SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
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: 5,080,331 shares (as of July 31, 1996)
Page 1 of 16
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 - 10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 14
PART II - OTHER INFORMATION
Item 5 - Other Information 15
Item 6 - Exhibits and Reports on Form 8-K 15 - 16
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
June 30, December 31,
1996 1995
Assets: -------- --------
Cash and cash equivalents $ 9,727 $ 8,865
Short-term investments 53,339 69,898
Receivables, net 40,824 36,277
Deferred tax asset 6,986 7,149
Inventories 40,005 29,111
Other current assets 2,549 2,325
-------- --------
Total current assets 153,430 153,625
-------- --------
Property, plant and equipment, at cost 203,475 198,051
Less, accumulated depreciation 143,656 141,782
-------- --------
Property, plant and equipment, net 59,819 56,269
Prepaid pension assets 32,643 31,128
Other assets 10,034 5,179
-------- --------
Total assets $255,926 $246,201
======== ========
Liabilities:
Accounts payable and accrued expenses 22,094 $ 17,244
Dividends payable 1,270
Income taxes payable 2,080 2,000
Other current liabilities 12,665 13,810
-------- --------
Total current liabilities 38,109 33,054
-------- --------
Long-term debt 10,347 10,347
Deferred income taxes 7,857 7,447
Other liabilities 22,165 23,174
-------- --------
Total liabilities 78,478 74,022
-------- --------
Stockholders' equity:
Common stock, $1 par value 10,000 10,000
Capital surplus 57,142 57,141
Retained earnings 294,688 288,710
Unearned portion of restricted stock (740) (780)
Equity adj from foreign currency translation (2,195) (1,330)
-------- --------
358,895 353,741
Less, cost of treasury stock 181,447 181,562
-------- --------
Total stockholders' equity 177,448 172,179
-------- --------
Total liabilities and stockholders'equity $255,926 $246,201
======== ========
[FN] See notes to consolidated financial statements.
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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,
------------------- ------------------
1996 1995 1996 1995
Revenues: -------- -------- ------- -------
Sales $ 79,559 $ 74,459 $43,243 $36,916
Rentals gains & (losses) on sales
of real estate and equipment, net 3,682 4,469 1,882 2,377
Interest, dividends and gains (losses)
on short-term investments, net 1,535 2,299 1,107 1,239
Other income, net 112 139 53 21
-------- -------- ------- -------
Total revenues 84,888 81,366 46,285 40,553
-------- -------- ------- -------
Costs and Expenses:
Product and engineering 53,472 51,585 29,230 25,604
Selling and service 3,230 3,037 1,612 1,448
Administrative and general 14,866 14,093 7,263 7,056
Interest 193 289 96 161
-------- -------- ------- -------
Total costs and expenses 71,761 69,004 38,201 34,269
-------- -------- ------- -------
Earnings before taxes 13,127 12,362 8,084 6,284
Provision for income taxes 4,610 4,125 2,882 2,059
-------- -------- ------- -------
Net earnings $ 8,517 $ 8,237 $ 5,202 $ 4,225
======== ======== ======= =======
Weighted average number of
common shares outstanding 5,078 5,061 5,078 5,061
===== ===== ===== =====
Net earnings per common share $1.68 $1.63 $1.02 $ .83
===== ===== ===== =====
Dividends per common share $ .50 $ .50 $ .25 $ .25
===== ===== ===== =====
[FN] See notes to consolidated financial statements.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months Ended
June 30
1996 1995
Cash flows from operating activities: -------- --------
Net earnings $ 8,517 $ 8,237
-------- --------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 4,472 4,975
Net gains on short-term investments (316) (714)
Increase in deferred taxes 573 1,226
Changes in operating assets and liabilities, net of
Business Acquisition:
Proceeds from sales of trading securities 187,303 90,750
Purchases of trading securities (169,810) (93,442)
Increase in receivables (1,382) (741)
Increase in inventory (4,060) (3,809)
Increase in progress payments 73 2,287
Inc (dec) in accounts payable and accrued expenses 3,619 (1,050)
Increase (decrease) in income taxes payable 80 (1,755)
Increase in other assets (2,371) (1,145)
Decrease in other liabilities (1,503) (958)
Other, net (637) 64
-------- --------
Total adjustments 16,041 (4,312)
-------- --------
Net cash provided by operating activities 24,558 3,925
-------- --------
Cash flows from investing activities:
Proceeds from sales of real estate and equipment 420 1,813
Additions to property, plant and equipment (5,187) (2,964)
Acquisition of Accessory Services business (16,390)
-------- --------
Net cash used by investing activities (21,157) (1,151)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt (54)
Dividends paid (2,539) (1,265)
-------- --------
Net cash used by financing activities (2,539) (1,319)
-------- --------
Net increase in cash and cash equivalents 862 1,455
Cash and cash equivalents at beginning of period 8,865 4,245
-------- --------
Cash and cash equivalents at end of period $ 9,727 $ 5,700
======== ========
[FN] See notes to consolidated financial statements.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS of STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands of dollars)
Equity
Unearned Adjustments
Common Stock Portion of from Foreign
Shares Capital Retained Restricted Currency Treasury Stock
Issued Amount Surplus Earnings Stock Translation Shares Amount
- ----------------- ---------- ------- ------- -------- ---------- --------- --------- --------
December 31, 1994 10,000,000 $10,000 $57,139 $275,600 $(1,622) 4,939,257 $182,348
Net earnings 18,169
Common dividends (5,059)
Exchange of com-
mon shares for
the exercise of
stock options 1,513 71
Stock options
exercised (31) (2,346) (110)
Stock awards
issued 33 $(780) (16,247) (747)
Translation ad-
justments, net 292
- ----------------- ---------- ------- ------- -------- ---------- --------- --------- --------
December 31, 1995 10,000,000 10,000 57,141 288,710 (780) (1,330) 4,922,177 181,562
Net earnings 8,517
Common dividends (2,539)
Amortization of
earned portion
of restricted
stock 40
Stock options
exercised, net (9) (702) (32)
Stock awards
issued 10 (1,806) (83)
Translation ad-
justment, net (865)
- ----------------- ---------- ------- ------- -------- ---------- --------- --------- --------
June 30, 1996 10,000,000 $10,000 $57,142 $294,688 $(740) $(2,195) 4,919,669 $181,447
========== ======= ======= ======== ========== ========= ========= ========
[FN] See notes to consolidated financial statements.
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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 concern which produces and markets precision
components and systems and provides highly engineered services to Aerospace
& Marine and Industrial markets. Its principal operations include three
domestic manufacturing facilities and thirty-two Metal Improvement service
facilities located in North America and Europe, and two aircraft component
overhaul facilities located in Florida and Denmark.
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 1995 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.
2. ACQUISITION
On May 20, 1996, the Corporation completed the purchase of the Miami,
Florida based Accessory Services unit of Aviall, Inc. ("Accessory
Services"). This acquisition expands the Corporation's component overhaul
business both geographically and from a product line perspective. The
newly-acquired business unit is a provider of a broad range of aircraft
component repair and overhaul services with a global customer base and has
annual sales of approximately $21 million.
The Corporation acquired the net assets of Accessory Services for
$16.4 million in cash and has accounted for the acquisition as a purchase.
The excess of purchase price over the estimated fair value of the net
assets acquired amounted to approximately $1.5 million and is being
amortized on a straight-line basis over 40 years. The fair value of the
net assets acquired was based on preliminary estimates and may be revised
at a later date. The results of operations of Accessory Services have been
included in the consolidated financial statements of the Corporation from
the date of acquisition.
- 7 -
The unaudited pro forma consolidated results of operations shown below
have been prepared as if the acquisition had occurred at the beginning of
1996:
(In thousands, except per share data)
Six Months Ended
June 30, 1996
----------------
Net sales $87,839
Net earnings $ 8,865
Net earnings per common share $1.75
3. RECEIVABLES
Receivables, at June 30, 1996 and December 31, 1995, 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,
1996 1995
------- -------
Accounts receivable, billed $37,126 $32,236
Less: progress payments applied 5,129 4,339
------- -------
31,997 27,897
------- -------
Unbilled charges on long-term contracts 26,252 25,128
Less: progress payments applied 16,322 15,988
------- -------
9,930 9,140
------- -------
Allowance for doubtful accounts (1,103) (760)
------- -------
Receivables, net $40,824 $36,277
======= =======
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4. INVENTORIES
Inventories are valued at the lower of cost (principally average cost) or
market. The composition of inventories at June 30, 1996 and December 31, 1995
is as follows:
(In thousands)
--------------------------
June 30, December 31,
1996 1995
------- -------
Raw materials $ 8,292 $ 3,757
Work-in-process 17,698 14,489
Finished goods 6,433 4,353
Inventoried costs related to U. S. Government and
other long-term contracts 11,856 11,474
------- -------
Total inventories 44,279 34,073
Less: progress payments applied, principally
related to long-term contracts 4,274 4,962
------- -------
Net inventories $40,005 $29,111
======= =======
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 recognizing any recovery from
insurance carriers, or third-party legal actions, and are not discounted.
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, N. J., Caldwell Trucking Company Superfund Site,
Fairfield, N. J., and Pfohl Brothers Landfill Site, Cheektowaga, N. Y.,
identified to date as the most significant sites. Other environmental
sites in which the Corporation is involved include but are not limited to
Chemsol, Inc. Superfund Site, Piscataway, N. J., and PJP Landfill, Jersey
City, N. J.
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.
- 9 -
6. CONSOLIDATED STATEMENTS OF CASH FLOWS
Interest payments of $187,000 and $294,000 were made primarily in
association with long-term debt in the first half of 1996 and 1995,
respectively. The Corporation made estimated federal income tax payments
totaling $2,534,000 and $3,012,000 for the first half of 1996 and 1995,
respectively.
7. EARNINGS PER SHARE
Earnings per share were computed by dividing the applicable amount of
earnings by the weighted average number of common shares outstanding during
each period shown in the accompanying Consolidated Statements of Earnings.
The assumed exercise of outstanding stock options had a dilutive but
immaterial effect on earnings per share in each respective period.
- 10 -
PART I - ITEM 2
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
RESULTS OF OPERATIONS:
Curtiss-Wright Corporation posted consolidated net earnings for the
second quarter of 1996 totaling $5.2 million, or $1.02 per share, a 23%
improvement from net earnings of $4.2 million, or $.83 per share, posted in
the second quarter of 1995. Total sales, new orders and pre-tax operating
earnings for the Corporation also showed substantial increases in the
second quarter of 1996, when compared with results for both the first
quarter of 1996 and the second quarter of the prior year.
Sales reported for the second quarter of 1996 were $43.2 million, an
increase of 19% from sales reported in the first quarter of 1996 and a 17%
increase over sales for the second quarter of 1995. Pre-tax operating
earnings totaled $7.0 million for the second quarter of 1996, 30% higher
than operating earnings for the first quarter of 1996 and a 42% increase
over operating earnings for the second quarter of 1995. New orders
received in the second quarter of 1996 totaled $44.4 million, an
improvement of 16% from orders reported in the first quarter of 1996 and
22% above orders received in the second quarter of 1995, principally due to
commercial aircraft actuation and control orders received from The Boeing
Company.
For the first six months of 1996, the Corporation posted consolidated
net earnings of $8.5 million, or $1.68 per share, a slight improvement over
net earnings of $8.2 million, or $1.63 per share, posted in the first six
months of 1995. Sales for the six month period of 1996 were $79.6 million,
7% above sales of $74.5 million posted in the same 1995 period. For the
first six months of 1996, aggregate pre-tax operating income totaled $12.4
million, an increase of 20% from operating income generated in the first
six months of 1995. New orders received in the first half of 1996 also
improved, totaling $82.6 million, 16% higher than orders received in the
same prior year period. Excluding the results of the Corporation's Buffalo
facility (sold in June 1995) from the six-month 1995 period, sales for the
same 1996 period improved 15% over the comparable prior year period, while
operating income improved 27% and new orders increased 36% over the
comparable prior year levels.
Operating results for the second quarter and first six months of 1996
reflect an overall improvement in both business segments of the
Corporation, as compared with the same prior year periods. In general,
improvements reflect the growth of our commercial overhaul business which
was augmented through the acquisition of the Accessory Services unit of
Aviall, Inc., as discussed in Note 2 to consolidated financial statements.
Substantial increases in shot-peening and peen-forming services, both
domestically and to a greater extent abroad, and improvements in commercial
valve sales for utilities provided additional benefits in the 1996 periods.
- 11 -
Segment Performance
The Corporation's Aerospace & Marine segment posted substantially
improved results for both the second quarter and first six months of 1996,
when compared with those for the same periods of 1995.
Sales increased 26% in the second quarter of 1996, to $27.6 million,
from sales in the same period of the prior year and totaled $48.8 million
for the first six months of 1996, 14% higher than in the same six month
period of 1995. Operating income increased substantially when comparing
both the second quarter and first six month periods of 1996 with the same
respective periods of 1995. The improvements in the 1996 periods reflect
the addition of contributions from both the Corporation's new Miami
overhaul facility in the six weeks since the acquisition and its European
overhaul facility, which had opened in May 1995. The Corporation's Shelby,
North Carolina overhaul business also continues to experience substantial
growth. Overall, the component overhaul portion of the aerospace business
has contributed approximately 80% of the sales growth of the segment when
comparing the first six months of 1996 with the first six months of 1995.
Sales of shot-peening and peen-forming services and sales of actuation
components for the F-16 foreign military production programs also increased
in both the second quarter and first six-month periods of 1996, as compared
with the same periods of 1995. The Aerospace & Marine segment sales also
reflected the achievement of contract milestones on the F-22 development
programs during the first half of 1996. Sales of military valve products
increased slightly for the second quarter of 1996, compared with the same
period of 1995, but were below 1995 levels for the six-month 1996 period.
New orders received by the Aerospace & Marine segment totaled $30.0
million for the second quarter of 1996, 67% ahead of orders received in the
second quarter of 1995. For the first six months of 1996, new orders
totaled $52.8 million, 53% above the same prior year period. During the
first six months of 1996, the Corporation has received significant orders
from Boeing for its commercial actuation products, including orders
received for the 747 and 767 programs. Orders received in 1996 for
overhaul services also show substantial increases over the prior year,
benefitting from the Accessory Services acquisition and a full six months
of orders received by the Denmark facility. Orders for military valve
products for use in the U. S. Nuclear Navy have also increased.
After excluding results for the Corporation's former Buffalo Extrusion
division from both 1995 periods, the Industrial segment posted substantial
increases in sales and operating income for both the second quarter and
first six months of 1996, when compared with the same respective prior year
periods. Sales totaled $15.6 million and $30.7 million for the second
quarter and first six months of 1996, respectively, as compared with
adjusted sales of $12.7 million and $26.1 million posted in the same
respective periods of 1995. After excluding Buffalo, operating income
improved 27% for the second quarter and was 30% higher for the six-month
period, when comparing 1996 results with same-period 1995 results.
Improvements in the Industrial segment's results are largely reflective of
higher sales volume for shot-peening services both domestically and to a
greater extent in Europe. These services experienced improvements in most
geographic markets during the first half of 1996. Sales and operating
profits of the Industrial segment in both 1996 periods also benefitted from
improvements in commercial valve production sales as well as increases in
field service and spare parts for commercial valve customers.
- 12 -
New orders received by the Industrial segment totaled $14.4 million
and $29.8 million for the second quarter and first six-month periods of
1996, respectively. The orders received in those 1996 periods reflect
improvements of 10% and 14%, respectively, after excluding orders received
by the Buffalo division from the same 1995 period totals. The improvement
in orders for both 1996 periods largely reflects the increased level of
shot-peening services when compared with the prior year.
Other Revenues and Costs:
Other revenue recorded in the second quarter of 1996 totaled $3.0
million, compared with $3.6 million recorded in the second quarter of 1995,
while other revenue for the first six months of 1996 totaled $5.3 million,
compared with $6.9 million recorded in the same period of 1995. The
decline in other revenue for both 1996 periods, as compared with the same
respective prior year periods, reflects lower overall investment income and
a non-recurrence of gains on the sale of machinery and equipment recorded
in the second quarter of 1995. Losses on writeoffs of fixed assets taken
in the first quarter of 1996 added to the decline in other revenue for the
six month comparable periods.
Operating costs for the Corporation as a whole increased 12% and 4%
for the second quarter and first six months of 1996, respectively, when
compared with costs incurred in the same respective periods of 1996,
generally reflecting the increase in sales, period to period. Administrative
expenses for the second quarter and first six-month periods of both years were
offset by accrued income generated from the Corporation's overfunded pension
plan. Net pension income for the first six months of 1996 totaled $1.5
million, compared with $1.4 million for the first six months of 1995.
CHANGES IN FINANCIAL CONDITION:
Liquidity and Capital Resources:
The Corporation's working capital was $115.3 million at June 30, 1996,
a 4% decrease from working capital at December 31, 1995 of $120.6 million.
The ratio of current assets to current liabilities was 4.0 to 1 at June 30,
1996, compared with a current ratio of 4.6 to 1 at December 31, 1995. The
Corporation's short-term investments totaled $53.3 million at June 30,
1996, a decline of $16.6 million from the prior year-end. The decline in
short-term investments reflects the acquisition cost of the Accessory
Services business. The Corporation purchased the net assets of Accessory
Services for $16.4 million in cash provided by the proceeds from sales of
the Corporation's trading securities.
Inventories and net receivables at June 30, 1996 have increased
substantially compared with their levels at December 31, 1995, primarily
reflecting the working capital acquired with Accessory Services. Current
inventory levels also reflect an increase associated with aerospace
development contracts, particularly inventory needed to support the ramp up
of production on new actuation programs for Boeing, as well as inventory
needed to support growth in overhaul services.
- 13 -
The Corporation continues to maintain its $22.5 million revolving
credit lending facility and its $22.5 million short-term credit agreement,
which provide additional sources of capital to the Corporation. The
revolving credit agreement, of which $7.8 million remains unused at June
30, 1996, encompasses various letters of credit issued primarily in
connection with outstanding industrial revenue bonds. There were no cash
borrowings made on the credit agreements during the first six months of
1996 or 1995.
During the first half of 1996, internally generated funds were
adequate to meet capital expenditures of $5.2 million, primarily for
machinery and equipment within the operating segments. Projected funds
from operating sources are expected to be more than adequate to cover the
cost of these projects as well as future cash requirements. Capital
expenditures of approximately $13.9 million are anticipated for the balance
of the year along with $3.9 million of anticipated expenditures connected
with environmental remediation programs.
- 14 -
PART II - OTHER INFORMATION
Item 5. OTHER INFORMATION
On May 20, 1996 Curtiss-Wright Flight Systems, Inc., a wholly
owned subsidiary of the Registrant, purchased the Aviall Accessory Services
unit of Aviall, Inc. pursuant to which agreement Aviall sold substantially
all of the assets and Curtiss-Wright Flight Systems, Inc. assumed certain
of the liabilities associated with Aviall's Accessory Services business.
Aviall Accessory Services provides aircraft component repair and overhaul
services and is located in Miami, Florida. The acquired business unit is
known as Curtiss-Wright Accessory Services, a division of Curtiss-Wright
Flight Systems, Inc.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedules (Page 16)
(b) Reports on Form 8-K
The Corporation filed a report on Form 8-K on May 2, 1996
announcing that Curtiss-Wright Flight Systems, Inc. had signed an Asset
Purchase Agreement, described above, with Aviall, Inc. for the purchase of
Aviall's Accessory Services business.
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,
Dated: August 13, 1996 Controller
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