Annual Statements Open main menu

CURTISS WRIGHT CORP - Quarter Report: 2011 June (Form 10-Q)

form10.htm



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, 2011

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
 
13-0612970
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

10 Waterview Boulevard
   
Parsippany, New Jersey
 
07054
(Address of principal executive offices)
 
(Zip Code)

(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
 
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o

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: 46,607,983 shares (as of July 31, 2011).

 
Page 1 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

TABLE of CONTENTS




       
       
PART I – FINANCIAL INFORMATION
  PAGE
       
       
Item 1.
Financial Statements (Unaudited):
 
       
   
3
       
   
4
       
   
5
       
   
6
       
   
7 - 19
       
Item 2.
20 -29
       
Item 3.
30
       
Item 4.
30
       
       
       
PART II – OTHER INFORMATION
 
       
       
Item 1.
31
       
Item 1A.
Risk Factors
31
       
Item 5.
Other Information
31
       
Item 6.
Exhibits
32
       
Signatures
 
33

 
Page 2 of 33

 


PART 1- FINANCIAL INFORMATION
Item 1. Financial Statements


CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(In thousands, except per share data)

 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
2011
   
2010
 
 
 
 
   
 
   
 
   
 
 
Net sales
  $ 514,905     $ 462,165     $ 976,755     $ 903,940  
Cost of sales
    345,948       307,782       658,829       611,573  
Gross profit
    168,957       154,383       317,926       292,367  
 
                               
Research and development expenses
    15,129       13,838       28,726       27,676  
Selling expenses
    29,936       28,520       59,159       56,340  
General and administrative expenses
    72,203       68,597       136,669       133,839  
Operating income
    51,689       43,428       93,372       74,512  
 
                               
Interest expense
    (4,967 )     (5,700 )     (10,088 )     (11,367 )
Other income, net
    29       384       85       536  
 
                               
Earnings before income taxes
    46,751       38,112       83,369       63,681  
Provision for income taxes
    14,955       12,214       27,057       21,448  
 
                               
Net earnings
  $ 31,796     $ 25,898     $ 56,312     $ 42,233  
 
                               
Basic earnings per share
  $ 0.69     $ 0.57     $ 1.22     $ 0.92  
Diluted earnings per share
  $ 0.68     $ 0.56     $ 1.20     $ 0.91  
 
                               
Dividends per share
  $ 0.08     $ 0.08     $ 0.16     $ 0.16  
 
                               
Weighted average shares outstanding:
                               
Basic
    46,311       45,743       46,250       45,691  
Diluted
    47,015       46,311       46,991       46,233  
 
                               
See notes to condensed consolidated financial statements
 

 
Page 3 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
(UNAUDITED)
(In thousands, except par value)

 
 
June 30,
   
December 31,
 
 
 
2011
   
2010
 
Assets
 
 
   
 
 
Current assets:
 
 
   
 
 
Cash and cash equivalents
  $ 63,088     $ 68,119  
Receivables, net
    501,868       461,632  
Inventories, net
    332,706       281,103  
Deferred tax assets, net
    50,152       48,568  
Other current assets
    37,186       40,605  
Total current assets
    985,000       900,027  
Property, plant, and equipment, net
    424,214       397,280  
Goodwill
    713,257       693,572  
Other intangible assets, net
    244,037       240,197  
Deferred tax assets, net
    874       1,033  
Other assets
    10,783       9,909  
Total assets
  $ 2,378,165     $ 2,242,018  
 
               
Liabilities
               
Current liabilities:
               
Current portion of long-term and short-term debt
  $ 2,641     $ 2,602  
Accounts payable
    134,530       133,180  
Dividends payable
    3,721       -  
Accrued expenses
    85,112       99,966  
Income taxes payable
    2,940       3,111  
Deferred revenue
    147,576       146,770  
Other current liabilities
    42,683       42,310  
Total current liabilities
    419,203       427,939  
Long-term debt
    458,986       394,042  
Deferred tax liabilities, net
    26,968       26,815  
Accrued pension and other postretirement benefit costs
    158,023       166,591  
Long-term portion of environmental reserves
    18,285       19,091  
Other liabilities
    49,674       47,437  
Total liabilities
    1,131,139       1,081,915  
Contingencies and commitments (Note 14)
               
 
               
Stockholders' Equity
               
Common stock, $1 par value
    48,717       48,558  
Additional paid in capital
    136,678       130,093  
Retained earnings
    1,121,340       1,072,459  
Accumulated other comprehensive income (loss)
    23,419       (2,813 )
 
    1,330,154       1,248,297  
Less:  Treasury stock, at cost
    (83,128 )     (88,194 )
Total stockholders' equity
    1,247,026       1,160,103  
Total liabilities and stockholders' equity
  $ 2,378,165     $ 2,242,018  
 
               
See notes to condensed consolidated financial statements
         

 
Page 4 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
(UNAUDITED)
(In thousands)

 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2011
   
2010
 
Cash flows from operating activities:
 
 
   
 
 
Net earnings
  $ 56,312     $ 42,233  
Adjustments to reconcile net earnings to net cash used for operating activities:
               
Depreciation and amortization
    42,244       39,036  
Net (gain) loss on sale of assets
    (302 )     673  
Deferred income taxes
    (2,955 )     1,525  
Share-based compensation
    5,193       5,191  
Change in operating assets and liabilities, net of businesses acquired:
               
Accounts receivable, net
    (31,991 )     (59,135 )
Inventories, net
    (35,324 )     (8,568 )
Progress payments
    911       7,936  
Accounts payable and accrued expenses
    (19,319 )     (13,648 )
Deferred revenue
    806       (9,658 )
Income taxes payable
    284       (4,656 )
Net pension and postretirement liabilities
    (7,019 )     12,558  
Other current and long-term assets
    3,632       (1,871 )
Other current and long-term liabilities
    2,581       (9,030 )
Total adjustments
    (41,259 )     (39,647 )
Net cash provided by operating activities
    15,053       2,586  
Cash flows from investing activities:
               
Proceeds from sales and disposals of long-lived assets
    307       19  
Acquisitions of intangible assets
    (16 )     (1,597 )
Additions to property, plant, and equipment
    (37,539 )     (22,343 )
Acquisition of businesses, net of cash acquired
    (53,604 )     (42,079 )
Net cash used for investing activities
    (90,852 )     (66,000 )
Cash flows from financing activities:
               
Borrowings on debt
    455,000       262,600  
Principal payments on debt
    (390,048 )     (190,995 )
Proceeds from exercise of stock options
    5,915       5,503  
Dividends paid
    (3,710 )     (3,667 )
Excess tax benefits from share-based compensation
    867       167  
Net cash provided by financing activities
    68,024       73,608  
Effect of exchange-rate changes on cash
    2,744       (3,460 )
Net (decrease) increase in cash and cash equivalents
    (5,031 )     6,734  
Cash and cash equivalents at beginning of period
    68,119       65,010  
Cash and cash equivalents at end of period
  $ 63,088     $ 71,744  
Supplemental disclosure of investing activities:
               
Fair value of assets acquired in current year acquisitions
  $ 60,102     $ 49,098  
Additional consideration paid on prior year acquisitions
    -       1,153  
Liabilities assumed from current year acquisitions
    (6,498 )     (7,492 )
Cash acquired
    -       (680 )
Acquisition of new businesses
  $ 53,604     $ 42,079  
 
               
See notes to condensed consolidated financial statements
 

 
Page 5 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
(UNAUDITED)
(In thousands)

 
 
Common Stock
   
Additional Paid in Capital
   
Retained Earnings
   
Accumulated Other Comprehensive (Loss) Income
   
Treasury Stock
 
 
 
 
   
 
   
 
   
 
   
 
 
December 31, 2009
  $ 48,214     $ 111,707     $ 980,590     $ (19,605 )   $ (94,149 )
Net earnings
    -       -       106,598       -       -  
Pension and postretirement  adjustment, net
    -       -       -       (14,791 )     -  
Foreign currency translation adjustments, net
    -       -       -       31,583       -  
Dividends paid
    -       -       (14,729 )     -       -  
Stock options exercised, net
    344       6,937       -       -       4,026  
Share-based compensation
    -       11,768       -       -       1,610  
Other
    -       (319 )     -       -       319  
December 31, 2010
  $ 48,558     $ 130,093     $ 1,072,459     $ (2,813 )   $ (88,194 )
Net earnings
    -       -       56,312       -       -  
Pension and postretirement  adjustment, net
    -       -       -       1,022       -  
Foreign currency translation adjustments, net
    -       -       -       25,210       -  
Dividends declared
    -       -       (7,431 )     -       -  
Stock options exercised, net
    159       3,200       -       -       3,258  
Share-based compensation
    -       3,644       -       -       1,549  
Other
    -       (259 )     -       -       259  
June 30, 2011
  $ 48,717     $ 136,678     $ 1,121,340     $ 23,419     $ (83,128 )
 
                                       
 
                                       
See notes to condensed consolidated financial statements
 

 
Page 6 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
 (UNAUDITED)

 

1.           BASIS OF PRESENTATION

Curtiss-Wright Corporation and 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 58 manufacturing facilities and 64 metal treatment service facilities.
 
The unaudited condensed consolidated financial statements include the accounts of Curtiss-Wright and its majority-owned subsidiaries.  All intercompany transactions and accounts have been eliminated.
 
The unaudited condensed consolidated financial statements of the Corporation have been prepared in conformity with the United States of America generally accepted accounting principles (“U.S. GAAP”), 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, warranty reserves, legal reserves, and the estimate of 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 2010 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
 
Revenue Recognition – Milestone Method
 
In April 2010, new guidance was issued that provides the 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.  The adoption of this guidance did not 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.  The adoption of this guidance did not have a material impact on the Corporation’s results of operations or financial condition.
 

 
Page 7 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 

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.  The adoption of this guidance did not have a material impact on the Corporation’s results of operations or financial condition.
 
STANDARDS ISSUED BUT NOT YET EFFECTIVE

Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS

In May 2011, new guidance was issued that amends the current fair value measurement and disclosure guidance to increase transparency around valuation inputs and investment categorization.  The new guidance does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within U.S. GAAP or International Financial Reporting Standards.  The new guidance is effective for annual and interim reporting periods beginning on or after December 15, 2011 and is to be adopted prospectively as early adoption is not permitted.  The adoption of this guidance is not expected to have a material impact on the Corporation’s results of operations or financial condition.
 
Other Comprehensive Income: Presentation of Comprehensive Income

In June 2011, new guidance was issued that amends the current comprehensive income guidance. The amendment allows the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single or continuous statement of comprehensive income or in two separate but consecutive statements.  The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The new guidance is to be applied retrospectively and is effective for fiscal years, and interim periods, beginning after December 15, 2011.  The adoption of this new guidance will not have an impact on the Corporation’s consolidated financial position, results of operations or cash flows as it only requires a change in the format of the current presentation of other comprehensive income.

2.           ACQUISITIONS
 
The Corporation acquired three businesses during the six months ended June 30, 2011, described in more detail below.
 
The acquisitions have been accounted for as purchases 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 generally recorded as goodwill.  The Corporation allocates the purchase price, including the value of identifiable intangibles with a finite life, based upon analysis and input from third party appraisals. The purchase price allocation will be finalized no later than twelve months from 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.
 
Metal Treatment Segment
 
Surface Technologies Division of BASF Corporation
 
On April 8, 2011, the Corporation acquired certain assets of BASF Corporation’s Surface Technologies (“BASF”) business for $20.5 million in cash. The Asset Purchase Agreement contains customary representations and warranties and provides for a purchase price adjustment based on the value of the closing day inventory.  The purchase price adjustment is reflected in the disclosed purchase price.  Management funded the purchase from the Corporation’s revolving credit facility.
 
 
 
Page 8 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 
 
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)
 
 
Inventory
  $ 1,514  
Property, plant, and equipment
    12,774  
Intangible assets
    3,000  
Current liabilities
    (263 )
Net tangible and intangible assets
    17,025  
Purchase price
    20,501  
Goodwill
  $ 3,476  

The Corporation has estimated that the goodwill will be tax deductible.
 
The Surface Technologies business is a supplier of metallic and ceramic thermal spray coatings primarily for the aerospace and power generation markets and expands the coatings capabilities within the Corporation’s Metal Treatment segment.  The business has approximately 150 employees at three operating facilities located in East Windsor, CT, Wilmington, MA and Duncan, SC.  Revenues of the acquired business were approximately $29 million for the year ended December 31, 2010.
 
Flow Control Segment
 
Douglas Equipment Ltd.
 
On April 6, 2011, the Corporation acquired the assets of Douglas Equipment Ltd. (“Douglas”) for £12.0 million ($19.6 million) in cash.  The Business Transfer Agreement contains customary representations and warranties, including a portion of the purchase price deposited into escrow as security for potential indemnification claims against the seller.  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:
 
(US dollars, in thousands)
 
 
Accounts receivable
  $ 852  
Inventory
    11,831  
Property, plant, and equipment
    672  
Other current assets
    402  
Intangible assets
    6,697  
Current liabilities
    (6,045 )
Net tangible and intangible assets
    14,409  
Purchase price
    19,600  
Goodwill
  $ 5,191  

The Corporation has estimated that the goodwill will be tax deductible.
 
Douglas designs and manufactures aircraft handling systems for the defense and commercial aerospace markets and will operate within the Marine and Power Products division of the Corporation’s Flow Control segment.  Douglas has approximately 135 employees and is headquartered in Cheltenham, U.K.  Revenues of the acquired business were approximately $28 million for the year ended 2010.
 
 
 
Page 9 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 
Motion Control Segment
 
Predator Systems, Inc.
 
On January 7, 2011, the Corporation acquired all the issued and outstanding stock of Predator Systems, Inc. (“PSI”), for $13.5 million in cash.  The Stock Purchase Agreement contains customary representations and warranties, including a portion of the purchase price deposited into escrow as security for potential indemnification claims against the seller.  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
  $ 862  
Inventory
    1,856  
Property, plant, and equipment
    2,100  
Other current assets
    67  
Intangible assets
    4,700  
Current liabilities
    (190 )
Net tangible and intangible assets
    9,395  
Purchase price
    13,503  
Goodwill
  $ 4,108  

The Corporation has estimated that the goodwill will be tax deductible.
 
PSI designs and manufactures motion control components and subsystems for ground defense, ordnance guidance, and aerospace applications, and will operate within the Flight Systems division of the Corporation’s Motion Control segment.  PSI had 45 employees as of the date of the acquisition and is headquartered in Boca Raton, FL.  Revenues of the acquired business were approximately $8 million for the year ended December 31, 2010.
 
 

 
Page 10 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 

 
3.           RECEIVABLES
 
Receivables at June 30, 2011 and December 31, 2010 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 is as follows:
 
 
 
(In thousands)
 
 
 
June 30,
   
December 31,
 
 
 
2011
   
2010
 
Billed receivables:
 
 
   
 
 
Trade and other receivables
  $ 311,139     $ 282,483  
Less: Allowance for doubtful accounts
    (5,058 )     (3,972 )
Net billed receivables
    306,081       278,511  
Unbilled receivables:
               
Recoverable costs and estimated earnings not billed
    222,455       210,766  
Less: Progress payments applied
    (26,668 )     (27,645 )
Net unbilled receivables
    195,787       183,121  
Receivables, net
  $ 501,868     $ 461,632  
 
               

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,
 
 
 
2011
   
2010
 
Raw material
  $ 159,868     $ 147,950  
Work-in-process
    100,196       69,302  
Finished goods and component parts
    78,835       73,419  
Inventoried costs related to U.S. Government and other long-term contracts
    49,270       41,029  
Gross inventories
    388,169       331,700  
Less:  Inventory reserves
    (44,574 )     (41,596 )
Progress payments applied, principally related to long-term contracts
    (10,889 )     (9,001 )
Inventories, net
  $ 332,706     $ 281,103  
 
               


 
Page 11 of 33

 

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 acquired tangible and intangible assets and liabilities assumed.  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, 2011 are as follows:
 
 
 
(In thousands)
 
 
 
Flow Control
   
Motion Control
   
Metal Treatment
   
Consolidated
 
December 31, 2010
  $ 310,047     $ 354,607     $ 28,918     $ 693,572  
Acquisitions
    5,191       4,108       3,476       12,775  
Foreign currency translation adjustment
    1,601       9,298       171       11,070  
Goodwill adjustments
    -       (4,160 )     -       (4,160 )
June 30, 2011
  $ 316,839     $ 363,853     $ 32,565     $ 713,257  

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.  Goodwill adjustments represent subsequent adjustments to the purchase price allocation for acquisitions as determined by the respective accounting guidance requirements for business combination accounting based on the date of acquisition.
 
6.           OTHER INTANGIBLE ASSETS, NET
 
Intangible assets are generally the result of acquisitions and consist primarily of purchased technology and customer related intangibles.  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, 2011
Gross
 
Accumulated Amortization
 
Net
 
Technology
  $ 149,812     $ (60,769 )   $ 89,043  
Customer related intangibles
    200,818       (75,496 )     125,322  
Other intangible assets
    43,112       (13,440 )     29,672  
Total
  $ 393,742     $ (149,705 )   $ 244,037  
 
                       
 
(In thousands)
 
December 31, 2010
Gross
 
Accumulated Amortization
 
Net
 
Technology
  $ 148,820     $ (54,994 )   $ 93,826  
Customer related intangibles
    189,567       (68,663 )     120,904  
Other intangible assets
    37,005       (11,538 )     25,467  
Total
  $ 375,392     $ (135,195 )   $ 240,197  
 
                       

Intangible assets acquired from the Corporation’s current year acquisitions include Technology of $4.6 million, Customer related intangibles of $7.3 million, and Other intangible assets of $2.5 million.
 
 
 
Page 12 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 
 
Total intangible amortization expense for the six months ended June 30, 2011 was $13.4 million.  The estimated amortization expense for the five years ending December 31, 2011 through 2015 is $25.2 million, $24.0 million, $22.2 million, $21.0 million, and $20.0 million, respectively.
 
7.           FAIR VALUE OF FINANCIAL INSTRUMENTS
 
The Corporation uses financial instruments, such as forward foreign exchange and currency option 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 and currency option 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.
 
All derivative assets are required to be recognized as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets based upon quoted market prices for comparable instruments.  These instruments are classified as Other current liabilities and Other current assets. The Corporation utilizes 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 the foreign exchange derivative forwards are valued at a Level 2 measurement (observable market based inputs or unobservable inputs that are corroborated by market data).  The derivative gains and losses are classified within General and administrative expenses.
 
 
 
 
   
 
 
 
 
(In thousands)
 
 
 
June 30,
   
December 31,
 
 
 
2011
   
2010
 
Foreign exchange contracts:
 
 
   
 
 
Other current assets
  $ 69     $ 532  
Other current liabilities
  $ 23     $ 309  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2011 
 
2010 
 
2011 
 
2010 
Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative expenses
 
$
 51 
 
$
 (390)
 
$
 943 
 
$
 1,783 

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, 2011.  The estimated fair values of the Corporation’s fixed rate debt instruments at June 30, 2011 aggregated to $308 million compared to a carrying value of $275 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.

 
 
Page 13 of 33

 

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)
 
 
 
2011
   
2010
 
Warranty reserves at January 1,
  $ 14,841     $ 13,479  
Provision for current year sales
    4,814       2,800  
Current year claims
    (2,450 )     (2,873 )
Change in estimates to pre-existing warranties
    (781 )     (931 )
Increase due to acquisitions
    -       25  
Foreign currency translation adjustment
    270       (238 )
Warranty reserves at June 30,
  $ 16,694     $ 12,262  

9.           FACILITIES RELOCATION AND RESTRUCTURING
 
2009 and 2010 Restructuring Plans
 
In 2009 and 2010, the Corporation completed a plan to restructure existing operations through a reduction in workforce and consolidation of operating locations both domestically and internationally.   During the six months ended June 30, 2010, the Corporation incurred costs of $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 within General and administrative expenses, Costs of sales, Selling expenses, and Research and development expenses for $1.4 million, $0.9 million, $0.1 million, and $0.1 million, respectively.  During 2010, the Corporation incurred total costs of $3.0 million related to this initiative in the Condensed Consolidated Statement of Earnings within General and administrative expenses, Cost of sales, and Selling expenses for $1.7 million, $1.2 million, and $0.1 million, respectively.
 
Oil and Gas Restructuring Initiative
 
During the fourth quarter of 2010, the Corporation initiated a restructuring plan within its Oil and Gas division, of the Flow Control segment. The objective of this initiative is to streamline our workflow and consolidate existing facilities.  In the fourth quarter of 2010 and during the six months ended June 30, 2011, the Corporation recorded charges of $0.5 million and $0.2 million, respectively, related to severance and benefit costs as part of this initiative.  These costs are recorded within General and administrative expenses in the Condensed Consolidated Statement of Earnings.  The Corporation is anticipating incurring approximately $0.1 to $0.5 million of additional costs associated with this initiative during the remainder of 2011.  As of June 30, 2011, approximately $0.5 million in payments have been made with the remaining payments expected to be made by December 31, 2011.
 


 
Page 14 of 33

 

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 2010 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, 2011 and 2010 are as follows:
 
 
 
(In thousands)
 
 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
2011
   
2010
 
Service cost
  $ 9,342     $ 7,021     $ 18,657     $ 14,075  
Interest cost
    6,566       6,261       13,108       12,557  
Expected return on plan assets
    (7,995 )     (6,937 )     (15,962 )     (13,907 )
Amortization of:
                               
Prior service cost
    301       279       600       557  
Unrecognized actuarial loss
    1,246       766       2,489       1,532  
Net periodic benefit cost
  $ 9,460     $ 7,390     $ 18,892     $ 14,814  
Curtailment loss (gain)
    53       -       53       (31 )
Total periodic benefit cost
  $ 9,513     $ 7,390     $ 18,945     $ 14,783  

During the six months ended June 30, 2011, the Corporation made $22 million in contributions to the Curtiss-Wright Pension Plan, and expects to make total contributions of approximately $35 million in 2011.  In addition, contributions of $3.4 million were made to the Corporation’s foreign benefit plans during the six months ended June 30, 2011.  Contributions to the foreign benefit plans are expected to be $4.5 million in 2011.
 
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, 2011 and 2010 are as follows:
 

 
(In thousands)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
 
2011
   
2010
   
2011
   
2010
 
Service cost
  $ 94     $ 189     $ 188     $ 378  
Interest cost
    250       434       500       868  
Amortization of:
                               
Prior service cost
    (157 )     -       (314 )     -  
Unrecognized actuarial gain
    (231 )     (156 )     (463 )     (312 )
Net periodic postretirement benefit cost
  $ (44 )   $ 467     $ (89 )   $ 934  

The reduction in the net periodic postretirement benefit cost is a result of modifications to the EMD Plan benefit design for post 65-retirees which went into effect on January 1, 2011.  The change reduced the benefit obligation by approximately $7.0 million.
 
During the six months ended June 30, 2011, the Corporation paid $0.7 million to the postretirement plans.  During 2011, the Corporation anticipates making total contributions of $1.5 million to the postretirement plans.
 
 
Page 15 of 33

 

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, except stock options outstanding)
 
 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
2011
   
2010
 
Basic weighted average shares outstanding
    46,311       45,743       46,250       45,691  
Dilutive effect of stock options and deferred stock compensation
    704       568       741       542  
Diluted weighted average shares outstanding
    47,015       46,311       46,991       46,233  

As of June 30, 2011 and 2010 there were 660,000 and 672,000 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 be considered anti-dilutive.
 
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
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
2011
   
2010
 
Net sales
 
 
   
 
   
 
   
 
 
Flow Control
  $ 266,614     $ 251,855     $ 505,756     $ 492,586  
Motion Control
    176,893       159,491       337,163       307,736  
Metal Treatment
    72,059       54,880       135,320       108,830  
Less: Intersegment revenues
    (661 )     (4,061 )     (1,484 )     (5,212 )
Total consolidated
  $ 514,905     $ 462,165     $ 976,755     $ 903,940  
 
                               
Operating income (expense)
                               
Flow Control
  $ 26,532     $ 24,855     $ 45,164     $ 41,524  
Motion Control
    18,804       18,343       35,090       32,296  
Metal Treatment
    10,407       6,457       20,464       12,497  
Corporate and eliminations (1)
    (4,054 )     (6,227 )     (7,346 )     (11,805 )
Total consolidated
  $ 51,689     $ 43,428     $ 93,372     $ 74,512  

(1) Corporate and eliminations includes pension expense, environmental remediation and administrative expenses, legal, foreign currency transactional gains and losses, and other expenses.
 
 
 
Page 16 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 
 
Adjustments to reconcile operating income to earnings before income taxes:
 
 
 
 
   
 
   
 
   
 
 
 
 
(In thousands)
 
 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
2011
   
2010
 
Total operating income
  $ 51,689     $ 43,428     $ 93,372     $ 74,512  
Interest expense
    (4,967 )     (5,700 )     (10,088 )     (11,367 )
Other income, net
    29       384       85       536  
Earnings before income taxes
  $ 46,751     $ 38,112     $ 83,369     $ 63,681  
 
                               
 
                 
(In thousands)
 
 
                 
June 30,
   
December 31,
 
 
                    2011       2010  
Identifiable assets
                               
Flow Control
                  $ 1,158,405     $ 1,102,417  
Motion Control
                    921,289       873,074  
Metal Treatment
                    265,472       233,356  
Corporate and other
                    32,999       33,171  
Total consolidated
                  $ 2,378,165     $ 2,242,018  

13.           COMPREHENSIVE INCOME
 
Total comprehensive income for the three and six months ended June 30, 2011 and 2010 are as follows:
 

 
 
(In thousands)
 
 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
2011
   
2010
 
Net earnings
  $ 31,796     $ 25,898     $ 56,312     $ 42,233  
Foreign currency translation adjustments, net
    7,516       (20,958 )     25,210       (5,239 )
Defined benefit pension and post retirement plans
    551       548       1,022       1,262  
Total comprehensive income
  $ 39,863     $ 5,488     $ 82,544     $ 38,256  

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 year-over-year by foreign currency fluctuations and by the acquisitions of foreign entities.
 



 
Page 17 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 

14.           CONTINGENCIES AND COMMITMENTS
 
Legal Proceedings
 
In January 2007, a former executive was awarded approximately $9.0 million in punitive and compensatory damages plus legal costs related to a gender bias lawsuit filed in 2003.  The Corporation recorded a $6.5 million accrual related to the lawsuit.  In August of 2009, the New Jersey Appellate Division reversed in part and affirmed in part the judgment of the trial court, resulting in the setting aside of the punitive damage award and the front pay award of the Plaintiff’s compensatory damages award.  The Plaintiff filed a Petition for Certification with the Supreme Court of New Jersey requesting review of the Appellate Division’s decision.  In December 2010, the Supreme Court of New Jersey issued an opinion reversing the Appellate Division’s decision, and reinstated the judgment rendered by the trial court.  The Corporation filed a Motion for Reconsideration with the Supreme Court of New Jersey.  In the motion, the Corporation requested that the Supreme Court of New Jersey remand the case back to the lower Appellate Division to resolve certain arguments raised by the Corporation regarding the appropriateness of damages.  The Supreme Court of New Jersey has granted the Corporation’s request for reconsideration and remanded the case back to the lower Appellate Division to decide the remaining undecided arguments raised by the Corporation.  The Corporation now waits for the Appellate Division to provide a scheduling order with regards to future briefing and oral argument on the unresolved issues before the Appellate Division.  In June 2011, Plaintiff filed a Motion for a Partial Dissolve of the Stay of Judgment requesting the Trial Court to authorize payment of counsel fees and economic damages associated with the affirmed discrimination charge in this matter.   The total accrual related to the lawsuit as of June 30, 2011 is approximately $10.6 million and recorded within Other current liabilities of the Condensed Consolidated Balance Sheets.
 
Consistent with other entities its size, the Corporation is a party to a number of legal actions and claims, none of which individually or in the aggregate, in the opinion of management, are expected to have a material adverse effect on the Corporation's results of operations or financial position.
 
Environmental Matters
 
The Corporation’s environmental obligations have not changed significantly from December 31, 2010.  The aggregate environmental liability was $20.7 million at June 30, 2011 and $20.8 million at December 31, 2010.  All environmental reserves exclude any potential recovery from insurance carriers or third-party legal actions.
 
The Corporation, through its Flow Control segment, has several NRC licenses necessary for the continued operation of its commercial nuclear operations. In connection with these licenses, the NRC required financial assurance from the Corporation in the form of a parent company guarantee, representing estimated environmental decommissioning and remediation costs associated with the commercial operations covered by the licenses. The guarantee for the decommissioning costs of the refurbishment facility, which is estimated for 2017, is $4.5 million.
 
Letters of Credit and Other Arrangements
 
The Corporation enters into standby letters of credit agreements and guarantees with financial institutions and customers primarily relating to guarantees of repayment on certain Industrial Revenue Bonds, future performance on certain contracts to provide products and services, and to secure advance payments the Corporation has received from certain international customers.  At June 30, 2011 and December 31, 2010,  the Corporation had contingent liabilities on outstanding letters of credit of $57.2 million and $47.0  million, respectively.
 
AP1000 Program
 
The Corporation’s Electro-Mechanical Division is the reactor coolant pump (“RCP”) supplier for the Westinghouse AP1000 nuclear power plants under construction in China.  The first RCP was scheduled for delivery in the fourth quarter of 2011.  During the final phase of testing, the Corporation detected a localized heating issue in the pump stator.  The Corporation is taking the necessary steps to ensure the long-term reliability and safety of the RCP.  As a result of addressing the heating issue, the Corporation increased the estimated contract costs in the second quarter of 2011, which did not result in a material impact to our quarterly financial results.  Based upon current negotiations with the customer, the Corporation believes that the existing contract will be modified to reflect revised delivery dates and that any damage or incentive provisions will be revised accordingly.  Based upon the information available, the Corporation does not believe that the ultimate outcome will result in a material impact to our operations or cash flows.

 
 
Page 18 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

 

15.           SUBSEQUENT EVENTS
 
IMR Test Labs
 
On July 22, 2011, the Corporation acquired the assets of IMR Test Labs (“IMR”), for approximately $20.0 million in cash.  The Corporation paid $18.0 million at closing, with $2.0 million held back as security for potential indemnification claims.  The agreement also provides for contingent consideration based on achievement of certain sales targets over a two-year period.  Management funded the purchase primarily from the Corporation’s revolving credit facility, and excess cash on hand.  IMR is a provider of mechanical and metallurgical testing services for the aerospace, power generation, and general industrial markets and will operate within the Corporation's Metal Treatment segment.  Revenues of the acquired business were approximately $14 million for the year ended December 31, 2010.
 
ACRA Control Ltd.
 
On July 28, 2011, the Corporation acquired the stock of ACRA Control Ltd. (“ACRA”) for €42.0 million (approximately $61.0 million) in cash, net of cash acquired.  Management funded the purchase primarily from the Corporation’s revolving credit facility and cash generated from foreign operations.  ACRA is a supplier of data acquisition systems and networks, data recorders, and telemetry ground stations for both defense and commercial aerospace markets.  ACRA will operate within the Corporation’s Motion Control segment and had revenues of approximately €20.5 million ($27.1 million) for its fiscal year ended March 31, 2011.
 
Legacy Distribution Business
 
On July 29, 2011, the Corporation sold the assets of the legacy distribution business in its Valve Systems and Controls operation to McJunkin Red Man Corporation for $4.6 million in cash, subject to adjustment based on closing inventory values.  Working capital, exclusive of inventory, was retained by the Corporation.  The determination was made to divest the business because it was not considered a core business of the Corporation.  The Corporation will not report the disposal as discontinued operations as the amounts are not considered significant.  This business was part of the Flow Control segment and contributed $13.7 million in sales and a pretax loss of $0.3 million for the year ended December 31, 2010.
 

 
Page 19 of 33

 

CURTISS WRIGHT CORPORATION and SUBSIDIARIES
PART I- ITEM 2
FINANCIAL CONDITION and RESULTS OF OPERATIONS


FORWARD-LOOKING STATEMENTS
 
Except for historical information, this Quarterly Report on Form 10-Q may be deemed to contain "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Examples of forward-looking statements include, but are not limited to: (a) projections of or statements regarding return on investment, future earnings, interest income, sales, volume, other income, earnings or loss per share, growth prospects, capital structure, and other financial terms, (b) statements of plans and objectives of management, (c) statements of future economic performance, and (d) statements of assumptions, such as economic conditions underlying other statements. Such forward-looking statements can be identified by the use of forward-looking terminology such as "anticipates," "believes," “continue,” "could," “estimate,” "expects," “intend,” "may," “might,” “outlook,” “potential,” “predict,” "should,"  "will," as well as the negative of any of the foregoing or variations of such terms or comparable terminology, or by discussion of strategy.  No assurance may be given that the future results described by the forward-looking statements will be achieved.  While we believe these forward-looking statements are reasonable, they are only predictions and are subject to known and unknown risks, uncertainties, and other factors, many of which are beyond our control, which could cause actual results, performance or achievement to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements.  These risks and uncertainties include, but are not limited to, those described in “Item 1A. Risk Factors” of our 2010 Annual Report on Form 10-K, as amended, and elsewhere in that report, those described in this Quarterly Report on Form 10-Q, and those described from time to time in our future reports filed with the Securities and Exchange Commission.  Such forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, those contained in Item 1. Financial Statements and Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.  These forward-looking statements speak only as of the date they were made and we assume no obligation to update forward-looking statements to reflect actual results or changes in or additions to the factors affecting such forward-looking statements.
 

 
Page 20 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued


COMPANY ORGANIZATION
 
Curtiss-Wright Corporation is a diversified, multinational provider of highly engineered, technologically advanced, value-added products and services to a broad range of markets in the flow control, motion control, and metal treatment industries.  We are positioned as a market leader across a diversified array of niche markets through engineering and technological leadership, precision manufacturing, and strong relationships with our customers. We provide products and services to a number of global markets, such as defense, commercial aerospace, commercial nuclear power generation, oil and gas, and general industrial. We have achieved balanced growth through the successful application of our core competencies in engineering and precision manufacturing, adapting these competencies to new markets through internal product development, and a disciplined program of strategic acquisitions. Our overall strategy is to be a balanced and diversified company, less vulnerable to cycles or downturns in any one market, and to establish strong positions in profitable niche markets.  Approximately 40% of our revenues are generated from defense-related markets.
 
We manage and evaluate our operations based on the products and services we offer and the different industries and markets we serve. Based on this approach, we have three reportable segments: Flow Control, Motion Control, and Metal Treatment.  For further information on our products and services and the major markets served by our three segments, please refer to our 2010 Annual Report on Form 10-K, as amended.
 
RESULTS OF OPERATIONS
 
Analytical Definitions
 
Throughout management’s discussion and analysis of financial condition and results of operations, the terms “incremental” and “organic” are used to explain changes from period to period. The term “incremental” is used to highlight the impact acquisitions had on the current year results, for which there was no comparable prior year period. Therefore, the results of operations for acquisitions are incremental for the first twelve months from the date of acquisition.  The remaining businesses are referred to as the “organic”.  The definition of “organic” excludes the effects of foreign currency translation.
 
 
 
Page 21 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

 
The discussion below is structured to separately discuss our Consolidated Statement of Earnings, Results by Business Segment, and our Liquidity and Capital Resources.
 

 
 
 
 
(In thousands)
 
 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
% of change
   
2011
   
2010
   
% of change
 
 
 
 
   
 
   
 
   
 
   
 
   
 
 
Sales
 
 
   
 
   
 
   
 
   
 
   
 
 
Flow Control
  $ 266,608     $ 251,855       5.9 %   $ 505,748     $ 492,586       2.7 %
Motion Control
    176,512       155,624       13.4 %     336,292       302,997       11.0 %
Metal Treatment
    71,785       54,686       31.3 %     134,715       108,357       24.3 %
Total sales
  $ 514,905     $ 462,165       11.4 %   $ 976,755     $ 903,940       8.1 %
 
                                               
Operating income
                                               
Flow Control
  $ 26,532     $ 24,855       6.7 %   $ 45,164     $ 41,524       8.8 %
Motion Control
    18,804       18,343       2.5 %     35,090       32,296       8.7 %
Metal Treatment
    10,407       6,457       61.2 %     20,464       12,497       63.8 %
Corporate and eliminations
    (4,054 )     (6,227 )     (34.9 %)     (7,346 )     (11,805 )     (37.8 %)
Total operating income
  $ 51,689     $ 43,428       19.0 %   $ 93,372     $ 74,512       25.3 %
 
                                               
Interest expense
    (4,967 )     (5,700 )     (12.9 %)     (10,088 )     (11,367 )     (11.3 %)
Other income, net
    29       384       (92.4 %)     85       536       (84.1 %)
 
                                               
Earnings before income taxes
    46,751       38,112       22.7 %     83,369       63,681       30.9 %
Provision for income taxes
    14,955       12,214       22.4 %     27,057       21,448       26.2 %
 
                                               
Net earnings
  $ 31,796     $ 25,898       22.8 %   $ 56,312     $ 42,233       33.3 %
 
                                               
New orders
  $ 491,956     $ 392,125             $ 980,172     $ 893,906          


Sales
 
Sales increased $53 million, or 11%, and $73 million, or 8%, over the comparable prior year quarter and year-to-date periods, respectively. The increase in sales for the current quarter and first six months primarily reflects higher volume in all segments, with the largest percent increase occurring in the Metal Treatment segment. Acquisitions made in the last twelve months contributed approximately $19 million and $26 million, in the current year quarter and first six months of 2011, respectively, while the effect of foreign currency translation increased sales by approximately $8 million and $11 million in the current quarter and first six months of 2011, respectively.  The table below further depicts our sales by market.
 
 
 
Page 22 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued


 
 
(In thousands)
 
 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
% change
   
2011
   
2010
   
% change
 
 
 
 
   
 
   
 
   
 
   
 
   
 
 
Defense markets:
 
 
   
 
   
 
   
 
   
 
   
 
 
Aerospace
  $ 74,209     $ 65,130       13.9 %   $ 137,746     $ 123,301       11.7 %
Ground
    31,008       28,258       9.7 %     59,034       60,142       (1.8 %)
Naval
    93,057       84,989       9.5 %     176,310       161,292       9.3 %
Other
    7,170       7,461       (3.9 %)     14,050       14,158       (0.8 %)
Total Defense
  $ 205,444     $ 185,838       10.6 %   $ 387,140     $ 358,893       7.9 %
 
                                               
Commercial markets:
                                               
Commercial Aerospace
  $ 78,888     $ 60,127       31.2 %   $ 145,519     $ 120,085       21.2 %
Oil and Gas
    61,755       64,147       (3.7 %)     116,009       129,458       (10.4 %)
Power Generation
    96,420       88,787       8.6 %     186,826       175,720       6.3 %
General Industrial
    72,398       63,266       14.4 %     141,261       119,784       17.9 %
Total Commercial
  $ 309,461     $ 276,327       12.0 %   $ 589,615     $ 545,047       8.2 %
 
                                               
Total Curtiss-Wright
  $ 514,905     $ 462,165       11.4 %   $ 976,755     $ 903,940       8.1 %

Commercial sales increased $33 million, or 12%, and $44 million, or 8%, over the comparable prior year quarter and year-to-date periods, primarily due to an increase in sales in the commercial aerospace, general industrial, and power generation markets, offset by a decline in sales in the oil and gas market.  The higher sales in the commercial aerospace, general industrial, and power generation markets were primarily due to increased demand for our metal treatment services, increased sales of  flight controls on Boeing aircraft, and higher sales in support of domestic AP1000 reactor projects. The decrease in sales in our oil and gas market is primarily due to the timing of new orders for international capital projects.
 
The increase in defense sales of $20 million, or 11%, and $28 million or 8%, over the comparable prior year quarter and year-to-date periods, is primarily due to higher sales in the aerospace defense and naval defense markets.  Sales in the aerospace defense market improved due to increases on the V-22 Osprey program and higher sales of our embedded computing and sensing products on the Black Hawk, while the increase in the naval defense market is primarily due to increased production on the Virginia class submarine.
 
Operating income
 
Operating income increased $8 million, or 19%, and $19 million, or 25%, over the comparable prior year quarter and year-to-date periods.  The increase in operating income for the current quarter, and first six months, primarily reflects higher sales volume across all of our segments resulting in improved absorption of overhead costs.  Acquisitions made in the last twelve months had a minimal impact on our current quarter and year-to-date results, while the effects of foreign currency translation decreased current quarter and year-to-date results by $1 million and $2 million, respectively.
 
Non-segment operating expense
 
The decrease in non-segment operating expense for the current quarter and first six months of 2011, of $2 million and $4 million, respectively, is primarily due to lower unallocated medical expenses, slightly offset by higher pension costs.
 
 
 
Page 23 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

 
Interest expense
 
Interest expense for the current quarter and first six months of 2011 decreased primarily due to lower average debt and interest rates as compared to the same periods in 2010.
 
Effective tax rate
 
Our effective tax rate for the current quarter and first six months was 32.0% and 32.5%, respectively, compared to 32.0% and 33.7%, in the prior year periods.  The lower effective year-to-date tax rate was primarily due to a one-time tax charge recorded in the first quarter of the prior year associated with a change in the healthcare law.
 
Net earnings
 
Net earnings increased $6 million in the current quarter and $14 million in the first six months of 2011, as compared to the prior year periods, primarily due to our increased operating income and lower interest expense discussed above.
 
New orders
 
New orders for the current quarter and first six months of 2011 increased by $100 million and $86 million, respectively, as compared to the prior year periods.  The increase in new orders is primarily due to higher orders in the power generation market that support existing nuclear operating reactors and increased demand in the oil and gas market for maintenance, repairs, and overhaul (“MRO”) projects and super vessels.  Acquisitions contributed incremental new orders of $32 million and $42 million, to the current year quarter and first six months of 2011, respectively.
 

RESULTS BY BUSINESS SEGMENT
 
Flow Control
 

 
(In thousands)
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
% change
   
2011
   
2010
   
% change
 
Sales
  $ 266,608     $ 251,855       5.9 %   $ 505,748     $ 492,586       2.7 %
Operating income
    26,532       24,855       6.7 %     45,164       41,524       8.8 %
Operating margin
    10.0 %     9.9 %  
10 bps
      8.9 %     8.4 %  
50 bps
 
New orders
  $ 276,273     $ 181,782       52.0 %   $ 527,913     $ 477,539       10.5 %


Three months ended June 30, 2011 compared with three months ended June 30, 2010
 
Sales
 
Sales increased $15 million, or 6%, compared to the prior year period, driven by increases of 7% and 5%, in the commercial and defense markets, respectively.  The increase in the commercial markets is primarily due to progress on  domestic AP1000 reactor projects, higher sales to the general industrial market for our commercial heating, ventilation, and air conditioning products, as well as increased sales in commercial aerospace due to the Douglas acquisition, which contributed $6 million of sales in the current quarter.  These increases were partially offset by a decline in sales in the oil and gas market due to the timing of orders for international capital projects.
 
The increase in sales in the defense market was primarily driven by increased production on the Virginia class submarine program due to the ramp-up in production from one submarine to two per year.  In addition, we experienced higher sales resulting from increases in production on the Advanced Arresting Gear for the Ford class aircraft carrier program.  Partially offsetting these increases was a decrease in production on certain aircraft carrier programs, particularly the CVN-78 and the Electromagnetic Aircraft Launching System (“EMALS”) programs. Foreign currency translation added more than $1 million to current period sales.
 
 
 
Page 24 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

 
Operating income
 
Operating income increased $2 million, or 10 basis points, compared to the same period in 2010, primarily due to favorable absorption of overhead costs in the general industrial and naval defense markets and benefits generated by our cost reduction and restructuring programs.  These increases were partially offset by under-absorption of overhead costs in our oil and gas market, primarily the result of delays in new oil and gas capital projects with international customers.   The second quarter of 2011 also included unanticipated costs for investments on the AP1000 program in our power generation market that were comparable to the prior year period.  A description of the investments and risks associated with this project is described in Footnote 14 Contingencies and Commitments. Our acquisition of Douglas and the effects of foreign currency rate changes had a minimal impact on the current period operating income.
 
New orders
 
New orders increased $94 million from the prior year quarter primarily due to higher orders in the power generation market that support existing nuclear operating reactors and increased demand in the oil and gas market for MRO projects and super vessels.  Our acquisition of Douglas contributed $20 million to new orders for the current period.
 
Six months ended June 30, 2011 compared with six months ended June 30, 2010
 
Sales
 
Sales increased $13 million, or 3%, in the first six months of 2011, compared with the same period of 2010, largely due to an increase of 6% in the defense market.  The higher defense sales were driven by increases in the naval defense market due to increased production on the Virginia class submarine.  This increase was partially offset by a decrease in production on certain aircraft carrier programs, particularly the CVN-78 and EMALS programs.  Sales in our commercial markets increased 1% due to higher demand in our general industrial market for our industrial control products as well as increased sales in our power generation market due to increased demand on domestic operating reactors.  These increases were partially offset by delays in new oil and gas international capital projects. Our acquisition of Douglas and the effects of foreign currency rate changes contributed $6 million and $2 million, respectively, to current period results.
 
Operating income
 
Operating income increased $4 million, or 50 basis points, compared to the same period in 2010,  primarily due to favorable absorption of overhead costs due to higher sales volumes in the general industrial market, benefits generated by our cost reduction and restructuring programs, and lower compensation costs. These increases were partially offset by higher than anticipated costs on several long-term contracts and under-absorption of fixed overhead costs due to delays in new oil and gas international capital projects.  Our Douglas acquisition and the effects of foreign currency translation had a minimal impact on current period operating income.
 
New orders
 
The increase in new orders of $50 million, as compared to the prior year period, is primarily due to higher orders in the power generation market that support existing nuclear operating reactors and increased demand in the oil and gas market for MRO projects and super vessels.   Our acquisition of Douglas contributed $20 million to new orders for the period.
 
 
 
Page 25 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued


Motion Control
 

 
(In thousands)
 
 
Three Months Ended
 
Six Months Ended
 
 
   
June 30,
   
June 30,
 
 
 
2011
   
2010
   
% change
   
2011
   
2010
   
% change
 
Sales
  $ 176,512     $ 155,624       13.4 %   $ 336,292     $ 302,997       11.0 %
Operating income
    18,804       18,343       2.5 %     35,090       32,296       8.7 %
Operating margin
    10.7 %     11.8 %  
-110 bps
      10.4 %     10.7 %  
-30 bps
 
New orders
  $ 143,688     $ 155,693       (7.7 %)   $ 316,695     $ 307,585       3.0 %


 
Three months ended June 30, 2011 compared with three months ended June 30, 2010
 
Sales
 
Sales increased $21 million, or 13%, from the comparable prior year period, driven by increases of 15% and 13%, in the commercial and defense markets, respectively.  Acquisitions made within the last twelve months and the effects of foreign currency rate changes contributed $5 million and $4 million, respectively, to current period sales.
 
The growth in the commercial market was primarily due to increased sales of our flight controls products on the Boeing 747, 777, and 787 aircraft.  In addition, higher demand for our sensors products contributed to increased sales in the general industrial market. The increase in sales in the defense market was primarily due to increases in the aerospace and ground defense markets. The aerospace defense market was driven by higher sales on the V-22 Osprey program as well as our embedded computing and sensing products on various helicopter programs, including the Blackhawk. The increase in ground defense was mainly due to sales of turret drive systems to international customers and various electronic systems used in ground defense applications.  This performance was partially offset by expected decreases related to the previous cancellations of the F-22 and Future Combat Systems (“FCS”) programs, as well as lower sales on the Bradley platform.
 
Operating income
 
Operating income increased $1 million, or 3%, compared to the same period in 2010.  Operating margin decreased 110 basis points from the prior year period to 10.7%, primarily due to unfavorable foreign currency translation of $2 million, which reduced operating margin by 120 basis points.  Excluding the impact of unfavorable foreign currency translation and our recently completed acquisitions, operating margin improved by 60 basis points over the prior year quarter, mainly due to higher sales volumes resulting in favorable absorption of fixed overhead costs, as well as the continual benefits generated by our cost reduction and containment efforts.
 
New orders
 
New orders decreased $12 million from the prior year quarter primarily due to the timing of orders on our sensors and controls and embedded computing products. Acquisitions contributed $5 million of incremental new orders to the current period.
 
Six months ended June 30, 2011 compared with six months ended June 30, 2010
 
Sales
 
Sales increased $33 million, or 11%, from the comparable prior year period, driven by increases in the commercial and defense markets, most notably due to higher sales in the commercial aerospace as well aerospace defense and naval defense markets.  Acquisitions made within the last twelve months contributed $13 million to the increase in sales, while the effect of foreign currency translation increased sales by $5 million.
 
 
 
Page 26 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

 
The growth in sales in the commercial aerospace market was primarily due to increases of our flight control products on Boeing 747 and 787 aircraft, as well as increased demand for sensors and controls and embedded computing products on various commercial aircraft. In addition, the incremental results of our acquisition of Hybricon contributed to increased sales in the general industrial market.
 
The higher sales in the aerospace defense market was driven by increased demand for our embedded computing and sensing products on various helicopter programs, most notably the Blackhawk.  In addition, we realized solid growth on the V-22 Osprey program.  These increases were partially offset by the previous cancellation of the F-22 program. The ground defense market was up slightly due to increases on turret drive systems and the incremental results of our Hybricon acquisition, offset by expected decreases related to the previous cancellations of the FCS program and lower sales on the Bradley platform.
 
Operating income
 
Operating income increased $3 million, or 9%, as compared to the same period in 2010.  Operating margin decreased 30 basis points from the prior year period to 10.4%, primarily due to unfavorable foreign currency translation of $3 million and lower margins from our recently completed acquisitions.  Excluding the impact of acquisitions and the negative impact of foreign currency translation, operating margin improved by 150 basis points over the prior year period, mainly due to higher volume resulting in favorable absorption of fixed overhead costs as well as the continual benefits generated by our cost reduction and containment efforts.
 
New orders
 
New orders increased by $9 million, as compared to the prior year period, primarily due to incremental orders from acquisitions of $15 million, offset by the timing of new orders on our embedded computing products.
 

Metal Treatment
 

 
(In thousands)
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2011
   
2010
   
% change
   
2011
   
2010
   
% change
 
Sales
  $ 71,785     $ 54,686       31.3 %   $ 134,715     $ 108,357       24.3 %
Operating income
    10,407       6,457       61.2 %     20,464       12,497       63.8 %
Operating margin
    14.5 %     11.8 %  
270 bps
      15.2 %     11.5 %  
370 bps
 
New orders
  $ 71,995     $ 54,650       31.7 %   $ 135,564     $ 108,782       24.6 %

Three months ended June 30, 2011 compared with three months ended June 30, 2010
 
Sales
 
Sales increased $17 million, or 31%, from the comparable prior year period, primarily due to increased demand across all of our major lines of business and markets, particularly for our shot peening and coatings services to commercial markets. The performance was led by growth within the commercial aerospace and general industrial markets, which grew 32% and 23%, respectively. Our acquisition of BASF and the effects of foreign currency translation contributed $7 million and $2 million, respectively, to current period sales.
 
 
 
Page 27 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

 
Operating income
 
Operating income increased $4 million, or 61%, compared to the same period in 2010, and was favorably impacted by approximately $1 million from our BASF acquisition and the effects of foreign currency translation.  Excluding these items, operating margin increased to 14.8%, a 300 basis point improvement over the prior year. The improvement was primarily driven by increased sales volume resulting in favorable absorption of fixed overhead costs, mainly in our shot peening and coatings businesses.
 
New orders
 
The increase in new orders of $17 million from the prior year quarter is primarily due to increased orders for domestic and international shot peening services. The acquisition of BASF contributed $7 million of new orders to the current quarter.
 
Six months ended June 30, 2011 compared with six months ended June 30, 2010
 
Sales
 
Sales increased $26 million, or 24%, from the comparable prior year period, due to increased demand across all of our major lines of business and markets, particularly for our shot peening and coatings services to commercial markets. Sales in the commercial aerospace and general industrial market were up 24% and 22%, respectively. Our BASF acquisition and the effects of foreign currency translation contributed $7 million and $3 million, respectively, to current period sales.
 
Operating income
 
Operating income increased $8 million, or 64%, compared to the same period in 2010 and was favorably impacted by approximately $1 million from our BASF acquisition and the effects of foreign currency translation. Excluding these items, operating margin increased to 15.3%, a 380 basis point improvement over the prior year. The improvement was primarily driven by increased sales volume resulting in favorable absorption of fixed overhead costs, mainly in our shot peening and coatings businesses.
 
New orders
 
The increase in new orders of $27 million as compared to the prior year period is due to increased orders for domestic and international shot peening services. The acquisition of BASF contributed $7 million of new orders to the period.
 

LIQUIDITY AND CAPITAL RESOURCES
 
Sources and Use of Cash
 
We derive the majority of our operating cash inflow from receipts on the sale of goods and services and cash outflow for the procurement of materials and labor; cash flow is therefore subject to market fluctuations and conditions. A substantial portion of our business is in the defense sector, which is characterized by long-term contracts.  Most of our long-term contracts allow for several billing points (progress or milestone) that provide us with cash receipts as costs are incurred throughout the project rather than upon contract completion, thereby reducing working capital requirements.  In some cases, these payments can exceed the costs incurred on a project.
 

Operating Activities
 
 
   
 
 
 
 
June 30, 2011
   
December 31, 2010
 
Working Capital
  $ 565,797     $ 472,088  
Ratio of Current Assets to Current Liabilities
 
2.4 to 1
   
2.1 to 1
 
Cash and Cash Equivalents
  $ 63,088     $ 68,119  
Days Sales Outstanding
 
49 days
   
49 days
 
Inventory Turns
    4.2       4.5  

 
 
Page 28 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
MANAGEMENT’S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS, continued

 
Excluding cash, working capital increased $99 million from December 31, 2010.  Working capital changes were affected by an increase in accounts receivable of $40 million due to strong year end collections, as well as an increase in inventory of $52 million due to a build up for future sales, stocking of new programs, and the purchase of long-lead time materials.  In addition, we experienced a decrease in accrued expenses of $15 million primarily due to the payment of annual compensation plans.  During the first six months of 2011, we contributed $22 million to the Curtiss-Wright Pension Plan, and expect to make additional contributions of $13 million during the remainder of 2011.
 
Investing Activities
 
Capital expenditures were $38 million in the first six months of 2011, an increase of $15 million from the prior year period, largely driven by our facility expansions within our oil and gas and flight systems businesses.  We expect to make additional capital expenditures of $30 to $40 million during the remainder of 2011.
 
Financing Activities
 
During the first six months of 2011, we used $65 million in available credit,  under the 2007 Senior Unsecured Revolving Credit Agreement (“Credit Agreement”), to fund operating and investing activities.  The cumulative total credit used is $175 million as of June 30, 2011.  The unused credit available under the Credit Agreement at June 30, 2011 was $183 million. The loans outstanding under the 2003 and 2005 Senior Notes, Credit Agreement, and Industrial Revenue Bonds had fixed and variable interest rates averaging 3.4% during the second quarter of 2011 and 3.6% for the first six months of 2011.
 
The Corporation continually monitors the credit markets, as the Credit Agreement expires in August 2012. While all companies are subject to economic risk, we believe that our cash and cash equivalents, cash flow from operations, and available borrowings are sufficient to meet both the short-term and long-term capital needs of the organization.
 

CRITICAL ACCOUNTING POLICIES
 
Our condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by the application of our accounting policies. Critical accounting policies are those that require application of management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2010 Annual Report on Form 10-K, as amended, filed with the U.S. Securities and Exchange Commission on February 25, 2011, in the Notes to the Consolidated Financial Statements, Note 1, and the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 

 
Page 29 of 33

 

CURTISS WRIGHT CORPORATION and SUBSIDIARIES
 

Item 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
There have been no material changes in our market risk during the six months ended June 30, 2011.  Information regarding market risk and market risk management policies is more fully described in item “7A.Quantitative and Qualitative Disclosures about Market Risk” of our 2010 Annual Report on Form 10-K, as amended.
 

Item 4.                      CONTROLS AND PROCEDURES
 
As of June 30, 2011, our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of June 30, 2011 insofar as they are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and they include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 

 
Page 30 of 33

 

CURTISS WRIGHT CORPORATION and SUBSIDIARIES
 

PART II- OTHER INFORMATION
 
Item 1.                      LEGAL PROCEEDINGS
 
In the ordinary course of business, we and our subsidiaries are subject to various pending claims, lawsuits, and contingent liabilities. We do not believe that the disposition of any of these matters, individually or in the aggregate, will have a material adverse effect on our consolidated financial position or results of operations.
 
We or our subsidiaries have been named in a number of lawsuits that allege injury from exposure to asbestos.  To date, neither us nor our subsidiaries have been found liable for or paid any material sum of money in settlement in any case.  We believe that the minimal use of asbestos in our past and current operations and the relatively non-friable condition of asbestos in our products makes it unlikely that we will face material liability in any asbestos litigation, whether individually or in the aggregate.  We do maintain insurance coverage for these potential liabilities and we believe adequate coverage exists to cover any unanticipated asbestos liability.
 

Item 1A.           RISK FACTORS
 
There has been no material changes in our Risk Factors during the six months ended June 30, 2011.  Information regarding our Risk Factors is more fully described in Item “1A. Risk Factors” of our 2010 Annual Report on Form 10-K, as amended.
 

Item 5.                      OTHER INFORMATION
 
There have been no material changes in our procedures by which our security holders may recommend nominees to our board of directors during the six months ended June 30, 2011.  Information regarding security holder recommendations and nominations for directors is more fully described in the section  entitled “Stockholder Recommendations and Nominations for Director” of our 2011 Proxy Statement on Schedule 14A, which is incorporated by reference to our 2010 Annual Report on Form 10-K, as amended.
 

 
Page 31 of 33

 

CURTISS WRIGHT CORPORATION and SUBSIDIARIES
 

Item 6.                      EXHIBITS

     
Incorporated by Reference
Filed
Exhibit No.
 
Exhibit Description
Form
Filing Date
Herewith
           
3.1
 
Amended and Restated Certificate of Incorporation of the Registrant
8-A/A
May 24, 2005
 
           
3.2
 
Amended and Restated Bylaws of the Registrant
8-K
May 13, 2011
 
           
31.1
 
Certification of Martin R. Benante, Chairman and CEO, Pursuant to Rules 13a – 14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended
   
X
           
31.2
 
Certification of Glenn E. Tynan, Chief Financial Officer, Pursuant to Rules 13a – 14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended
   
X
           
32
 
Certification of Martin R. Benante, Chairman and CEO, and Glenn E. Tynan, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350
   
X
           
101.INS
 
XBRL Instance Document (1)
     
           
101.SCH
 
XBRL Taxonomy Extension Schema Document (1)
     
           
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document (1)
     
           
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document (1)
     
           
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document (1)
     
           
 
(1) In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document.

 
Page 32 of 33

 

CURTISS WRIGHT CORPORATION and SUBSIDIARIES
 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

                      CURTISS-WRIGHT CORPORATION
                                                  (Registrant)

                      By:_/s/ Glenn E. Tynan___________
                               Glenn E. Tynan
                                   Vice President Finance / C.F.O.
                                   Dated:  August 5, 2011
 

 


 
Page 33 of 33