UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2010
or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _________ to _______
Commission File Number 1-134
CURTISS-WRIGHT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
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13-0612970
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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10 Waterview Boulevard
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Parsippany, New Jersey
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07054
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(Address of principal executive offices)
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(Zip Code)
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(973) 541-3700
(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 (or for such shorter period of time that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
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Accelerated filer o
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Non-accelerated filer o
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(Do not check if a smaller reporting company)
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
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: 46,071,619 shares (as of July 31, 2010).
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
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PAGE
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PART I – FINANCIAL INFORMATION
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Item 1.
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Unaudited Financial Statements:
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3
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4
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5
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6
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7 - 18
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Item 2.
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19 - 22
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Item 3.
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23
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Item 4.
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23
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PART II – OTHER INFORMATION
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Item 1.
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24
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Item 1A.
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Risk Factors
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24
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Item 5.
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Other Information
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24
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Item 6.
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Exhibits
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25
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26
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PART 1- FINANCIAL INFORMATION
Item 1. Financial Statements
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
(UNAUDITED)
(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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June 30,
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2010
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2009
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2010
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2009
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Net sales
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$ |
462,165 |
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$ |
447,371 |
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$ |
903,940 |
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$ |
871,163 |
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Cost of sales
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307,782 |
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302,789 |
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611,573 |
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590,821 |
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Gross profit
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154,383 |
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144,582 |
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292,367 |
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280,342 |
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Research and development costs
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13,838 |
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13,200 |
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27,676 |
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26,324 |
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Selling expenses
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28,520 |
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27,415 |
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56,340 |
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53,278 |
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General and administrative expenses
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68,597 |
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60,204 |
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133,839 |
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125,834 |
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Operating income
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43,428 |
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43,763 |
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74,512 |
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74,906 |
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Other income, net
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384 |
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47 |
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536 |
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348 |
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Interest expense
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(5,700 |
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(6,542 |
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(11,367 |
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(13,482 |
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Earnings before income taxes
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38,112 |
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37,268 |
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63,681 |
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61,772 |
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Provision for income taxes
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12,214 |
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12,814 |
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21,448 |
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21,513 |
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Net earnings
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$ |
25,898 |
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$ |
24,454 |
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$ |
42,233 |
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$ |
40,259 |
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Basic earnings per share
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$ |
0.57 |
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$ |
0.54 |
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$ |
0.92 |
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$ |
0.89 |
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Diluted earnings per share
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$ |
0.56 |
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$ |
0.54 |
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$ |
0.91 |
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$ |
0.88 |
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Dividends per share
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$ |
0.08 |
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$ |
0.08 |
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$ |
0.16 |
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$ |
0.16 |
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Weighted average shares outstanding:
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Basic
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45,743 |
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45,127 |
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45,691 |
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45,063 |
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Diluted
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46,311 |
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45,537 |
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46,233 |
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45,504 |
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See notes to condensed consolidated financial statements
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
(UNAUDITED)
(In thousands, except par value)
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June 30,
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December 31,
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2010
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2009
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Assets
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Current Assets:
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Cash and cash equivalents
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$ |
71,744 |
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$ |
65,010 |
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Receivables, net
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452,822 |
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404,539 |
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Inventories, net
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296,116 |
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285,608 |
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Deferred tax assets, net
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47,347 |
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48,777 |
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Other current assets
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38,588 |
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33,567 |
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Total current assets
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906,617 |
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837,501 |
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Property, plant, and equipment, net
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388,053 |
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401,149 |
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Goodwill
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676,022 |
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648,452 |
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Other intangible assets, net
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247,902 |
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242,506 |
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Deferred tax assets, net
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2,091 |
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1,994 |
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Other assets
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13,316 |
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10,439 |
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Total Assets
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$ |
2,234,001 |
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$ |
2,142,041 |
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Liabilities
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Current Liabilities:
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Current portion of long-term debt and short-term debt
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$ |
77,704 |
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$ |
80,981 |
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Accounts payable
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114,400 |
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129,880 |
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Dividends payable
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3,678 |
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- |
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Accrued expenses
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90,625 |
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90,855 |
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Income taxes payable
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4,579 |
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4,212 |
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Deferred revenue
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158,025 |
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167,683 |
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Other current liabilities
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38,715 |
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50,708 |
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Total current liabilities
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487,726 |
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524,319 |
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Long-term debt
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459,084 |
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384,112 |
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Deferred tax liabilities, net
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28,284 |
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25,549 |
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Accrued pension and other postretirement benefit costs
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130,912 |
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120,930 |
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Long-term portion of environmental reserves
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18,186 |
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18,804 |
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Other liabilities
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41,130 |
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41,570 |
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Total Liabilities
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1,165,322 |
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1,115,284 |
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Contingencies and Commitments (Note 14)
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Stockholders' Equity
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Common stock, $1 par value
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48,394 |
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48,214 |
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Additional paid in capital
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118,831 |
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111,707 |
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Retained earnings
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1,015,478 |
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980,590 |
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Accumulated other comprehensive loss
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(23,582 |
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(19,605 |
) |
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1,159,121 |
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1,120,906 |
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Less: Cost of treasury stock
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(90,442 |
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(94,149 |
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Total Stockholders' Equity
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1,068,679 |
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1,026,757 |
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Total Liabilities and Stockholders' Equity
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$ |
2,234,001 |
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$ |
2,142,041 |
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See notes to condensed consolidated financial statements
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
(UNAUDITED)
(In thousands)
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Six Months Ended
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June 30,
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2010
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2009
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Cash flows from operating activities:
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Net earnings
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$ |
42,233 |
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$ |
40,259 |
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Adjustments to reconcile net earnings to net cash provided by operating activities:
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Depreciation and amortization
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39,036 |
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38,045 |
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Net loss on sales and disposals of long-lived assets
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673 |
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644 |
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Gain on bargain purchase
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- |
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(1,937 |
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Deferred income taxes
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|
1,525 |
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2,246 |
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Share-based compensation
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|
5,191 |
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6,574 |
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Change in operating assets and liabilities, net of businesses acquired:
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(Increase) decrease in receivables
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(59,135 |
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13,148 |
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Increase in inventories
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(8,568 |
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(13,000 |
) |
Increase (decrease) in progress payments
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7,936 |
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|
(5,302 |
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Decrease in accounts payable and accrued expenses
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(13,648 |
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(57,894 |
) |
(Decrease) increase in deferred revenue
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|
(9,658 |
) |
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|
22,936 |
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Decrease in income taxes payable
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|
(4,656 |
) |
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|
(9,750 |
) |
Increase in net pension and postretirement liabilities
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|
12,558 |
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|
7,917 |
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Increase in other current and long-term assets
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(1,871 |
) |
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(1,287 |
) |
Decrease in other current and long-term liabilities
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|
(9,030 |
) |
|
|
(8,334 |
) |
Total adjustments
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(39,647 |
) |
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|
(5,994 |
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Net cash provided by operating activities
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|
2,586 |
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|
34,265 |
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Cash flows from investing activities:
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Proceeds from sales and disposals of long-lived assets
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|
19 |
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|
2,640 |
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Acquisitions of intangible assets
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(1,597 |
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(321 |
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Additions to property, plant, and equipment
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(22,343 |
) |
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|
(37,528 |
) |
Acquisition of businesses, net of cash acquired
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|
(42,079 |
) |
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|
(49,726 |
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Net cash used for investing activities
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(66,000 |
) |
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(84,935 |
) |
Cash flows from financing activities:
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Borrowings on debt
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262,600 |
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|
437,880 |
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Principal payments on debt
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(190,995 |
) |
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(393,218 |
) |
Proceeds from exercise of stock options
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|
5,503 |
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|
5,315 |
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Dividends paid
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|
(3,667 |
) |
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|
(3,617 |
) |
Excess tax benefits from share-based compensation
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|
167 |
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|
74 |
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Net cash provided by financing activities
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|
73,608 |
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|
46,434 |
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Effect of exchange-rate changes on cash
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|
(3,460 |
) |
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|
2,740 |
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Net increase (decrease) in cash and cash equivalents
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|
6,734 |
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(1,496 |
) |
Cash and cash equivalents at beginning of period
|
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|
65,010 |
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|
60,705 |
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Cash and cash equivalents at end of period
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$ |
71,744 |
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$ |
59,209 |
|
Supplemental disclosure of investing activities:
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Fair value of assets acquired in current year acquisitions
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$ |
49,098 |
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$ |
55,504 |
|
Additional consideration paid (received) on prior year acquisitions
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|
1,153 |
|
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|
(870 |
) |
Liabilities assumed from current year acquisitions
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|
|
(7,492 |
) |
|
|
(2,969 |
) |
Gain on bargain purchase
|
|
|
- |
|
|
|
(1,937 |
) |
Cash acquired
|
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|
(680 |
) |
|
|
(2 |
) |
Acquisition of businesses, net of cash acquired
|
|
$ |
42,079 |
|
|
$ |
49,726 |
|
See notes to condensed consolidated financial statements
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CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
(UNAUDITED)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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Accumulated
|
|
|
|
|
|
|
|
|
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Additional
|
|
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Other
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|
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|
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Common
|
|
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Paid in
|
|
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Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
$ |
47,903 |
|
|
$ |
94,500 |
|
|
$ |
899,928 |
|
|
$ |
(72,551 |
) |
|
$ |
(103,018 |
) |
Net earnings
|
|
|
- |
|
|
|
- |
|
|
|
95,221 |
|
|
|
|
|
|
|
- |
|
Pension and postretirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,350 |
|
|
|
- |
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36,596 |
|
|
|
- |
|
Dividends paid
|
|
|
- |
|
|
|
- |
|
|
|
(14,559 |
) |
|
|
- |
|
|
|
- |
|
Stock options exercised, net
|
|
|
311 |
|
|
|
6,085 |
|
|
|
- |
|
|
|
- |
|
|
|
4,727 |
|
Share-based compensation
|
|
|
- |
|
|
|
11,431 |
|
|
|
- |
|
|
|
- |
|
|
|
3,833 |
|
Other
|
|
|
- |
|
|
|
(309 |
) |
|
|
- |
|
|
|
- |
|
|
|
309 |
|
December 31, 2009
|
|
$ |
48,214 |
|
|
$ |
111,707 |
|
|
$ |
980,590 |
|
|
$ |
(19,605 |
) |
|
$ |
(94,149 |
) |
Net earnings
|
|
|
- |
|
|
|
- |
|
|
|
42,233 |
|
|
|
|
|
|
|
- |
|
Pension and postretirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,262 |
|
|
|
- |
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,239 |
) |
|
|
- |
|
Dividends declared
|
|
|
- |
|
|
|
- |
|
|
|
(7,345 |
) |
|
|
- |
|
|
|
- |
|
Stock options exercised, net
|
|
|
180 |
|
|
|
4,042 |
|
|
|
- |
|
|
|
- |
|
|
|
1,598 |
|
Share based compensation
|
|
|
- |
|
|
|
3,401 |
|
|
|
- |
|
|
|
- |
|
|
|
1,790 |
|
Other
|
|
|
- |
|
|
|
(319 |
) |
|
|
- |
|
|
|
- |
|
|
|
319 |
|
June 30, 2010
|
|
$ |
48,394 |
|
|
$ |
118,831 |
|
|
$ |
1,015,478 |
|
|
$ |
(23,582 |
) |
|
$ |
(90,442 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements
|
|
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Curtiss-Wright Corporation with its subsidiaries (the “Corporation”) is a diversified, multinational manufacturing and service company that designs, manufactures, and overhauls precision components and systems and provides highly engineered products and services to the aerospace, defense, automotive, shipbuilding, processing, oil, petrochemical, agricultural equipment, railroad, power generation, security, and metalworking industries. Operations are conducted through 57 manufacturing facilities and 66 metal treatment service facilities.
The unaudited condensed consolidated financial statements include the accounts of Curtiss-Wright Corporation and its majority-owned subsidiaries. All significant transactions and accounts have been eliminated.
The unaudited condensed consolidated financial statements of the Corporation have been prepared in conformity with accounting principles generally accepted in the United States of America, which requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenue, and expenses and disclosure of contingent assets and liabilities in the accompanying financial statements. The most significant of these estimates includes the estimate of costs to complete long-term contracts under the percentage-of-completion accounting methods, the estimate of useful lives for property, plant, and equipment, cash flow estimates used for testing the recoverability of assets, pension plan and postretirement obligation assumptions, estimates for inventory obsolescence, estimates for the valuation and useful lives of intangible assets, estimates for warranty reserves, and future environmental costs. Actual results may differ from these estimates. In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in these financial statements.
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2009 Annual Report on Form 10-K, as amended. The results of operations for interim periods are not necessarily indicative of trends or of the operating results for a full year.
RECENTLY ISSUED ACCOUNTING STANDARDS
ADOPTION OF NEW STANDARDS
Improving Disclosures About Fair Value Measurements
In February 2010, new guidance was issued which adds new requirements for disclosures about transfers into and out of Level 1 and 2 measurements and separate disclosures about purchases, sales, issuances, and settlements related to Level 3 measurements. The guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. In addition, employers’ disclosures about postretirement benefit plan assets are required to disclose classes of assets instead of major categories of assets. The new guidance was effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of the guidance did not have a material impact on our disclosures. See Footnote 7 for additional information.
Amendments to Certain Recognition and Measurement Requirements
In February 2010, new guidance was issued to provide certain recognition and disclosure requirements surrounding subsequent events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued, by requiring U.S. Securities and Exchange Commission (“SEC”) filers to evaluate subsequent events through the date that the financial statements are issued and by removing the requirement for SEC filers to disclose the date through which subsequent events have been evaluated. The new guidance was effective upon issuance. In accordance with this guidance, the Corporation has determined no subsequent events have occurred that would require adjustment to or additional disclosure in its condensed consolidated financial statements.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
STANDARDS ISSUED BUT NOT YET EFFECTIVE
Revenue Recognition – Milestone Method
In April 2010, new guidance was issued that provides criteria that should be met for determining whether the milestone method of revenue recognition is appropriate, as well as the associated disclosure requirements. The new guidance clarifies that a vendor can recognize consideration that is contingent on achieving a milestone as revenue in the period in which the milestone is achieved, only if the milestone meets all criteria to be considered substantive. The new guidance is effective for fiscal years beginning after June 15, 2010. We do not anticipate that the adoption of this guidance will have a material impact on the Corporation’s results of operations or financial condition.
Revenue Arrangements with Multiple Deliverables
In September 2009, new guidance was issued on revenue arrangements with multiple deliverables. The new guidance modifies the requirements for determining whether a deliverable can be treated as a separate unit of accounting by removing the criteria that verifiable and objective evidence of fair value exists for undelivered items, establishes a selling price hierarchy to help entities allocate arrangement consideration to separate units of account, requires the relative selling price allocation method for all arrangements, and expands required disclosures. The new guidance is effective for fiscal years beginning after June 15, 2010. We do not anticipate that the adoption of this guidance will have a material impact on the Corporation’s results of operations or financial condition.
Certain Revenue Arrangements That Include Software Elements
In September 2009, new guidance was issued on certain revenue arrangements that include software elements. The new guidance amended past guidance on software revenue recognition to exclude from scope all tangible products containing both software and non-software elements that function together to interdependently deliver the product’s essential functionality. The new guidance is effective for fiscal years beginning after June 15, 2010. We do not anticipate that the adoption of this guidance will have a material impact on the Corporation’s results of operations or financial condition.
RECENT DEVELOPMENTS
U.S. Health Care Legislation
In March 2010, the Patient Protection and Affordable Care Act (the “PPACA”) and the Health Care and Education Reconciliation Act of 2010 (the “HCERA” and, together with PPACA, the “Acts”) were signed into law. The Acts effectively change the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits at least as actuarially equivalent to the corresponding benefits provided under Medicare Part D.
The federal subsidy paid to employers was introduced as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “MMA 2003”). The Corporation has been receiving the federal subsidy since the 2006 tax year related to certain retiree prescription drug plans that were determined to be actuarially equivalent to the benefit provided under Medicare Part D. Under the MMA 2003, the federal subsidy does not reduce an employer’s income tax deduction for the costs of providing such prescription drug plans nor is it subject to income tax to the individual.
Under the Acts, beginning in 2013, an employer’s income tax deduction for the costs of providing Medicare Part D-equivalent prescription drug benefits to retirees will be reduced by the amount of the federal subsidy. Under the general standards of accounting, any impact from a change in tax law must be recognized in earnings in the period enacted regardless of the effective date. As a result, management recognized a one-time non-cash charge of approximately $0.8 million in the quarter ended March 31, 2010 for the write-off of deferred tax assets to reflect the change in the tax treatment of the federal subsidy.
2. ACQUISITIONS
The Corporation acquired two businesses during the six months ended June 30, 2010. The acquisitions have been accounted for as a purchase under the guidance for business combinations, where the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired is recorded as goodwill. The Corporation allocates the purchase price, including the value of identifiable intangibles with a finite life, based upon analysis which includes input from third party appraisals. The analysis, while substantially complete, is finalized no later than twelve months from the date of acquisition. The results of the acquired businesses have been included in the consolidated financial results of the Corporation from the date of acquisition in the segment indicated.
Motion Control Segment
Hybricon Corporation
On June 1, 2010, the Corporation acquired all the issued and outstanding stock of Hybricon Corporation (“Hybricon”) for $18.8 million in cash. Under the terms of the Stock Purchase Agreement, the Corporation deposited $2.3 million into escrow as security for potential indemnification claims against the seller. The escrow amount will be held for a period of eighteen months, provided that 50% of the escrow will be released after twelve months subject to amounts held back for pending claims. Management funded the purchase from the Corporation’s revolving credit facility.
The purchase price of the acquisition has been allocated to the net tangible and intangible assets acquired with the remainder recorded as goodwill on the basis of estimated fair values, as follows:
|
|
|
|
(In thousands)
|
|
|
|
Accounts receivable
|
|
$ |
2,273 |
|
Inventory
|
|
|
2,075 |
|
Property, plant, and equipment
|
|
|
151 |
|
Other current assets
|
|
|
68 |
|
Intangible assets
|
|
|
6,677 |
|
Current liabilities
|
|
|
(1,420 |
) |
Deferred income taxes
|
|
|
(2,223 |
) |
Net tangible and intangible assets
|
|
|
7,601 |
|
Purchase price
|
|
|
18,809 |
|
Goodwill
|
|
$ |
11,208 |
|
|
|
|
|
|
The goodwill of $11.2 million consists largely of synergies from combining the operations of Hybricon with our Electronic Systems business in Littleton, MA as well as value associated with the acquisition’s assembled workforce. The Corporation has determined that the goodwill will not be deductible for tax purposes.
Hybricon designs and manufactures custom and standards-based enclosures and electronic backplanes for defense and commercial applications, and is a leading supplier for the most popular embedded commercial-off-the-shelf (COTS) system architectures. Hybricon had 72 employees as of the date of the acquisition and is located in Ayer, MA. Hybricon will operate in Curtiss-Wright's Motion Control segment. Revenues of the acquired business were $16.8 million for the fiscal year ended June 30, 2009.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Specialist Electronics Services Limited
On June 21, 2010, the Corporation acquired all the issued and outstanding stock of Specialist Electronics Services Ltd. (“SES”) for £15.0 million ($22.2 million), net of cash acquired. Under the terms of the Share Purchase Agreement, the Corporation deposited £1.9 million ($2.8 million) into escrow as security for potential indemnification claims against the seller. The escrow amount will be held for a period of twenty-four months, provided that 50% of the escrow will be released after twelve months subject to amounts held back for pending claims. Management funded the purchase from a combination of cash generated from foreign operations and the Corporation’s revolving credit facility.
The purchase price of the acquisition has been allocated to the net tangible and intangible assets acquired with the remainder recorded as goodwill on the basis of estimated fair values, as follows:
(USD, In thousands)
|
|
|
|
Accounts receivable
|
|
$ |
1,680 |
|
Inventory
|
|
|
1,593 |
|
Property, plant, and equipment
|
|
|
72 |
|
Other current assets
|
|
|
25 |
|
Intangible assets
|
|
|
7,525 |
|
Current and non-current liabilities
|
|
|
(1,705 |
) |
Deferred income taxes
|
|
|
(2,089 |
) |
Net tangible and intangible assets
|
|
|
7,101 |
|
Purchase price
|
|
|
22,172 |
|
Goodwill
|
|
$ |
15,071 |
|
|
|
|
|
|
|
|
|
|
|
The goodwill of £10.1 million ($15.1 million) consists largely of synergies achieved through the introduction of SES products to the Corporation’s distribution channels as well as synergies achieved from combining the operations of SES with United Kingdom based operations. The Corporation has determined that the goodwill will not be deductible for tax purposes.
SES provides a range of rugged products for airborne and other severe environments, with particular expertise in solid state data recording, computing and control display units. Key platforms include fixed-wing, rotary-wing and unmanned aircraft, tactical vehicles and navy vessels. SES is located in Camberley, United Kingdom and had 41 employees as of the date of the acquisition. Revenues of the acquired business were £4.7 million ($7.5 million) for the fiscal year ended May 31, 2010.
3. RECEIVABLES
Receivables at June 30, 2010 and December 31, 2009 include amounts billed to customers, claims, other receivables, and unbilled charges on long-term contracts consisting of amounts recognized as sales but not billed. Substantially all amounts of unbilled receivables are expected to be billed and collected within one year.
The composition of receivables for those periods is as follows:
|
|
(In thousands)
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Billed Receivables:
|
|
|
|
|
|
|
Trade and other receivables
|
|
$ |
274,327 |
|
|
$ |
264,191 |
|
Less: Allowance for doubtful accounts
|
|
|
(3,742 |
) |
|
|
(3,997 |
) |
Net billed receivables
|
|
|
270,585 |
|
|
|
260,194 |
|
Unbilled Receivables:
|
|
|
|
|
|
|
|
|
Recoverable costs and estimated earnings not billed
|
|
|
210,325 |
|
|
|
163,115 |
|
Less: Progress payments applied
|
|
|
(28,088 |
) |
|
|
(18,770 |
) |
Net unbilled receivables
|
|
|
182,237 |
|
|
|
144,345 |
|
Receivables, net
|
|
$ |
452,822 |
|
|
$ |
404,539 |
|
4. INVENTORIES
Inventoried costs contain amounts relating to long-term contracts and programs with long production cycles, a portion of which will not be realized within one year. Inventories are valued at the lower of cost (principally average cost) or market. The composition of inventories is as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Raw material
|
|
$ |
134,291 |
|
|
$ |
131,108 |
|
Work-in-process
|
|
|
67,620 |
|
|
|
67,351 |
|
Finished goods and component parts
|
|
|
82,199 |
|
|
|
84,674 |
|
Inventoried costs related to U.S. Government and other long-term contracts
|
|
|
61,402 |
|
|
|
53,597 |
|
Gross inventories
|
|
|
345,512 |
|
|
|
336,730 |
|
Less: Inventory reserves
|
|
|
(39,395 |
) |
|
|
(39,739 |
) |
Progress payments applied, principally related to long-term contracts
|
|
|
(10,001 |
) |
|
|
(11,383 |
) |
Inventories, net
|
|
$ |
296,116 |
|
|
$ |
285,608 |
|
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. GOODWILL
The Corporation accounts for acquisitions by assigning the purchase price to tangible and intangible assets and liabilities. Assets acquired and liabilities assumed are recorded at their fair values, and the excess of the purchase price over the amounts assigned is recorded as goodwill.
The changes in the carrying amount of goodwill for the six months ended June 30, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Flow Control
|
|
|
Motion Control
|
|
|
Metal Treatment
|
|
|
Consolidated
|
|
December 31, 2009
|
|
$ |
308,051 |
|
|
$ |
311,546 |
|
|
$ |
28,855 |
|
|
$ |
648,452 |
|
Goodwill from 2010 acquisitions
|
|
|
- |
|
|
|
26,279 |
|
|
|
- |
|
|
|
26,279 |
|
Change in estimate to fair value of net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
assets acquired in prior year
|
|
|
42 |
|
|
|
- |
|
|
|
- |
|
|
|
42 |
|
Additional consideration of prior years’ acquisitions
|
|
|
- |
|
|
|
(1,066 |
) |
|
|
- |
|
|
|
(1,066 |
) |
Other adjustments
|
|
|
- |
|
|
|
(974 |
) |
|
|
- |
|
|
|
(974 |
) |
Currency translation adjustment
|
|
|
(965 |
) |
|
|
4,523 |
|
|
|
(269 |
) |
|
|
3,289 |
|
June 30, 2010
|
|
$ |
307,128 |
|
|
$ |
340,308 |
|
|
$ |
28,586 |
|
|
$ |
676,022 |
|
The purchase price allocations relating to the businesses acquired are initially based on estimates. The Corporation adjusts these estimates based upon final analysis including input from third party appraisals, when deemed appropriate. The determination of fair value is finalized no later than twelve months from acquisition.
As of January 1, 2010, the Corporation’s Canadian entity changed its functional currency from the U.S. dollar to the Canadian dollar. The nature of this operation’s cash flow changed from predominately U.S. dollar to the Canadian dollar, therefore requiring the change in functional currency. In accordance with the guidance on foreign currency translation, an adjustment of $13.4 million, attributable to current-rate translation, was recorded to goodwill. This adjustment resulted in an increase to goodwill and is reported within the “currency translation adjustment” caption above.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. OTHER INTANGIBLE ASSETS, NET
Intangible assets are generally the result of acquisitions and consist primarily of purchased technology, customer related intangibles, and trademarks. Intangible assets are amortized over useful lives that range between 1 to 20 years.
The following tables present the cumulative composition of the Corporation’s intangible assets and include $9.9 million of indefinite lived intangible assets within other intangible assets for both periods presented.
|
(In thousands)
|
|
June 30, 2010
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Technology
|
|
$ |
139,900 |
|
|
$ |
(49,126 |
) |
|
$ |
90,774 |
|
Customer related intangibles
|
|
|
181,301 |
|
|
|
(61,339 |
) |
|
|
119,962 |
|
Other intangible assets
|
|
|
47,152 |
|
|
|
(9,986 |
) |
|
|
37,166 |
|
Total
|
|
$ |
368,353 |
|
|
$ |
(120,451 |
) |
|
$ |
247,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
December 31, 2009
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Technology
|
|
$ |
135,879 |
|
|
$ |
(44,051 |
) |
|
$ |
91,828 |
|
Customer related intangibles
|
|
|
174,884 |
|
|
|
(54,614 |
) |
|
|
120,270 |
|
Other intangible assets
|
|
|
38,887 |
|
|
|
(8,479 |
) |
|
|
30,408 |
|
Total
|
|
$ |
349,650 |
|
|
$ |
(107,144 |
) |
|
$ |
242,506 |
|
The following table presents the changes in the net balance of intangibles assets during the six months ended June 30, 2010.
|
|
(In thousands)
|
|
|
|
|
|
Customer
|
|
Other
|
|
|
|
|
|
|
|
|
Related
|
|
Intangible
|
|
|
|
|
|
Technology, net
|
|
Intangibles, net
|
|
Assets, net
|
|
Total
|
|
December 31,2009
|
|
$ |
91,828 |
|
|
$ |
120,270 |
|
|
$ |
30,408 |
|
|
$ |
242,506 |
|
Acquired during 2010
|
|
|
2,610 |
|
|
|
5,561 |
|
|
|
7,545 |
|
|
|
15,716 |
|
Amortization expense
|
|
|
(4,705 |
) |
|
|
(6,409 |
) |
|
|
(1,600 |
) |
|
|
(12,714 |
) |
Change in estimate to fair value of net assets acquired in prior year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net currency translation adjustment
|
|
|
1,041 |
|
|
|
540 |
|
|
|
813 |
|
|
|
2,394 |
|
June 30, 2010
|
|
$ |
90,774 |
|
|
$ |
119,962 |
|
|
$ |
37,166 |
|
|
$ |
247,902 |
|
The purchase price allocations relating to the businesses acquired are initially based on estimates. The Corporation adjusts these estimates based upon final analysis including input from third party appraisals, when deemed appropriate. The determination of fair value is finalized no later than twelve months from acquisition.
As of January 1, 2010, the Corporation’s Canadian entity changed its functional currency from the U.S. dollar to the Canadian dollar. The nature of this operations cash flow changed from predominately U.S. dollar to the Canadian dollar, therefore requiring the change in functional currency. In accordance with the guidance on foreign currency translation, an adjustment of $5.5 million, attributable to current-rate translation, was recorded to intangible assets. This adjustment resulted in an increase to other intangible assets and is reported within the “net currency translation adjustment” caption above.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Corporation uses financial instruments, such as forward foreign exchange contracts to hedge a portion of existing and anticipated foreign currency denominated transactions. The purpose of the Corporation’s foreign currency risk management program is to reduce volatility in earnings caused by exchange rate fluctuations. The Corporation does not elect to receive hedge accounting treatment and thus, records forward foreign exchange contracts at fair value, with the gain or loss on these transactions recorded into earnings in the period in which they occur. The Corporation does not use derivative financial instruments for trading or speculative purposes.
The Corporation utilizes the fair value hierarchy to measure the value of its derivative instruments. The hierarchy establishes a framework for measuring fair value in accordance with generally accepted accounting principles:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The Corporation values its derivative instruments by using the bid ask pricing that is common in the dealer markets. The dealers are ready to transact at these prices which use the mid-market pricing convention and are considered to be at fair market value. Based upon the fair value hierarchy, all of our foreign exchange derivative forwards are valued at Level 2. In addition, no transfers have been made between the levels.
As of June 30, 2010, the fair value of these instruments is ($0.1) million. These instruments are classified as other current liabilities and other current assets. See the following tables for information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets and derivative gains and losses in the Condensed Consolidated Statements of Earnings.
|
Fair Values of Derivative Instruments
|
|
|
(In thousands)
|
|
|
Balance Sheet Location
|
Asset Derivatives
|
|
Balance Sheet Location
|
Liability Derivatives
|
|
|
|
June 30,
|
|
December 31,
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
|
2010
|
|
2009
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactional
|
Other Current Assets
|
|
$ |
43 |
|
|
$ |
- |
|
Other Current Liabilities
|
|
$ |
94 |
|
|
$ |
342 |
|
Forecasted
|
Other Current Assets
|
|
|
|
|
|
|
41 |
|
Other Current Liabilities
|
|
|
87 |
|
|
|
- |
|
Total
|
|
|
$ |
43 |
|
|
$ |
41 |
|
|
|
$ |
181 |
|
|
$ |
342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
Amount of Gain (Loss) Recognized in Income on Derivatives
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
Transactional
|
General and Administrative Expenses
|
|
$ |
(3 |
) |
|
$ |
4,658 |
|
Forecasted
|
General and Administrative Expenses
|
|
|
(387 |
) |
|
|
1,015 |
|
Total
|
|
|
$ |
(390 |
) |
|
$ |
5,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
Amount of Gain (Loss) Recognized in Income on Derivatives
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
Transactional
|
General and Administrative Expenses
|
|
$ |
1,876 |
|
|
$ |
2,552 |
|
Forecasted
|
General and Administrative Expenses
|
|
|
(93 |
) |
|
|
362 |
|
Total
|
|
|
$ |
1,783 |
|
|
$ |
2,914 |
|
Debt
The estimated fair value amounts were determined by the Corporation using available market information which is primarily based on quoted market prices for the same or similar issues as of June 30, 2010. Based upon the fair value hierarchy, all of our fixed rate debt is valued at Level 2. The estimated fair values of the Corporation’s fixed rate debt instruments at June 30, 2010 aggregated to $380.8 million compared to a carrying value of $350.0 million. The carrying amount of the variable interest rate debt approximates fair value because the interest rates are reset periodically to reflect current market conditions.
The fair values described above may not be indicative of net realizable value or reflective of future fair values. Furthermore, the use of different methodologies to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. WARRANTY RESERVES
The Corporation provides its customers with warranties on certain commercial and governmental products. Estimated warranty costs are charged to expense in the period the related revenue is recognized based on quantitative historical experience. Estimated warranty costs are reduced as these costs are incurred and as the warranty period expires or may be otherwise modified as specific product performance issues are identified and resolved. Warranty reserves are included within other current liabilities in the Condensed Consolidated Balance Sheets. The following table presents the changes in the Corporation’s warranty reserves:
|
|
(In thousands)
|
|
|
|
2010
|
|
|
2009
|
|
Warranty reserves at January 1,
|
|
$ |
13,479 |
|
|
$ |
10,775 |
|
Provision for current year sales
|
|
|
2,800 |
|
|
|
4,634 |
|
Current year claims
|
|
|
(2,873 |
) |
|
|
(2,004 |
) |
Change in estimates to pre-existing warranties
|
|
|
(931 |
) |
|
|
(1,224 |
) |
Increase due to acquisitions
|
|
|
25 |
|
|
|
127 |
|
Foreign currency translation adjustment
|
|
|
(238 |
) |
|
|
207 |
|
Warranty reserves at June 30,
|
|
$ |
12,262 |
|
|
$ |
12,515 |
|
9. FACILITIES RELOCATION AND RESTRUCTURING
In connection with the acquisitions of VMETRO and Mechetronics in 2008, the Corporation established a restructuring accrual of $7.6 million that was recorded against goodwill in accordance with the guidance on Business Combinations. These acquisitions are consolidated into the Motion Control segment. The accrual was established as of December 31, 2008 for $7.1 million, while the balance was recorded in 2009 for $0.5 million based upon further analysis of the restructuring activities. The restructuring accrual consists of costs to exit the activities of certain facilities, including lease cancellation costs and external legal and consulting fees, as well as costs to relocate or involuntarily terminate certain employees of the acquired business. As of June 30, 2010, the Corporation had a balance of $0.4 million remaining in the restructuring accrual. The Corporation has substantially finalized its actions associated with the restructuring and has estimated the remaining costs noted above. The remaining costs are associated with the finalization of the payments associated with the plan. These activities are expected to be completed by the third quarter of 2010.
During 2009, the Corporation committed to a plan to restructure existing operations through a reduction in workforce and consolidation of operating locations both domestically and internationally. The decision was based on a review of various cost saving initiatives undertaken in connection with the development of the Corporation’s budget and operating plan. This plan impacts our Flow Control, Motion Control, and Metal Treatment segments and resulted in costs incurred of $5.6 million. During the six months ended June 30, 2010, the Corporation continued to consolidate existing operations and incurred an additional $2.5 million consisting of severance costs to involuntarily terminate certain employees, relocation costs, exit activities of certain facilities, including lease cancellation costs and external legal and consulting fees. These costs were recorded in the Condensed Consolidated Statement of Earnings with the majority of the costs affecting the general and administrative expenses, cost of sales, selling, and research and development costs for $1.4 million, $0.9 million, $0.1 million, and $0.1 million, respectively. The liability is included in other current liabilities. As of June 30, 2010, the Corporation has not finalized its plans associated with the restructuring and expects to complete the majority of these activities by December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and Benefits
|
|
|
Facility Closing Costs
|
|
|
Relocation Costs
|
|
|
Total
|
|
Flow Control
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,2009
|
|
$ |
57 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
57 |
|
Provisions
|
|
|
734 |
|
|
|
723 |
|
|
|
377 |
|
|
|
1,834 |
|
Payments
|
|
|
(778 |
) |
|
|
(358 |
) |
|
|
(377 |
) |
|
|
(1,513 |
) |
Adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net currency translation adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
June 30,2010
|
|
$ |
13 |
|
|
$ |
365 |
|
|
$ |
- |
|
|
$ |
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected and incurred to date
|
|
$ |
1,663 |
|
|
$ |
923 |
|
|
$ |
1,033 |
|
|
$ |
3,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motion Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,2009
|
|
$ |
1,545 |
|
|
$ |
1,080 |
|
|
$ |
125 |
|
|
$ |
2,750 |
|
Provisions
|
|
|
520 |
|
|
|
71 |
|
|
|
100 |
|
|
|
691 |
|
Payments
|
|
|
(1,096 |
) |
|
|
(339 |
) |
|
|
(165 |
) |
|
|
(1,600 |
) |
Adjustments
|
|
|
(358 |
) |
|
|
(497 |
) |
|
|
- |
|
|
|
(855 |
) |
Net currency translation adjustment
|
|
|
(23 |
) |
|
|
31 |
|
|
|
- |
|
|
|
8 |
|
June 30,2010
|
|
$ |
588 |
|
|
$ |
346 |
|
|
$ |
60 |
|
|
$ |
994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected and incurred to date
|
|
$ |
8,411 |
|
|
$ |
2,230 |
|
|
$ |
778 |
|
|
$ |
11,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal Treatment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,2009
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Provisions
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Payments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net currency translation adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
June 30,2010
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected and incurred to date
|
|
$ |
296 |
|
|
$ |
583 |
|
|
$ |
199 |
|
|
$ |
1,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Curtiss-Wright
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,2009
|
|
$ |
1,602 |
|
|
$ |
1,080 |
|
|
$ |
125 |
|
|
$ |
2,807 |
|
Provisions
|
|
|
1,254 |
|
|
|
794 |
|
|
|
477 |
|
|
|
2,525 |
|
Payments
|
|
|
(1,874 |
) |
|
|
(697 |
) |
|
|
(542 |
) |
|
|
(3,113 |
) |
Adjustments
|
|
|
(358 |
) |
|
|
(497 |
) |
|
|
- |
|
|
|
(855 |
) |
Net currency translation adjustment
|
|
|
(23 |
) |
|
|
31 |
|
|
|
- |
|
|
|
8 |
|
June 30,2010
|
|
$ |
601 |
|
|
$ |
711 |
|
|
$ |
60 |
|
|
$ |
1,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected and incurred to date
|
|
$ |
10,370 |
|
|
$ |
3,736 |
|
|
$ |
2,010 |
|
|
$ |
16,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected and incurred to date through goodwill
|
|
$ |
5,168 |
|
|
$ |
1,938 |
|
|
$ |
628 |
|
|
$ |
7,734 |
|
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The following tables are consolidated disclosures of all domestic and foreign defined pension plans as described in the Corporation’s 2009 Annual Report on Form 10-K, as amended. The postretirement benefits information includes the domestic Curtiss-Wright Corporation and EMD postretirement benefit plans, as there are no foreign postretirement benefit plans.
Pension Plans
The components of net periodic pension cost for the three and six months ended June 30, 2010 and 2009 were:
|
|
(In thousands)
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Service cost
|
|
$ |
7,021 |
|
|
$ |
6,196 |
|
|
$ |
14,075 |
|
|
$ |
11,942 |
|
Interest cost
|
|
|
6,261 |
|
|
|
5,881 |
|
|
|
12,557 |
|
|
|
11,399 |
|
Expected return on plan assets
|
|
|
(6,937 |
) |
|
|
(7,193 |
) |
|
|
(13,907 |
) |
|
|
(14,451 |
) |
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
|
279 |
|
|
|
162 |
|
|
|
557 |
|
|
|
320 |
|
Unrecognized actuarial loss
|
|
|
766 |
|
|
|
331 |
|
|
|
1,532 |
|
|
|
459 |
|
Net periodic benefit cost
|
|
$ |
7,390 |
|
|
$ |
5,377 |
|
|
$ |
14,814 |
|
|
$ |
9,669 |
|
Curtailment (gain)loss
|
|
|
- |
|
|
|
- |
|
|
|
(31 |
) |
|
|
83 |
|
Total periodic benefit cost
|
|
$ |
7,390 |
|
|
$ |
5,377 |
|
|
$ |
14,783 |
|
|
$ |
9,752 |
|
During the six months ended June 30, 2010, the Corporation made no contributions to the Curtiss-Wright Pension Plan, and expects to make no contributions in 2010. However, we do expect to make contributions in the range of $25 to $30 million in 2011. In addition, contributions of $2.3 million were made to the Corporation’s foreign benefit plans during the first six months of 2010. Contributions to the foreign benefit plans are expected to be $4.8 million in 2010.
Other Postretirement Benefit Plans
The components of the net postretirement benefit cost for the Curtiss-Wright and EMD postretirement benefit plans for the three and six months ended June 30, 2010 and 2009 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30, |
|
June 30, |
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Service cost
|
|
$ |
189 |
|
|
$ |
155 |
|
|
$ |
378 |
|
|
$ |
310 |
|
Interest cost
|
|
|
434 |
|
|
|
419 |
|
|
|
868 |
|
|
|
837 |
|
Amortization of unrecognized actuarial gain
|
|
|
(156 |
) |
|
|
(191 |
) |
|
|
(312 |
) |
|
|
(382 |
) |
Net periodic postretirement benefit cost
|
|
$ |
467 |
|
|
$ |
383 |
|
|
$ |
934 |
|
|
$ |
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30,, 2010, the Corporation paid $0.8 million on the postretirement plans. During 2010, the Corporation anticipates contributing $1.7 million to the postretirement plans.
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11. EARNINGS PER SHARE
Diluted earnings per share were computed based on the weighted average number of shares outstanding plus all potentially dilutive common shares. A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Basic weighted average shares outstanding
|
|
|
45,743 |
|
|
|
45,127 |
|
|
|
45,691 |
|
|
|
45,063 |
|
Dilutive effect of share-based and deferred stock compensation
|
|
|
568 |
|
|
|
410 |
|
|
|
542 |
|
|
|
441 |
|
Diluted weighted average shares outstanding
|
|
|
46,311 |
|
|
|
45,537 |
|
|
|
46,233 |
|
|
|
45,504 |
|
At June 30, 2010 and 2009 there were 672,000 and 1,058,000 stock options outstanding, respectively, that could potentially dilute earnings per share in the future, which were excluded from the computation of diluted earnings per share as they would have been anti-dilutive for those periods.
12. SEGMENT INFORMATION
The Corporation manages and evaluates its operations based on the products and services it offers and the different markets it serves. Based on this approach, the Corporation has three reportable segments: Flow Control, Motion Control, and Metal Treatment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Three Months Ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flow Control
|
|
Motion Control
|
|
Metal Treatment
|
|
Segment Total
|
|
Corporate & Other(1)
|
|
Consolidated
|
|
Revenue from external
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
customers
|
|
$ |
251,855 |
|
|
$ |
155,624 |
|
|
$ |
54,686 |
|
|
$ |
462,165 |
|
|
$ |
- |
|
|
$ |
462,165 |
|
Intersegment revenues
|
|
|
- |
|
|
|
3,867 |
|
|
|
194 |
|
|
|
4,061 |
|
|
|
(4,061 |
) |
|
|
- |
|
Operating income(expense)
|
|
|
24,855 |
|
|
|
18,343 |
|
|
|
6,457 |
|
|
|
49,655 |
|
|
|
(6,227 |
) |
|
|
43,428 |
|
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
(In thousands)
|
|
|
|
|
Three Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flow Control
|
|
Motion Control
|
|
Metal Treatment
|
|
Segment Total
|
|
Corporate & Other(1)
|
|
Consolidated
|
|
Revenue from external
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
customers
|
|
$ |
242,414 |
|
|
$ |
155,748 |
|
|
$ |
49,209 |
|
|
$ |
447,371 |
|
|
$ |
- |
|
|
$ |
447,371 |
|
Intersegment revenues
|
|
|
- |
|
|
|
226 |
|
|
|
590 |
|
|
|
816 |
|
|
|
(816 |
) |
|
|
- |
|
Operating income (expense)
|
|
|
21,728 |
|
|
|
19,513 |
|
|
|
4,458 |
|
|
|
45,699 |
|
|
|
(1,936 |
) |
|
|
43,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Six Months Ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flow Control
|
|
Motion Control
|
|
Metal Treatment
|
|
Segment Total
|
|
Corporate & Other(1)
|
|
Consolidated
|
|
Revenue from external
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
customers
|
|
$ |
492,586 |
|
|
$ |
302,997 |
|
|
$ |
108,357 |
|
|
$ |
903,940 |
|
|
$ |
- |
|
|
$ |
903,940 |
|
Intersegment revenues
|
|
|
- |
|
|
|
4,739 |
|
|
|
473 |
|
|
|
5,212 |
|
|
|
(5,212 |
) |
|
|
- |
|
Operating income (expense)
|
|
|
41,524 |
|
|
|
32,296 |
|
|
|
12,497 |
|
|
|
86,317 |
|
|
|
(11,805 |
) |
|
|
74,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flow Control
|
|
Motion Control
|
|
Metal Treatment
|
|
Segment Total
|
|
Corporate & Other(1)
|
|
Consolidated
|
|
Revenue from external
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
customers
|
|
$ |
472,786 |
|
|
$ |
296,457 |
|
|
$ |
101,920 |
|
|
$ |
871,163 |
|
|
$ |
- |
|
|
$ |
871,163 |
|
Intersegment revenues
|
|
|
22 |
|
|
|
1,808 |
|
|
|
963 |
|
|
|
2,793 |
|
|
|
(2,793 |
) |
|
|
- |
|
Operating income (expense)
|
|
|
35,059 |
|
|
|
33,779 |
|
|
|
11,072 |
|
|
|
79,910 |
|
|
|
(5,004 |
) |
|
|
74,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flow Control
|
|
Motion Control
|
|
Metal Treatment
|
|
Segment Total
|
|
Corporate & Other
|
|
Consolidated
|
|
June 30, 2010
|
|
$ |
1,143,271 |
|
|
$ |
828,780 |
|
|
$ |
225,855 |
|
|
$ |
2,197,906 |
|
|
$ |
36,095 |
|
|
$ |
2,234,001 |
|
December 31,2009
|
|
|
1,099,960 |
|
|
|
771,355 |
|
|
|
232,658 |
|
|
|
2,103,973 |
|
|
|
38,068 |
|
|
|
2,142,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Operating expense for Corporate and Other includes pension expense, environmental remediation and administrative expenses, legal, foreign currency transactional gains and losses, and other expenses.
|
|
|
|
|
|
|
|
|
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Adjustments to reconcile to earnings before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Total segment operating income
|
|
$ |
49,655 |
|
|
$ |
45,699 |
|
|
$ |
86,317 |
|
|
$ |
79,910 |
|
Corporate and other
|
|
|
(6,227 |
) |
|
|
(1,936 |
) |
|
|
(11,805 |
) |
|
|
(5,004 |
) |
Other income, net
|
|
|
384 |
|
|
|
47 |
|
|
|
536 |
|
|
|
348 |
|
Interest expense
|
|
|
(5,700 |
) |
|
|
(6,542 |
) |
|
|
(11,367 |
) |
|
|
(13,482 |
) |
Earnings before income taxes
|
|
$ |
38,112 |
|
|
$ |
37,268 |
|
|
$ |
63,681 |
|
|
$ |
61,772 |
|
13. COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the three and six months ended June 30, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Net earnings
|
|
$ |
25,898 |
|
|
$ |
24,454 |
|
|
$ |
42,233 |
|
|
$ |
40,259 |
|
Equity adjustments from foreign currency translations, net
|
|
|
(20,958 |
) |
|
|
37,337 |
|
|
|
(5,239 |
) |
|
|
24,361 |
|
Defined benefit pension and post-retirement plans, net
|
|
|
548 |
|
|
|
(324 |
) |
|
|
1,262 |
|
|
|
(147 |
) |
Total comprehensive income
|
|
$ |
5,488 |
|
|
$ |
61,467 |
|
|
$ |
38,256 |
|
|
$ |
64,473 |
|
The equity adjustment from foreign currency translation represents the effect of translating the assets and liabilities of the Corporation’s non-U.S. entities. This amount is impacted period-over-period by foreign currency fluctuations and by the acquisitions of foreign entities.
As of January 1, 2010, the Corporation’s Canadian entity changed its functional currency from the U.S. dollar to the Canadian dollar. The nature of this operations cash flow changed from predominately U.S. dollar to the Canadian dollar, therefore requiring the change in functional currency. In accordance with the guidance on foreign currency translation, an adjustment of $18.6 million, attributable to current-rate translation of non-monetary assets, was recorded to the currency translation account. This adjustment resulted in an increase to total comprehensive income and is reported within the “equity adjustment from foreign currency translations, net” caption above.
14. CONTINGENCIES AND COMMITMENTS