefit costs |
|
90,004 |
|
|
138,635 |
|
|
(35) |
% |
|
|||
Long-term operating lease liability |
|
137,213 |
|
|
145,124 |
|
|
(5) |
% |
|
|||
Long-term portion of environmental reserves |
|
15,271 |
|
|
15,026 |
|
|
2 |
% |
|
|||
Other liabilities |
|
97,167 |
|
|
105,575 |
|
|
(8) |
% |
|
|||
|
Total liabilities |
|
1,929,376 |
|
|
1,989,889 |
|
|
(3) |
% |
|
||
|
|
|
|
|
|
|
|
|
|||||
Stockholders' equity |
|
|
|
|
|
|
|
||||||
Common stock, $1 par value |
|
49,187 |
|
|
49,187 |
|
|
— |
% |
|
|||
Additional paid in capital |
|
118,467 |
|
|
116,070 |
|
|
2 |
% |
|
|||
Retained earnings |
|
2,565,727 |
|
|
2,497,111 |
|
|
3 |
% |
|
|||
Accumulated other comprehensive loss |
|
(342,681) |
|
|
(325,274) |
|
|
(5) |
% |
|
|||
Less: cost of treasury stock |
|
(677,405) |
|
|
(562,722) |
|
|
(20) |
% |
|
|||
|
Total stockholders' equity |
|
1,713,295 |
|
|
1,774,372 |
|
|
(3) |
% |
|
||
|
|
|
|
|
|
|
|
|
|||||
|
Total liabilities and stockholders' equity |
|
$ |
3,642,671 |
|
|
$ |
3,764,261 |
|
|
(3) |
% |
|
|
|
|
|
|
|
|
|
|
|||||
NM - not meaningful |
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES |
||||||||||||
SEGMENT INFORMATION (UNAUDITED) |
||||||||||||
($'s in thousands) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
|
|
|
|
Change |
|
|
|
|
|
Change |
|
|
2020 |
|
2019 |
|
% |
|
2020 |
|
2019 |
|
% |
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial/Industrial |
|
$213,648 |
|
$292,900 |
|
(27%) |
|
$478,016 |
|
$562,758 |
|
(15%) |
Defense |
|
169,955 |
|
158,492 |
|
7% |
|
336,066 |
|
292,275 |
|
15% |
Power |
|
166,444 |
|
187,604 |
|
(11%) |
|
337,196 |
|
362,277 |
|
(7%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
$550,047 |
|
$638,996 |
|
(14%) |
|
$1,151,278 |
|
$1,217,310 |
|
(5%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial/Industrial |
|
$14,366 |
|
$51,376 |
|
(72%) |
|
$49,353 |
|
$86,581 |
|
(43%) |
Defense |
|
27,872 |
|
32,607 |
|
(15%) |
|
56,576 |
|
53,339 |
|
6% |
Power |
|
21,259 |
|
31,983 |
|
(34%) |
|
41,881 |
|
57,364 |
|
(27%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments |
|
$63,497 |
|
$115,966 |
|
(45%) |
|
$147,810 |
|
$197,284 |
|
(25%) |
Corporate and other |
|
(8,148) |
|
(10,281) |
|
21% |
|
(20,015) |
|
(19,554) |
|
(2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
$55,349 |
|
$105,685 |
|
(48%) |
|
$127,795 |
|
$177,730 |
|
(28%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margins: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial/Industrial |
|
6.7% |
|
17.5% |
|
(1,080 bps) |
|
10.3% |
|
15.4% |
|
(510 bps) |
Defense |
|
16.4% |
|
20.6% |
|
(420 bps) |
|
16.8% |
|
18.2% |
|
(140 bps) |
Power |
|
12.8% |
|
17.0% |
|
(420 bps) |
|
12.4% |
|
15.8% |
|
(340 bps) |
Total Curtiss-Wright |
|
10.1% |
|
16.5% |
|
(640 bps) |
|
11.1% |
|
14.6% |
|
(350 bps) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment margins |
|
11.5% |
|
18.1% |
|
(660 bps) |
|
12.8% |
|
16.2% |
|
(340 bps) |
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES |
||||||||||||||||||||||
SALES BY END MARKET (UNAUDITED) |
||||||||||||||||||||||
($'s in thousands) |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||||||||
|
|
|
|
|
|
Change |
|
|
|
|
|
Change |
||||||||||
|
|
2020 |
|
2019 |
|
% |
|
2020 |
|
2019 |
|
% |
||||||||||
Defense markets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Aerospace |
|
$ |
109,305 |
|
|
$ |
104,426 |
|
|
5 |
% |
|
$ |
211,133 |
|
|
$ |
183,213 |
|
|
15 |
% |
Ground |
|
20,029 |
|
|
26,394 |
|
|
(24 |
%) |
|
42,686 |
|
|
47,151 |
|
|
(9 |
%) |
||||
Naval |
|
164,941 |
|
|
149,853 |
|
|
10 |
% |
|
330,633 |
|
|
280,941 |
|
|
18 |
% |
||||
Total Defense |
|
$ |
294,275 |
|
|
$ |
280,673 |
|
|
5 |
% |
|
$ |
584,452 |
|
|
$ |
511,305 |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial markets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Aerospace |
|
$ |
71,084 |
|
|
$ |
108,000 |
|
|
(34 |
%) |
|
$ |
171,765 |
|
|
$ |
211,222 |
|
|
(19 |
%) |
Power Generation |
|
76,202 |
|
|
93,171 |
|
|
(18 |
%) |
|
160,550 |
|
|
189,652 |
|
|
(15 |
%) |
||||
General Industrial |
|
108,486 |
|
|
157,152 |
|
|
(31 |
%) |
|
234,511 |
|
|
305,131 |
|
|
(23 |
%) |
||||
Total Commercial |
|
$ |
255,772 |
|
|
$ |
358,323 |
|
|
(29 |
%) |
|
$ |
566,826 |
|
|
$ |
706,005 |
|
|
(20 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Curtiss-Wright |
|
$ |
550,047 |
|
|
$ |
638,996 |
|
|
(14 |
%) |
|
$ |
1,151,278 |
|
|
$ |
1,217,310 |
|
|
(5 |
%) |
Use of Non-GAAP Financial Information (Unaudited)
The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these non-GAAP measures provide investors with additional insight into the Company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
The Company’s presentation of its financials and guidance includes an Adjusted (non-GAAP) view that excludes significant restructuring costs in 2020 associated with its operations, including one-time actions taken in response to COVID-19, a non-cash impairment of capitalized development costs related to a commercial aerospace program, first year purchase accounting costs associated with its acquisitions, as well as one-time transition and IT security costs, and capital investments, specifically associated with the relocation of the DRG business in the Power segment. Transition costs include relocation of employees and equipment as well as overlapping facility and labor costs associated with the relocation. We believe this Adjusted view will provide improved transparency to the investment community in order to better measure Curtiss-Wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within this release.
The following definitions are provided:
Adjusted Operating Income, Operating Margin, Net Earnings and Diluted EPS
These Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Earnings and Diluted Earnings per Share (EPS) under GAAP excluding: (i) the impact of first year purchase accounting costs associated with acquisitions for current and prior year periods, specifically one-time inventory step-up, backlog amortization and transaction costs; (ii) one-time transition and IT security costs associated with the relocation of a business in the current year period; (iii) the non-cash impairment of capitalized development costs related to a commercial aerospace program; and (iv) significant restructuring costs in 2020 associated with its operations.
Organic Sales and Organic Operating Income
The Corporation discloses organic sales and organic operating income because the Corporation believes it provides investors with insight as to the Company’s ongoing business performance. Organic sales and organic operating income are defined as sales and operating income excluding the impact of restructuring costs, foreign currency fluctuations and contributions from acquisitions made during the last twelve months.
|
Three Months Ended |
||||||||||||||
|
June 30, |
||||||||||||||
|
2020 vs. 2019 |
||||||||||||||
|
Commercial/Industrial |
|
Defense |
|
Power |
|
Total Curtiss-Wright |
||||||||
|
Sales |
|
Operating income |
|
Sales |
|
Operating income |
|
Sales |
|
Operating income |
|
Sales |
|
Operating income |
Organic |
(28%) |
|
(59%) |
|
(2%) |
|
(11%) |
|
(11%) |
|
(14%) |
|
(17%) |
|
(35%) |
Acquisitions |
1% |
|
0% |
|
9% |
|
(1%) |
|
0% |
|
0% |
|
3% |
|
(1%) |
Restructuring |
0% |
|
(14%) |
|
0% |
|
(5%) |
|
0% |
|
(20%) |
|
0% |
|
(13%) |
Foreign Currency |
0% |
|
1% |
|
0% |
|
2% |
|
0% |
|
0% |
|
0% |
|
1% |
Total |
(27%) |
|
(72%) |
|
7% |
|
(15%) |
|
(11%) |
|
(34%) |
(14%) |
|
(48%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
||||||||||||||
|
June 30, |
||||||||||||||
|
2020 vs. 2019 |
||||||||||||||
|
Commercial/Industrial |
|
Defense |
|
Power |
|
Total Curtiss-Wright |
||||||||
|
Sales |
|
Operating income |
|
Sales |
|
Operating income |
|
Sales |
|
Operating income |
|
Sales |
|
Operating income |
Organic |
(16%) |
|
(35%) |
|
5% |
|
10% |
|
(7%) |
|
(14%) |
|
(8%) |
|
(19%) |
Acquisitions |
1% |
|
0% |
|
10% |
|
(1%) |
|
0% |
|
0% |
|
3% |
|
0% |
Restructuring |
0% |
|
(9%) |
|
0% |
|
(5%) |
|
0% |
|
(13%) |
|
0% |
|
(10%) |
Foreign Currency |
0% |
|
1% |
|
0% |
|
2% |
|
0% |
|
0% |
|
0% |
|
1% |
Total |
(15%) |
|
(43%) |
|
15% |
|
6% |
|
(7%) |
|
(27%) |
(5%) |
|
(28%) |
Free Cash Flow and Free Cash Flow Conversion
The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as cash flow provided by operating activities less capital expenditures. Adjusted free cash flow excludes: (i) a capital investment in the Power segment related to the new, state-of-the-art naval facility principally for DRG; (ii) a voluntary contribution to the Company’s corporate defined benefit pension plan made in the first quarter of 2020; and (iii) the cash impact from restructuring in 2020. The Corporation discloses free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as free cash flow divided by net earnings from continuing operations. Adjusted free cash flow conversion is defined as Adjusted free cash flow divided by Adjusted net earnings.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES |
||||||||||||||||
NON-GAAP FINANCIAL DATA (UNAUDITED) |
||||||||||||||||
($'s in thousands) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net cash provided by operating activities |
$ |
140,367 |
|
|
$ |
92,244 |
|
|
$ |
(52,209) |
|
|
$ |
40,386 |
|
|
Capital expenditures |
(10,687) |
|
|
(16,437) |
|
|
(29,324) |
|
|
(33,471) |
|
|||||
Free cash flow |
$ |
129,680 |
|
|
$ |
75,807 |
|
|
$ |
(81,533) |
|
|
$ |
6,915 |
|
|
Voluntary pension contribution |
|
— |
|
|
— |
|
|
150,000 |
|
|
— |
|
||||
Adjustment to capital expenditures (DRG facility investment) |
|
1,998 |
|
|
4,039 |
|
|
9,675 |
|
|
9,162 |
|
||||
Restructuring |
|
4,076 |
|
|
— |
|
|
4,741 |
|
|
— |
|
||||
Adjusted free cash flow |
$ |
135,754 |
|
|
$ |
79,846 |
|
|
$ |
82,883 |
|
|
$ |
16,077 |
|
|
Adjusted free cash flow conversion |
247 |
% |
|
100 |
% |
|
74 |
% |
|
12 |
% |
CURTISS-WRIGHT CORPORATION | |||||||||||||||||||||||||||||||
2020 Guidance | |||||||||||||||||||||||||||||||
As of August 3, 2020 | |||||||||||||||||||||||||||||||
($'s in millions, except per share data) | |||||||||||||||||||||||||||||||
2019 Reported (GAAP) |
2019 Adjustments (1) (Non-GAAP) |
2019 Adjusted (Non-GAAP) |
2020 Reported Guidance (GAAP) |
2020 Restructuring Adjustments (2) Non-GAAP) |
2020 Other Adjustments (2) (Non-GAAP) |
2020 Adjusted Guidance (3)(4)(5) (Non-GAAP) |
|||||||||||||||||||||||||
Low | High | Low | High | 2020 Chg vs 2019 Adjusted | |||||||||||||||||||||||||||
Sales: | |||||||||||||||||||||||||||||||
Commercial/Industrial |
$ |
1,138 |
$ |
- |
$ |
1,138 |
$ |
935 |
$ |
965 |
$ |
- |
$ |
- |
$ |
935 |
$ |
965 |
|||||||||||||
Defense |
|
626 |
|
2 |
|
628 |
|
675 |
|
685 |
|
- |
|
- |
|
675 |
|
685 |
|||||||||||||
Power |
|
724 |
|
- |
|
724 |
|
740 |
|
750 |
|
- |
|
- |
|
740 |
|
750 |
|||||||||||||
Total sales |
$ |
2,488 |
$ |
2 |
$ |
2,490 |
$ |
2,350 |
$ |
2,400 |
$ |
- |
$ |
- |
$ |
2,350 |
$ |
2,400 |
(4 to 6%) | ||||||||||||
Operating income: | |||||||||||||||||||||||||||||||
Commercial/Industrial |
$ |
180 |
$ |
- |
$ |
180 |
$ |
106 |
$ |
114 |
$ |
20 |
$ |
2 |
$ |
128 |
$ |
136 |
|||||||||||||
Defense |
|
137 |
|
2 |
|
140 |
|
139 |
|
142 |
|
4 |
|
13 |
|
156 |
|
159 |
|||||||||||||
Power |
|
122 |
|
4 |
|
126 |
|
113 |
|
116 |
|
11 |
|
3 |
|
127 |
|
129 |
|||||||||||||
Total segments |
|
439 |
|
7 |
|
446 |
|
358 |
|
372 |
|
35 |
|
18 |
|
411 |
|
424 |
|||||||||||||
Corporate and other |
|
(35) |
|
- |
|
(35) |
|
(35) |
|
(36) |
|
- |
|
- |
|
(35) |
|
(36) |
|||||||||||||
Total operating income |
$ |
404 |
$ |
7 |
$ |
411 |
$ |
323 |
$ |
336 |
$ |
35 |
$ |
18 |
$ |
376 |
$ |
389 |
(5 to 8%) | ||||||||||||
Interest expense |
$ |
(31) |
$ |
- |
$ |
(31) |
$ |
(35) |
$ |
(36) |
$ |
- |
$ |
- |
$ |
(35) |
$ |
(36) |
|||||||||||||
Other income, net |
|
24 |
|
- |
|
24 |
|
13 |
|
14 |
|
- |
|
10 |
|
23 |
|
24 |
|||||||||||||
Earnings before income taxes |
|
397 |
|
|
7 |
|
403 |
|
|
301 |
|
|
315 |
|
|
35 |
|
27 |
|
|
363 |
|
377 |
|
|||||||
Provision for income taxes |
|
(89) |
|
(2) |
|
(90) |
|
(71) |
|
(74) |
|
(8) |
|
(6) |
|
(85) |
|
(89) |
|||||||||||||
Net earnings |
$ |
308 |
$ |
5 |
$ |
313 |
$ |
230 |
$ |
241 |
$ |
27 |
$ |
21 |
$ |
278 |
$ |
289 |
|||||||||||||
Diluted earnings per share |
$ |
7.15 |
$ |
0.12 |
$ |
7.27 |
$ |
5.47 |
$ |
5.72 |
$ |
0.64 |
$ |
0.50 |
$ |
6.60 |
$ |
6.85 |
(6 to 9%) | ||||||||||||
Diluted shares outstanding |
|
43.0 |
|
43.0 |
|
42.1 |
|
42.1 |
|
42.1 |
|
42.1 |
|||||||||||||||||||
Effective tax rate |
|
22.4% |
|
22.4% |
|
23.5% |
|
23.5% |
|
23.5% |
|
23.5% |
|||||||||||||||||||
Operating margins: | |||||||||||||||||||||||||||||||
Commercial/Industrial |
|
15.8% |
|
- |
|
15.8% |
|
11.4% |
|
11.8% |
+210 bps |
|
- |
|
13.7% |
|
14.1% |
(170 to 210 bps) | |||||||||||||
Defense |
|
21.9% |
+40 bps |
|
22.3% |
|
20.6% |
|
20.8% |
+60 bps |
+190 bps |
|
23.1% |
|
23.2% |
80 to 90 bps | |||||||||||||||
Power |
|
16.9% |
+50 bps |
|
17.4% |
|
15.2% |
|
15.4% |
+150 bps |
+40 bps |
|
17.1% |
|
17.2% |
(20 to 30 bps) | |||||||||||||||
Total operating margin |
|
16.2% |
+30 bps |
|
16.5% |
|
13.7% |
|
14.0% |
+150 bps |
+70 bps |
|
16.0% |
|
16.2% |
(30 to 50 bps) | |||||||||||||||
Free cash flow (6) |
$ |
352 |
$ |
19 |
$ |
371 |
$ |
167 |
$ |
197 |
$ |
20 |
$ |
163 |
$ |
350 |
$ |
380 |
Notes: Full year amounts may not add due to rounding. All financial information by reportable segment for the 2019 and 2020 reporting periods reflects the Corporation’s first quarter 2020 segment reorganization. | ||||||||||||||||||||
(1) 2019 Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding the impact of first year purchase accounting costs associated with acquisitions (Defense segment), specifically one-time backlog amortization and transaction costs, as well as one-time transition and IT security costs related to the relocation of the DRG business (Power Segment). | ||||||||||||||||||||
(2) 2020 Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Income and Diluted EPS under GAAP excluding $35 million in restructuring costs, $11 million in first year purchase accounting costs, specifically one-time backlog amortization and transaction costs associated with acquisitions, $4 million non-cash impairment of capitalized development costs related to a commercial aerospace program, and $3 million in one-time transition and IT security costs related to the relocation of the DRG business, as well as a $10 million non-cash currency translation loss (within non-operating income) related to the liquidation of a foreign legal entity. | ||||||||||||||||||||
(3) Commercial/Industrial segment 2020 Adjusted guidance excludes $20 million in restructuring costs and $2 million in one-time backlog amortization and transaction costs associated with the acquisition of Dyna-Flo. | ||||||||||||||||||||
(4) Defense segment 2020 Adjusted guidance excludes $4 million in restructuring costs, $9 million in one-time backlog amortization and transaction costs associated with the acquisitions of 901D and IADS, and $4 million non-cash impairment of capitalized development costs related to a commercial aerospace program. | ||||||||||||||||||||
(5) Power segment 2020 Adjusted guidance excludes $11 million in restructuring costs and $3 million in one-time transition and IT security costs related to the relocation of the DRG business. | ||||||||||||||||||||
(6) Free Cash Flow is defined as cash flow from operations less capital expenditures. 2019 Adjusted Free Cash Flow excludes a $19 million capital investment in the Power segment related to construction of a new, state-of-the-art naval facility for the DRG business. 2020 Adjusted Free Cash Flow guidance excludes a $150 million voluntary contribution made in January to the Company’s corporate defined benefit pension plan, a $20 million cash impact from restructuring, and a $13 million capital investment related to the aforementioned DRG facility. |
CURTISS-WRIGHT CORPORATION |
||
2020 Sales Growth Guidance by End Market |
||
As of August 3, 2020 |
||
|
|
|
|
|
2020 % Change vs 2019 |
Defense Markets |
|
|
Aerospace |
|
4 - 6% |
Ground |
|
(5 - 7%) |
Navy |
|
14 - 16% |
Total Defense |
|
8 - 10% |
|
|
|
Commercial Markets |
|
|
Commercial Aerospace |
|
(19 - 21%) |
Power Generation |
|
(3 - 5%) |
General Industrial |
|
(18 - 20%) |
Total Commercial |
|
(14 - 16%) |
|
|
|
Total Curtiss-Wright Sales |
|
(4 - 6%) |
|
|
|
About Curtiss-Wright Corporation
Curtiss-Wright Corporation (NYSE: CW) is a global innovative company that delivers highly engineered, critical function products and services to the commercial, industrial, defense and energy markets. Building on the heritage of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of providing reliable solutions through trusted customer relationships. The company employs approximately 8,900 people worldwide. For more information, visit www.curtisswright.com.
Certain statements made in this press release, including statements about future revenue, financial performance guidance, quarterly and annual revenue, net income, operating income growth, future business opportunities, cost saving initiatives, the successful integration of the Company’s acquisitions, future cash flow from operations, and potential impacts of the COVID-19 pandemic are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act") and the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include, but are not limited to: a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; a change in government spending; an inability to perform customer contracts at anticipated cost levels; the impact of a global pandemic or national epidemic, and other factors that generally affect the business of aerospace, defense contracting, electronics, marine, and industrial companies. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and subsequent reports filed with the Securities and Exchange Commission.
This press release and additional information are available at www.curtisswright.com.
Jim Ryan
(704) 869-4621
Jim.Ryan@curtisswright.com
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