SECURITIES and EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
Commission File Number 1-134
CURTISS-WRIGHT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-0612970
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Wall Street West
Lyndhurst, New Jersey 07071
(Address of principal executive offices) (Zip Code)
(201) 896-8400
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $1.00 per share: 10,013,769 shares (as of October 31,
2000)
Page 1 of 24
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 - 17
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 18
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 19
Signatures 20
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(UNAUDITED)
September 30, December 31,
2000 1999
------------------- -----------------------
Assets
Current Assets:
Cash and cash equivalents $ 10,486 $ 9,547
Short-term investments 50,548 25,560
Receivables, net 67,055 70,729
Deferred tax assets 9,340 8,688
Inventories, net 54,084 60,584
Other current assets 3,307 5,262
------------------- -----------------------
Total current assets 194,820 180,370
------------------- -----------------------
Property, plant and equipment, at cost 244,189 242,000
Accumulated depreciation 153,888 147,422
------------------- -----------------------
Property, plant and equipment, net 90,301 94,578
Prepaid pension costs 57,750 50,447
Goodwill 49,585 50,357
Other assets 9,751 11,374
------------------- -----------------------
Total Assets $ 402,207 $ 387,126
=================== =======================
Liabilities
Current Liabilities:
Current portion of long-term debt $ 4,047 $ 4,047
Account payable and accrued expenses 31,421 32,767
Dividends payable 1,303
0
Income taxes payable 2,859 5,203
Other current liabilities 12,093 13,915
------------------- -----------------------
Total current liabilities 51,723 55,932
Long-term debt 26,867 34,171
Deferred income taxes 17,908 14,113
Accrued postretirement benefit costs 5,451 8,515
Other liabilities 16,157 16,040
------------------- -----------------------
Total Liabilities 118,106 128,771
------------------- -----------------------
Stockholders' Equity
Common stock, $1 par value 15,000 15,000
Capital surplus 51,426 51,599
Retained earnings 403,048 376,006
Unearned portion of restricted stock (26) (24)
Accumulated other comprehensive income (2,736) (2,622)
-------------------- -----------------------
466,712 439,959
Less: cost of treasury stock 182,611 181,604
------------------- -----------------------
Total Stockholders' Equity 284,101 258,355
------------------- -----------------------
Total Liabilities and Stockholders' Equity $ 402,207 $ 387,126
=================== =======================
See notes to consolidated financial statements.
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,
2000 1999 (1) 2000 1999 ( 1)
-------------- ------------------ ----------------- -----------------
Net sales $ 81,878 $ 69,009 $ 247,165 $ 209,554
Cost of sales 51,111 45,128 156,998 135,917
------------ ------------------ ----------------- --------------
Gross profit 30,767 23,881 90,167 73,637
Research & development expenses 1,373 506 4,247 2,246
Selling expenses 4,381 3,988 14,069 11,740
General and administrative expenses 11,964 10,968 34,466 30,038
Environmental exp. (recoveries), net 27 (12,331) (11,777)
(1,755)
-------------- ------------------- ----------------- --------------
Operating income 13,022 20,750 39,140 41,390
Investment income, net 725 496 1,744 1,954
Rental income, net 971 554 3,021 2,856
Pension income, net 2,163 1,274 6,248 3,837
Other income (expenses), net 1,413 278 1,306 (59)
Interest expense (394) (366) (1,166) (996)
------------- ----------------- ----------------- --------------
Earnings before income taxes 17,900 22,986 50,293 48,982
Provision for income taxes 6,821 9,001 19,341 18,736
------------ ------------------ ----------------- --------------
Net earnings $ 11,079 $ 13,985 $ 30,952 $ 30,246
============ ================== ================= ==============
Basic earnings per common share $ 1.11 $ 1.38 $ 3.09 $ 2.98
============ ================== ================= ==============
Diluted earnings per common share $ 1.09 $ 1.38 $ 3.03 $ 2.95
============ ================== ================= ==============
Dividends per common share $ 0.13 $ 0.13 $ 0.39 $ 0.39
============ ================== ================= ==============
Weighted average shares outstanding:
Basic 10,012 10,135 10,015 10,135
============ ================== ================= ==============
Diluted 10,199 10,135 10,202 10,269
============ ================== ================= ==============
See notes to consolidated financial statements.
<FN>
(1) Certain prior year information restated to conform to current presentation.
</FN>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended
September 30,
-------------------------------------
2000 1999 (1)
Cash flows from operating activities:
Net earnings $ 30,952 $ 30,246
----------------- ---------------
Adjustments to reconcile net earnings to
net cash provided by operating activities
(net of businesses acquired):
Depreciation and amortization 10,883 9,140
Net (gains) losses on short-term investments (89) 206
Non-cash pension income (6,248) (3,837)
Increase in deferred taxes 3,143 453
Changes in operating assets and liabilities:
Proceeds from sales of trading securities 204,342 360,855
Purchases of trading securities (229,241) (319,361)
Decrease in receivables 5,705 15,248
Decrease (increase) in inventory 6,436 (2,238)
Decrease in progress payments (1,967) (13,350)
Decrease in accounts payable and accrued expenses (1,346) (1,327)
(Decrease) increase in income taxes payable (2,344) 2,363
Decrease (increase) in other assets 1,369 (436)
Decrease in other liabilities (4,769) (20)
Other, net (1,213) (226)
------------------ ---------------
Total adjustments (15,339) 47,470
------------------ --------------
Net cash provided by operating activities 15,613 77,716
----------------- ---------------
Cash flows from investing activities:
Proceeds from sales of real estate and equipment 1,586 29
Additions to property, plant and equipment (6,383) (17,167)
Acquisition of new businesses 0 (49,858)
----------------- ---------------
Net cash used in investing activities (4,797) (66,996)
------------------ --------------
Cash flows from financing activities:
Dividends Paid (2,606) (2,633)
Debt repayments (5,782) 0
Common stock repurchases (1,489) (3,992)
------------------ --------------
Net cash used in financing activities (9,877) (6,625)
------------------ --------------
Net increase in cash and cash equivalents 939 4,095
Cash and cash equivalents at beginning of period 9,547 5,809
----------------- --------------
Cash and cash equivalents at end of period $ 10,486 $ 9,904
================= ==============
See notes to consolidated financial statements.
<FN>
(1) Certain prior year information restated to conform to current presentation.
</FN>
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
Unearned Accumulated Other
Portion of Comprehensive
Common Stock Capital Retained Restricted Income Treasury
Surplus Earnings Stock Stock
------------- -------------- ------------ --------------- ------------------- ------------
December 31, 1998 $ 15,000 $ 51,669 $342,218 ($40) ($2,800) $176,454
Net earnings 39,045
Common dividends (5,257)
Common stock repurchased 5,440
Stock options exercised, net (70) (290)
Amortization of earned
portion o of restricted stock 16
Translation adjustments, net 178
------------- -------------- ------------ --------------- ------------------- ------------
December 31, 1999 15,000 51,599 376,006 (24) (2,622) 181,604
------------- -------------- ------------ --------------- ------------------- ------------
Net earnings 30,952
Common dividends (3,910)
Common stock issued (15)
Common stock repurchased 1,489
Stock options exercised, net (173) (482)
Amortization of earned
portion of restricted 13
stock
Translation adjustments, net (114)
============= ============== ============ =============== =================== ============
September 30, 2000 $ 15,000 $ 51,426 $403,048 ($26) ($2,736) $182,611
============= ============== ============ =============== =================== ============
See notes to consolidated financial statements.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS of PRESENTATION
Curtiss-Wright Corporation including its subsidiaries (the
"Corporation") is a diversified multi-national manufacturing and
service concern that designs, manufactures and repairs precision
components and systems and provides highly engineered services to the
aerospace and ground defense, automotive, shipbuilding, oil,
petrochemical, agricultural equipment, railroad, power generation,
metalworking and fire and rescue industries. Operations are conducted
through six manufacturing facilities, thirty-seven metal treatment
service facilities and three component repair locations.
The information furnished in this report has been prepared in
conformity with generally accepted accounting principles and as such
reflects all adjustments, consisting primarily of normal recurring
accruals, which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. The
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Corporation's 1999 Annual Report on Form 10-K.
The results of operations for these interim periods are not necessarily
indicative of the operating results for a full year. Certain
reclassifications of prior year amounts have been made in order to
conform to the current presentation.
2. RECEIVABLES
Receivables, at September 30, 2000 and December 31, 1999, include
amounts billed to customers and unbilled charges on long-term contracts
consisting of amounts recognized as sales but not billed as of the
dates presented. Substantially all amounts of unbilled receivables are
expected to be billed and collected within a year. The composition of
receivables for these periods is as follows:
(In thousands)
9/30/2000 12/31/1999
--------- ----------
Accounts receivable, billed $55,260 $66,652
Less: progress payments applied 833 1,922
------- -------
54,427 64,730
------- -------
Unbilled charges on long-term contracts 21,150 16,473
Less: progress payments applied 6,302 7,244
------- -------
14,848 9,229
Less: allowance for doubtful accounts (2,220) (3,230)
------- -------
Receivables, net $67,055 $70,729
======= =======
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
3. INVENTORIES
Inventories are valued at the lower of cost (principally average cost)
or market. The composition of inventories at September 30, 2000 and
December 31, 1999 is as follows:
(In thousands)
9/30/2000 12/31/1999
--------- ----------
Raw materials $11,774 $12,952
Work-in-process 18,623 23,207
Finished goods 35,587 36,276
------ ------
Total inventories 65,984 72,435
Less: progress payments applied 1,403 1,340
------ ------
64,581 71,095
Less: reserves 10,497 10,511
------ ------
Inventories, net $54,084 $60,584
====== ======
4. ENVIRONMENTAL MATTERS
The Corporation establishes a reserve for a potential environmental
responsibility when it concludes that a determination of legal
liability is probable, based upon the advice of counsel. Such amounts,
if quantified, reflect the Corporation's estimate of the amount of that
liability. If only a range of potential liability can be estimated, a
reserve will be established at the low end of that range. Such reserves
represent today's values of anticipated remediation not reduced by any
potential recovery from insurance carriers or through contested
third-party legal actions, and are not discounted for the time value of
money. The Corporation is joined with many other corporations and
municipalities as potentially responsible parties (PRPs) in a number of
environmental cleanup sites, which include but are not limited to the
Sharkey landfill superfund site, Parsippany, New Jersey; Caldwell
Trucking Company superfund site, Fairfield, New Jersey; Pfohl Brothers
landfill site, Cheektowaga, New York; Amenia landfill site, Amenia, New
York; and Chemsol, Inc. superfund site, Piscataway, New Jersey. The
Corporation believes that the outcome of any of these matters would not
have a material adverse effect on the Corporation's results of
operations or financial condition.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
5. SEGMENT INFORMATION
The Corporation conducts its business operations through three
segments: Motion Control (formerly Actuation and Control Products &
Services); Metal Treatment (formerly Precision Manufacturing Products &
Services); and Flow Control (formerly Flow Control Products &
Services).
(In thousands)
Three Months Ended September 30, 2000
Motion Metal Flow Segment Corporate Consolidated
Control Treatment Control Total & Other Total
Revenue from external customers $32,614 $25,320 $23,944 $81,878 $ 0 $81,878
Intersegment revenues 0 126 0 126 0 126
Operating income 4,537 5,743 3,054 13,334 (312) 13,022
(In thousands)
Three Months Ended September 30, 1999
Motion Metal Flow Segment Corporate Consolidated
Control (1) Treatment Control Total & Other (2) Total
Revenue from external customers $28,074 $26,048 $14,887 $69,009 $ 0 $69,009
Intersegment revenues 0 77 0 77 0 77
Operating Income (1) (2) 1,350 5,356 1,203 7,909 12,841 20,750
<FN>
(1) Operating income for the Motion Control segment includes consolidation costs for the relocation of operations
in the amount of $1.2 million.
(2) Operating income for Corporate and Other includes an insurance settlement, net of related expenses, in the
amount of $12.4 million.
</FN>
Reconciliation: (In thousands)
Three months ended
9/30/00 9/30/99
------- -------
Total operating income $13,022 $20,750
Investment income, net 725 496
Rental income, net 971 554
Pension income, net 2,163 1,274
Other income, net 1,413 278
Interest expense (394) (366)
------ ------
Earnings before income taxes $17,900 $22,986
====== ======
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
(In thousands)
Nine Months Ended September 30, 2000
Motion Metal Flow Segment Corporate Consolidated
Control Treatment Control Total & Other (1) Total
Revenue from external customers $92,264 $80,021 $74,880 $247,165 $ 0 $247,165
Intersegment revenues 0 427 0 427 0 427
Operating income(1) 11,055 17,966 7,499 36,520 2,620 39,140
Segment assets 106,837 84,938 82,486 274,261 127,946 402,207
<FN>
(1) Operating income for Corporate and Other includes a $2.8 million gain for the curtailment of
post-retirement benefits associated with the closing of the Fairfield, NJ facility and environmental
recoveries, net of expenses, of $1.9 million.
</FN>
(In thousands)
Nine Months Ended September 30, 1999
Motion Metal Flow Segment Corporate Consolidated
Control(2) Treatment Control Total & Other(3) Total
Revenue from external customers $88,912 $78,066 $42,576 $209,554 $ 0 $209,554
Intersegment revenues 0 249 0 249 0 249
Operating income (2) (3) 5,182 17,547 4,438 27,167 14,223 41,390
Segment assets 116,137 82,196 86,919 285,252 101,874 387,126
<FN>
(2) Operating income for the Motion Control segment includes consolidation costs for the relocation of operations
in the amount of $3.0 million.
(3) Operating income for Corporate and Other includes environmental recoveries, net of expenses, of $12.4 million.
</FN>
Reconciliation: (In thousands)
Nine months ended
9/30/00 9/30/99
------- -------
Total operating income $39,140 $41,390
Investment income, net 1,744 1,954
Rental income, net 3,021 2,856
Pension income, net 6,248 3,837
Other income (expense), net 1,306 (59)
Interest expense (1,166) (996)
------ ------
Earnings before income taxes $50,293 $48,982
====== ======
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
6. COMPREHENSIVE INCOME
Total comprehensive income for the three months and nine months ended
September 30, 2000 and 1999 is as follows:
(In thousands)
Three Months Ended Nine Months Ended
------------------------ ------------------------
9/30/00 9/30/99 9/30/00 9/30/99
------- ------- ------- -------
Net earnings $11,079 $13,985 $30,952 $30,246
Foreign currency translations 242 1,566 (114) 978
------- ------- ------- -------
Total comprehensive income $11,321 $15,551 $30,838 $31,224
======= ======= ======= =======
7. EARNINGS PER SHARE
The Corporation accounts for its earnings per share (EPS) in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS No. 128). Diluted earnings per share were computed based
on the weighted average number of shares outstanding plus all
potentially dilutive common shares issuable for the periods. Dilutive
common shares for the three and nine months ended September 30, 2000
were 187,000, and for the three and nine months ended September 30,
1999 were zero and 134,000, respectively.
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued Statement
No. 137 deferring the effective date of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" (SFAS No. 133). SFAS No. 133 is now effective for fiscal
years beginning after June 15, 2000 (January 1, 2001 for the
Corporation). SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of
hedge transaction. Management of the Corporation anticipates that, due
to its limited use of derivative instruments, the adoption of SFAS No.
133 will not have a significant effect on its results of operations or
its financial position.
PART I - ITEM 2
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
RESULTS of OPERATIONS
Sales for the current quarter increased 19% to $81.9 million from $69.0
million in the prior year and operating income of $13.0 million was 37% below
that for the same period in 1999. New orders in the third quarter of 2000 were
$66.8 million, 8% below the third quarter of 1999, and backlog at $195.3 million
was 6% higher than the prior year. Net earnings decreased 21% in the third
quarter of 2000, to $11.1 million, or $1.09 per diluted share, from $14.0
million, or $1.38 per diluted share for the third quarter of 1999.
Sales for the first nine months of 2000 rose 18% to $247.2 million, from
$209.6 million a year ago. Operating income at $39.1 million was 5% lower than
the prior year and new orders totaled $229.6 million, 13% above the same
nine-month period of last year. Net earnings for the first nine months of 2000
increased 2% to $31.0 million, or $3.03 per diluted share, from $30.2 million,
or $2.95 per diluted share, for the first nine months of 1999.
Operating results for the third quarter of 1999 included several
non-recurring items. Results were favorably impacted by the receipt of an
insurance settlement (net of related expenses) of $12.4 million ($7.3 million
after tax), offset partially by costs of $1.2 million ($0.7 million after tax)
relating to the relocation of our Fairfield, NJ operations to our low cost,
state-of-the-art facility located in North Carolina. After considering the
foregoing, operating income for the third quarter 2000 of $13.0 million was 37%
higher than "normalized" operating income for the third quarter of 1999 of $9.5
million. The third quarter of 2000 pre-tax earnings (other non-operating income)
includes a $1.4 million gain ($0.9 million after tax) on the sale of a
non-operating facility located in Chester, England. "Normalized" net income for
the third quarter of 2000 of $10.2 million, or $1.00 per diluted share, was 38%
higher than "normalized" net income for 1999 of $7.4 million, or $0.73 per
diluted share.
In addition to the non-recurring item from the third quarter mentioned
above, operating results for the first nine months of 2000 also benefited from
the net effect of several non-recurring items recorded in the first and second
quarters of this year. Those items, discussed in the "Other Revenue and Costs"
section later in this report, favorably impacted 2000 pre-tax earnings by $3.9
million and after-tax earnings by $2.4 million. The results for the first nine
months of 1999 included the insurance settlement and $3.0 million ($1.8 million
after tax) of consolidation costs mentioned above. Excluding these non-recurring
items, "normalized" operating income for the first nine months of 2000 of $35.2
million was 10% ahead of "normalized" operating income for the first nine months
of 1999 of $32.0 million. "Normalized" net earnings for the first nine months of
2000 would have been $27.6 million, or $2.71 per diluted share, as compared to
$24.8 million, or $2.41 per diluted share in 1999.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
RESULTS of OPERATIONS (continued)
During 2000, especially the third quarter, foreign exchange rates have had
an adverse effect in comparing this year's results to those of the prior year.
For the third quarter and nine-month year-to-date period, the fluctuation in
foreign exchange rates adversely impacted sales by $1.5 million and $3.2
million, respectively. Operating income was similarly negatively impacted for
the third quarter and nine month year-to-date period by $.6 million and $1.1
million, respectively.
The improvement in operating results year-to-year largely reflects the
acquisitions made by the Corporation in 1999 of Farris Engineering, Sprague
Products and Metallurgical Processing Inc. Sales from these companies, in the
aggregate, accounted for increases of $9.1 million and $31.2 million when
comparing the third quarter and first nine months of 2000 to those same
respective periods of the prior year.
During the third quarter of 2000, the company sold its PME distribution
business, consisting of net inventory and other assets, and recorded an
immaterial loss as a result of this sale.
Operating Performance
Motion Control
Sales for the Corporation's Motion Control segment improved to $32.6
million in the third quarter of 2000, from $28.1 million in the third quarter of
1999, a 16% increase. Sales for the quarter were largely a result of improved
aerospace military sales and Drive Technology business in Europe, which showed
continued growth in the ground defense aiming and stabilization markets as
compared to the prior year. Sales of aerospace repair and overhaul services for
the third quarter 2000 also improved over the third quarter 1999. Sales of
commercial actuation products to Boeing were relatively flat in the third
quarter when compared to the prior year period. Sales of Motion Control products
for the first nine months of 2000 were $92.3 million, 4% higher than the 1999
levels.
Operating income for the Motion Control segment showed substantial
improvements from both the third quarter and first nine months of last year as
well as the first and second quarters of 2000. Prior year periods reflected the
consolidation costs of the Fairfield, NJ operation into Motion Control's
low-cost, state-of-the-art facility in North Carolina. Expenses related to the
consolidation activities totaled approximately $1.2 million during the third
quarter and $3.0 million for the first nine months of 1999. Year 2000 earnings
reflect the very significant cost savings resulting from this consolidation.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
Operating Performance (continued)
Metal Treatment
Sales for the Corporation's Metal Treatment segment totaled $25.3 million
and $80.0 million for the third quarter and first nine months of 2000,
respectively, when compared with sales of $26.0 million and $78.1 million for
those same respective periods of 1999. Year-to-date sales improvements over the
prior year reflect an acquisition which occurred in mid-1999 and increased sales
volume in the commercial European aerospace market, which were largely offset by
the negative effect of the strong dollar on currency translation. The weak
European currencies had an adverse impact on sales of $0.9 million and $2.1
million in the third quarter and nine month year-to-date period, respectively.
In addition, domestically, the Company has experienced increased sales in the
heat treating operations, which were partially due to the acquisition made in
mid-1999.
Operating income for the Metal Treatment segment showed a 7% increase in
the third quarter as compared to 1999 and a slight increase when comparing the
first nine months of 2000 with the same period of 1999. For the nine months
ended September 30, 2000, improvements in heat-treating operations were largely
offset by lower income at both European and North American shot-peening
operations. As with sales, income from our European shot-peening operations were
adversely affected by currency translation. The weak European currencies had an
adverse impact on operating income of $0.5 million and $1.1 million in the third
quarter and nine month year-to-date periods, respectively.
Flow Control
The Corporation's Flow Control segment posted sales of $23.9 million for
the third quarter and $74.9 million for the first nine months of 2000, compared
with sales of $14.9 million and $42.6 million reported in those same respective
periods of 1999. Operating income for the third quarter and first nine month
periods of 2000 were also significantly higher than 1999. The significant
improvements in both sales and operating income were largely the result of the
acquisition of the Farris and Sprague product lines which occurred in August of
last year.
In the third quarter of 2000, sales and earnings from the traditional
product lines in the Flow Control segment exceeded the levels achieved in the
third quarter of 1999. Sales of marine product lines to the U.S. Navy continued
to perform well, as did sales from retrofit and service programs for domestic
nuclear utilities, and the sale of valves for new offshore nuclear power plant
construction. Industrial valve sales continued to perform well notwithstanding
general softness in two primary markets-petrochemical and chemical process
industries.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
Other Revenue and Costs
During the third quarter of 2000, the company sold a non-operating facility
located in Chester, England. Pre-tax earnings in the quarter includes a $1.4
million ($0.9 million after tax) gain on this sale. During the second quarter of
2000, the company settled litigation to recover environmental remediation costs
against all but one remaining insurance carrier. These settlements, net of
associated litigation expenses and amounts recognized for additional related
environmental costs, provided additional operating income and net earnings for
the period of $1.9 million and $1.2 million, respectively. During the first
quarter of 2000, the company recognized a $2.8 million ($1.7 million after tax)
reduction to general and administrative expenses from the curtailment of
postretirement benefits associated with the closing of the Fairfield, New Jersey
facility, partially offset by $0.8 million ($0.5 million after tax) of
non-recurring postemployment expenses.
For the third quarter of 2000, the Corporation recorded other non-operating
revenue netting to $5.3 million, compared with $2.6 million for the third
quarter of 1999. The increase was primarily caused by higher non-cash pension
income, reflecting the increased overfunded status of the Corporation's pension
plan. In addition, the company recorded a gain on the sale of the Chester, U.K.
building of $1.4 million included in other income during the third quarter 2000.
For the first nine months of 2000, other non-operating net revenue totaling
$12.3 million compared with $8.6 million for the 1999 period as higher pension
income and the gain recorded was partially offset by lower investment income.
CHANGES IN FINANCIAL CONDITION
Liquidity and Capital Resources
The Corporation's working capital was $143.1 million at September 30, 2000,
15% above working capital at December 31, 1999 of $124.4 million. The ratio of
current assets to current liabilities was 3.77 to 1 at September 30, 2000,
compared with a ratio of 3.22 to 1 at December 31, 1999.
Cash, cash equivalents and short-term investments totaled $61.0 million in
aggregate at September 30, 2000, a 74% increase from $35.1 million at the prior
year-end, primarily caused by decreases in both receivables and inventories,
proceeds from the sale of a facility in Chester, England, offset partially by
retirement of long-term debt.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
Liquidity and Capital Resources (continued)
Cash flow for the Corporation benefited from declines in receivables and
inventories as the Corporation has made concentrated efforts to reduce its days
sales outstanding and improve its inventory turnover. Days sales outstanding at
September 30, 2000 has been reduced to 58 days from 77 at December 31, 1999 and
inventory turnover improved to 3.90 from 3.20 at the prior year-end.
The Corporation has two credit agreements, a Revolving Credit Agreement and
a Short-Term Credit Agreement, aggregating $100.0 million with a group of five
banks. The credit agreements allow for borrowings to take place in U. S. or
certain foreign currencies. The Revolving Credit Agreement commits a maximum of
$60.0 million to the Corporation for cash borrowings and letters of credit. The
unused credit available under this facility at September 30, 2000 was $26.2
million. The commitments made under the Revolving Credit Agreement expire
December 17, 2004, but may be extended annually for successive one-year periods
with the consent of the bank group. The Corporation also has in effect a
Short-Term Credit Agreement, which allows for cash borrowings of $40.0 million,
all of which was available at September 30, 2000. The Short-Term Credit
Agreement expires on December 17, 2000. The Short-Term Credit Agreement may be
extended, with the consent of the bank group, for an additional period not to
exceed 364 days. Cash borrowings (excluding letters of credit of $21.6 million)
under the two credit agreements at September 30, 2000 were at a US Dollar
equivalent of $12.2 million, compared with cash borrowing of $20.7 million at
September 30, 1999.
On May 30, 2000, the Corporation repaid 10.0 million Swiss francs of the
initial 31.0 million Swiss franc borrowings used to finance the Drive Technology
acquisition in December 1998. The debt repayment equated to US $5.8 million. The
loans had variable interest rates which had a weighted average of 3.3% for our
outstanding loans for the first nine months of 2000 and variable interest rates
averaging 2.0% for the first nine months of 1999.
During the first nine months of 2000, internally available funds were
adequate to meet capital expenditures of $6.4 million. Expenditures incurred
during the first nine months were generally for new and replacement machinery
and equipment needed for operations. Expenditures amounted to $3.0 million, $1.6
million and $1.5 million for the Metal Treatment, Motion Control and Flow
Control segments, respectively. During the first nine months of 2000, the
Corporation also repurchased 41,270 shares of its common stock at a total cost
of approximately $1.5 million.
The Corporation is expected to make capital expenditures of an additional
$5.1 million during the balance of the year, primarily for machinery and
equipment for the business segments. Funds from internal sources are expected to
be adequate to meet planned capital expenditures, environmental and other
obligations for the remainder of the year.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
RECENTLY ISSUED ACCOUNTING STANDARDS
As discussed in Note 8 to the Consolidated Financial Statements, the
Corporation has reviewed Statement of Financial Accounting Standards No. 133,
"Accounting for Derivatives and Hedging Activities." Due to the limited use of
derivative instruments by the Corporation, this statement is not expected to
have a material effect on the Corporation's results of operations or financial
condition. The statement is effective for the Corporation beginning January 1,
2001.
FORWARD-LOOKING INFORMATION
Except for historical information contained herein, this Quarterly Report
on Form 10-Q does contain "forward looking" information within the meaning of
Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act
of 1934. Examples of forward looking information include, but are not limited
to, (a) projections of or statements regarding return on investment, future
earnings, interest income, other income, earnings or loss per share, investment
mix and quality, growth prospects, capital structure and other financial terms,
(b) statements of plans and objectives of management, (c) statements of future
economic performance, and (d) statements of assumptions, such as economic
conditions underlying other statements. Such forward looking information can be
identified by the use of forward looking terminology such as "believes,"
"expects," "may," "will," "should," "anticipates," or the negative of any of the
foregoing or other variations thereon or comparable terminology, or by
discussion of strategy. No assurance can be given that the future results
described by the forward looking information will be achieved. Such statements
are subject to risks, uncertainties, and other factors which are outside our
control that could cause actual results to differ materially from future results
expressed or implied by such forward looking information. Readers are cautioned
not to put undue reliance on such forward-looking information. Such statements
in this Report include, without limitation, those 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.
PART I - ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Although there have been no material changes in the Corporation's market risk
during the nine months ended September 30, 2000, additional information
regarding the adverse impact of foreign currency translation appears under the
caption entitled "Operating Performance" in Item 2. More specific information
regarding market risk and market risk management policies is more fully
described in item 7A. "Quantitative and Qualitative Disclosures about Market
Risk" of the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1999.
PART II - OTHER INFORMATION
Item 6. EXHIBITS and REPORTS on FORM 8-K
(a) Exhibits
Exhibit 10 - Tenth Amendment to the Curtiss-Wright
Corporation Retirement Plan (Page 21)
Exhibit 27 - Financial Data Schedules (Page 24)
(b) Reports on Form 8-K
The Registrant did not file any report on Form 8-K during the
quarter ended September 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CURTISS-WRIGHT CORPORATION
(Registrant)
By: /s/ Robert A. Bosi
------------------
Robert A. Bosi
Vice President - Finance
(Chief Financial Officer)
By: /s/ Glenn E. Tynan
------------------
Glenn E. Tynan
Corporate Controller
(Chief Accounting Officer)
Dated: November 6, 2000