SECURITIES and EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
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: 5,085,420 shares (as of April 30,
1997)
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 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
Forward-Looking Statements 13
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 15
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
March 31, December 31,
1997 1996
Assets:
Cash and cash equivalents $ 6,142 $ 6,317
Short-term investments 49,002 55,674
Receivables, net 43,922 37,708
Deferred tax asset 9,153 8,769
Inventories 48,932 46,987
Other current assets 2,392 2,378
--------- ---------
Total current assets 159,543 157,833
--------- ---------
Property, plant and equipment, at cost 214,550 210,230
Less, accumulated depreciation 147,995 146,268
--------- ---------
Property, plant and equipment, net 66,555 63,962
Prepaid pension costs 35,891 35,016
Other assets 10,261 10,353
--------- ----------
Total assets $272,250 $267,164
======== ========
Liabilities:
Accounts payable and accrued expenses $ 23,982 $ 25,206
Dividends payable 1,270
Income taxes payable 5,029 3,189
Other current liabilities 15,029 14,021
---------- ----------
Total current liabilities 45,310 42,416
--------- ----------
Long-term debt 10,347 10,347
Deferred income taxes 9,031 8,686
Accrued postretirement benefit costs 10,302 10,302
Other liabilities 11,767 12,050
---------- ----------
Total liabilities 86,757 83,801
---------- ----------
Stockholders' equity:
Common stock, $1 par value 10,000 10,000
Capital surplus 57,071 57,127
Retained earnings 303,425 299,740
Unearned portion of restricted stock (545) (608)
Equity adjustments from foreign currency
translation (3,240) (1,506)
--------- ----------
366,711 364,753
Less, cost of treasury stock 181,218 181,390
--------- ---------
Total stockholders' equity 185,493 183,363
--------- ---------
Total liabilities and
stockholders' equity $272,250 $267,164
======== ========
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)
Three Months Ended
March 31,
1997 1996(1)
---- ----
Net sales $53,148 $36,316
Cost of sales 36,504 24,073
-------- --------
Gross margin 16,644 12,243
Research and development costs 598 169
Selling expense 1,456 1,618
General and Administrative 8,360 5,927
--------- ---------
Operating income 6,230 4,529
Investment income, net 638 428
Rental income, net 940 447
Other income (expense), net (107) (264)
Interest expense 73 97
----------- -----------
Earnings before tax 7,628 5,043
Provision for tax 2,673 1,728
--------- ---------
Net earnings $ 4,955 $ 3,315
======== ========
Weighted average shares outstanding 5,085 5,078
===== =====
Earnings per common share $0.97 $0.65
===== =====
Dividends per common share $0.25 $0.25
===== =====
(1) Prior year information has been restated to conform to current presentation.
See notes to consolidated financial statements.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended
March 31
1997 1996
---- ----
Cash flows from operating activities:
Net earnings $ 4,955 $ 3,315
-------- --------
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,455 2,206
Net gains on short-term investments (211) (227)
(Increase) decrease in deferred taxes (39) 192
Changes in operating assets and liabilities:
Proceeds from sales of trading securities 67,641 77,392
Purchases of trading securities (60,425) (77,797)
Increase in receivables (4,718) (764)
Increase in inventory (809) (3,237)
Decrease in progress payments (2,632) (1,463)
Increase (decease) in accounts payable
and accrued expenses (1,224) 156
Increase in income taxes payable 1,840 1,388
Increase in other assets (797) (907)
Increase (decrease) in other liabilities 392 (1,047)
Other, net (1,467) 17
--------- -------
Total adjustments 6 (4,091)
--------- -------
Net cash provided (used) by operating
activities 4,961 (776)
--------- --------
Cash flows from investing activities:
Proceeds from sales of real estate and equipment 6 75
Additions to property, plant and equipment (5,142) (2,266)
--------- --------
Net cash used by investing activities (5,136) (2,191)
--------- --------
Cash flows from financing activities:
Principal payments on long-term debt - -
---------- --------
Net cash used by financing activities - -
---------- --------
Net increase (decrease) in cash and cash
equivalents (175) (2,967)
Cash and cash equivalents at beginning of period 6,317 8,865
--------- --------
Cash and cash equivalents at end of period $ 6,142 $ 5,898
======== ========
See notes to consolidated financial statements.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS of STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
Equity
Unearned Adjustments
Portion of from Foreign
Common Capital Retained Restricted Currency Treasury
Stock Surplus Earnings Stock Awards Translation Stock
December 31, 1995 $10,000 $57,141 $288,710 $(780) $(1,330) $181,562
Net earnings 16,109
Common dividends (5,079)
Stock awards issued 10 (93) (83)
Stock options exercised (24) (89)
Amortization of earnings portion
of restricted stock 265
Translation adjustments, net (176)
------- ------ ------- ------ ------- -------
December 31, 1996 10,000 57,127 299,740 (608) (1,506) 181,390
Net earnings 4,955
Common dividends (1,270)
Stock options exercised (56) (172)
Amortization of earned portion
of restricted stock 63
Translation adjustment, net (1,736)
------- ------- -------- ------ ------- ---------
March 31, 1997 $10,000 $57,071 $303,425 $(545) $(3,240) $181,218
======= ======= ======== ====== ======== =========
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 and service concern that designs,
manufactures and overhauls precision components and systems and
provides highly engineered services to the aerospace, automotive,
shipbuilding, oil, petrochemical, agricultural equipment, power
generation, metal working and fire & rescue industries. Operations are
conducted principally by three wholly-owned subsidiaries:
Curtiss-Wright Flight Systems, Inc., Metal Improvement Company, Inc.
and Curtiss-Wright Flow Control Corporation. The group's principal
operations include three domestic manufacturing facilities,
thirty-three Metal Improvement service facilities located in North
America and Europe, and two 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 1996 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. RECEIVABLES
Receivables, at March 31, 1997 and December 31, 1996, 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)
March 31, December 31,
1997 1996
----------- -----------
Accounts receivable, billed $43,990 $37,253
Less: progress payments applied 5,798 5,701
-------- ---------
38,192 31,552
-------- --------
Unbilled charges on long-term
contracts 17,408 19,761
Less: progress payments applied 10,455 12,048
-------- --------
6,953 7,713
-------- ---------
Allowance for doubtful accounts (1,223) (1,557)
-------- ---------
Receivables, net $43,922 $37,708
======= =======
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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 March 31, 1997 and
December 31, 1996 is as follows:
(In thousands)
March 31, December 31,
1997 1996
------------ -----------
Raw materials $ 4,437 $ 4,653
Work-in-process 24,968 25,128
Finished goods 17,800 15,817
Inventoried costs related to U.S.
Government and other long-term
contracts 5,509 6,307
--------- ---------
Total inventories 52,714 51,905
Less: progress payments applied,
principally related to long-term
contracts 3,782 4,918
--------- ---------
Net inventories $48,932 $46,987
========= =========
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 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.
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
(UNAUDITED)
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.
5. 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 an
immaterial dilutive effect on earnings per share in each respective
period.
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("SFAS No. 128"). This
statement simplifies the standards for computing earnings per share
("EPS"), making them comparable to international EPS standards and
amends certain disclosure requirements regarding EPS. The Corporation
plans to adopt this statement for interim and annual periods ending
after December 15, 1997 which is the statement's effective date. The
statement is not expected to have a material impact on the Corporation.
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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 a 46% increase in sales and a 49%
increase in net earnings for the first quarter of 1997, as compared with the
same period of 1996. The increases primarily reflect improved performance by the
business segments during the first quarter of 1997, particularly in the
Aerospace & Marine businesses. Operating income from the Corporation's business
segments totaled $7.4 million for the first quarter of 1997, a 38% increase over
the $5.4 million earned in the first quarter of 1996.
Overall, net earnings for the Corporation totaled $5.0 million, or $.97 per
share, for the first quarter of 1997, as compared with $3.3 million or $.65 per
share, for the first quarter of 1996. Sales for the 1997 period were $53.1
million, compared with $36.3 million for the prior year quarter. New orders
received in the first quarter of 1997 totaled $45.6 million, a 20% increase over
orders of $38.2 million for the first quarter of 1996.
SEGMENT PERFORMANCE
The Corporation's Aerospace & Marine segment posted sales of $37.1 million
for the first quarter of 1997, a 75% increase over sales reported in the same
1996 period. Operating income also showed a substantial improvement, totaling
$4.1 million for the 1997 period compared with $2.1 million for the prior year
first quarter. Improvements in sales for the 1997 period are largely due to the
contributions from our Miami, Florida overhaul and repair facility acquired in
May 1996, work performed on Boeing production contracts received in 1995 and
1996 and the general ramp-up of production on mature programs to meet Boeing's
needs.
Sales of overhaul and repair services continue to show substantial growth
from our established facilities in Shelby, North Carolina and Karup, Denmark,
and the addition of the Miami facility. Sales of overhaul services increased
170% in the first quarter of 1997 over like sales in the first quarter of 1996.
In the aggregate, overhaul and repair services now provide 29% of the total
Aerospace & Marine revenue. The Corporation shipped a higher level of actuation
production products for the Boeing 737 Classic, 737-700, 747 and 767 aircraft in
the first quarter of 1997, than in the same period of 1996. Sales to Boeing are
expected to more than double in the next few years as a result of increases in
Boeing's production rates. The Corporation's metal- treating operations are also
benefiting from increased production by both domestic and foreign aircraft
manufacturers. Sales of aerospace metal-treating services worldwide improved 22%
on a quarter-to-quarter basis, comparing 1997 with the prior year. The Aerospace
& Marine segment also showed improvements in sales of military actuation
products for the F-16 program, in support of Lockheed Martin's foreign military
sales requirements, as well as increased sales of military valve products.
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CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Operating income for the Aerospace & Marine segment rose despite the
continuing engineering cost overruns on military development programs. As
discussed in previous reports, the Corporation is proceeding with the testing
phase of major military actuation and control development programs for the F-22,
the V-22 Osprey and the F/A-18 E/F aircraft. During the remainder of 1997, the
Corporation expects to substantially complete the testing phase of these
programs.
The Corporation's Industrial segment posted sales of $16.0 million for the
first quarter of 1997, a 6% increase over sales for the same period of 1996.
Operating income improved by 3% in the same comparable period. Increases in the
Industrial segment's performance are primarily reflective of higher levels of
metal-treating services, particularly within the construction and oil tool
industries. Sales of compressor valve reeds also increased due to a new program
in the refrigeration industry which started in the latter part of 1996. Slightly
offsetting improvements in these product lines were lower sales and operating
income for commercial valve products. During the first quarter of 1996, the
Corporation had benefited from sales of valve products to two utilities in
response to their emergency shutdown requirements.
NON-OPERATING REVENUES:
Administrative expenses for the first quarters of 1997 and 1996 were
reduced by accrued income generated from the Corporation's overfunded pension
plan. Net pension income increased slightly, totaling $.9 million for the first
quarter of 1997, compared with $.8 million for the first quarter of 1996.
The Corporation recorded other non-operating net revenue totaling $1.5
million for the first quarter of 1997, compared with $.6 million for the first
quarter of 1996. Net rental income improved $.5 million in the 1997 period as
compared to the prior year quarter driven by an increase in occupancy at the
Corporation's Wood-Ridge, New Jersey Business Complex and a non-recurrence of
high maintenance costs at the complex due to the severe winter of 1996.
Investment income also increased in the first quarter of 1997 over the first
quarter of 1996. The Corporation's total other revenue also improved because of
the absence in the 1997 quarter of losses recorded on fixed asset write-offs in
the first quarter of 1996.
CHANGES IN FINANCIAL CONDITION:
LIQUIDITY AND CAPITAL RESOURCES:
The Corporation's working capital was $114.2 million at March 31, 1997,
slightly below working capital at December 31, 1996 of $115.4 million. The ratio
of current assets to current liabilities was 3.52 to 1 at March 31, 1997,
compared with a current ratio of 3.72 to 1 at December 31, 1996. Cash, cash
equivalents and short-term investments totaled $55.1 million in aggregate at
March 31, 1996, declining from $62.0 million at the prior year end. Changes in
working capital reflect a substantial increase in accounts receivable
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CURTISS-WRIGHT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
from customers largely due to a 15% increase in sales for the first quarter
of 1997, as compared with sales for the fourth quarter of 1996. Gross inventory
also increased due to a high level of finished goods required to maintain our
component overhaul and repair businesses. Partially offsetting the increase in
working capital from higher receivables and inventory levels was an increase in
income taxes payable at March 31, 1997, from December 31, 1996, and accrued
dividends payable only at the former date.
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 March 31, 1997, encompasses
various letters of credit issued primarily in connection with outstanding
industrial revenue bonds. There were no cash borrowings during the first quarter
of 1997 and no outstanding balances for borrowed funds under the agreement at
March 31, 1997.
During the first quarter of 1997, internally generated funds were adequate
to meet capital expenditures of $5.1 million. Expenditures incurred during the
first quarter were primarily for machinery and equipment at the Corporation's
newly expanded Shelby, North Carolina facility and expenditures related to the
opening of a metal- treating facility in Belgium. Projected funds from operating
sources and the Corporation's short-term investments are expected to be more
than adequate to cover the cost of planned domestic and foreign metal-treating
expansion in 1997. Capital expenditures of approximately $15.2 million are
anticipated for the balance of the year along with $3.7 million of anticipated
expenditures connected with environmental remediation programs at the
Corporation's Wood-Ridge, New Jersey Business Complex.
RECENTLY ISSUED ACCOUNTING STANDARDS
As discussed in Note 6 to the Consolidated Financial Statements, the
Corporation plans to adopt SFAS No. 128, "Earnings per Share", for interim and
annual periods ending after December 15, 1997 as required by the statement. The
adoption of SFAS No. 128 is not expected to have a material impact on the
Corporation.
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FORWARD-LOOKING INFORMATION
Because forward-looking statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied. Such statements
in this report include those contained in (a) the Environmental Matters note to
the Consolidated Financial Statements, (b) projections regarding sales in the
Results of Operations portion of the Management Discussion and Analysis ("MD&A")
section hereof and (c) information relating to future capital expenditures
contained in the Changes in Financial Condition portion of the MD&A section
hereof. 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 the current order backlog; (ii) an economic downturn
in the airline industry; (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 that could affect the company's revenue
and/or cost basis; (vi) changes in customer requirements and (vii) other factors
that generally affect the business of aerospace and industrial companies.
-13-
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 11, 1997, the Registrant held its annual meeting of
stockholders. The matters submitted to a vote by the stockholders were
the election of directors, the retention of independent accounts for
the Registrant, and the approval by the stockholders of an increase in
the authorized number of the Registrant's common shares
The vote received by the director nominees was as follows:
For Withheld
Thomas R. Berner 4,354,935 8,336
James B. Busey IV 4,355,837 7,434
David Lasky 4,356,223 7,048
William B. Mitchell 4,356,060 7,211
John R. Myers 4,355,960 7,311
William W. Sihler 4,355,935 7,336
J. McLain Stewart 4,354,911 8,360
The foregoing represent all of the Registrant's directors.
There were no votes against or broker nonvotes.
The stockholders approved the retention of Price Waterhouse LLP,
independent accountants for the Registrant. The holders of 4,354,948
shares voted in favor; 2,118 voted against. There were no broker
nonvotes.
The final item voted on at the April 11, 1997 meeting was the proposed
increase in the authorized number of the Registrant's common shares
from 12,500,000 to 22,500,000. The stockholders approved the plan, the
holders of 4,198,296 shares voting in favor and 154,362 voting against,
there having been 10,613 abstentions.
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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 Registrant did not file any report on Form 8-K during the
quarter ended March 31, 1997.
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
undesigned thereunto duly authorized.
CURTISS-WRIGHT CORPORATION
(Registrant)
By: /s Robert A. Bosi
Robert A. Bosi
Vice President - Finance
By: /s Kenneth P. Slezak
Kenneth P. Slezak
Controller
Dated: May 15, 1997
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