q1_09q.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 March 31, 2009

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)

4 Becker Farm Road, Roseland, New Jersey 07068
(Former name, former address and former fiscal year, if changed since last report)

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  o                        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 xAccelerated 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


 
Page 1 of 33

 


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: 45,224,414 shares (as of April 30, 2009).

 
Page 2 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

TABLE of CONTENTS




     
PAGE
       
PART I – FINANCIAL INFORMATION
 
       
       
Item 1.
Unaudited Financial Statements:
 
       
   
Condensed Consolidated Statements of Earnings
4
       
   
Condensed Consolidated Balance Sheets
5
       
   
Condensed Consolidated Statements of Cash Flows
6
       
   
Condensed Consolidated Statements of Stockholders’ Equity
7
       
   
Notes to Condensed Consolidated Financial Statements
8-21
       
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22-29
       
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
30
       
Item 4.
Controls and Procedures
30
       
       
       
PART II – OTHER INFORMATION
 
       
       
Item 1.
Legal Proceedings
31
       
Item 1A.
Risk Factors
31
       
Item 5.
Other Information
31
       
Item 6.
Exhibits
32
       
Signatures
 
33

 
Page 3 of 33

 


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

 
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 
(UNAUDITED)
 
(In thousands except per share data)
 
             
   
Three Months Ended
 
   
March 31,
 
             
   
2009
   
2008
 
             
Net sales
  $ 423,792     $ 433,379  
Cost of sales
    288,032       294,910  
Gross profit
    135,760       138,469  
                 
Research and development costs
    13,124       12,836  
Selling expenses
    25,863       25,340  
General and administrative expenses
    65,630       59,566  
Operating income
    31,143       40,727  
                 
Other income, net
    301       474  
Interest expense
    (6,940 )     (7,583 )
                 
Earnings before income taxes
    24,504       33,618  
Provision for income taxes
    8,699       11,839  
                 
Net earnings
  $ 15,805     $ 21,779  
                 
Basic earnings per share
  $ 0.35     $ 0.49  
Diluted earnings per share
  $ 0.35     $ 0.48  
                 
Dividends per share
  $ 0.08     $ 0.08  
                 
Weighted average shares outstanding:
               
   Basic
    44,994       44,584  
   Diluted
    45,466       45,226  
                 



See notes to condensed consolidated financial statements

 
Page 4 of 33

 


 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(UNAUDITED)
 
(In thousands)
 
   
March 31,
   
December 31,
 
   
2009
   
2008
 
Assets
           
Current Assets:
           
Cash and cash equivalents
  $ 64,405     $ 60,705  
Receivables, net
    383,757       395,659  
Inventories, net
    300,579       281,508  
Deferred tax assets, net
    37,303       37,314  
Other current assets
    25,548       26,833  
Total current assets
    811,592       802,019  
Property, plant, and equipment, net
    374,258       364,032  
Goodwill
    620,779       608,898  
Other intangible assets, net
    239,891       234,596  
Deferred tax assets, net
    21,285       23,128  
Other assets
    10,097       9,357  
Total Assets
  $ 2,077,902     $ 2,042,030  
                 
Liabilities
               
Current Liabilities:
               
Short-term debt
  $ 3,197     $ 3,249  
Accounts payable
    111,657       140,954  
Dividends payable
    3,624       -  
Accrued expenses
    77,918       103,973  
Income taxes payable
    4,265       8,213  
Deferred revenue
    130,425       138,753  
Other current liabilities
    54,209       56,542  
Total current liabilities
    385,295       451,684  
Long-term debt
    609,455       513,460  
Deferred tax liabilities, net
    24,839       26,850  
Accrued pension and other postretirement benefit costs
    128,573       125,762  
Long-term portion of environmental reserves
    20,193       20,377  
Other liabilities
    35,892       37,135  
Total Liabilities
    1,204,247       1,175,268  
   Contingencies and Commitments (Note 14)
               
                 
Stockholders' Equity
               
Common stock, $1 par value
    48,042       47,903  
Additional paid-in capital
    101,301       94,500  
Retained earnings
    912,109       899,928  
Accumulated other comprehensive income
    (85,350 )     (72,551 )
      976,102       969,780  
Less:  Cost of treasury stock
    (102,447 )     (103,018 )
Total Stockholders' Equity
    873,655       866,762  
Total Liabilities and Stockholders' Equity
  $ 2,077,902     $ 2,042,030  
                 

See notes to condensed consolidated financial statements

 
Page 5 of 33

 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
   
Three Months Ended
March 31,
 
   
2009
   
2008
 
Cash flows from operating activities:
           
      Net earnings
  $ 15,805     $ 21,779  
Adjustments to reconcile net earnings to net cash
used for operating activities:
               
Depreciation and amortization
    19,033       18,747  
Net loss on sale of assets
    157        
Gain on bargain purchase
    (2,091 )      
Deferred income taxes
    912       (405 )
Share based compensation
    3,545       2,791  
Change in operating assets and liabilities, net of businesses acquired:
               
Decrease in receivables
    14,086       10,812  
Increase in inventories
    (10,266 )     (24,767 )
(Decrease) increase in progress payments
    (4,130 )     4,281  
Decrease in accounts payable and accrued expenses
    (57,281 )     (41,932 )
Decrease in deferred revenue
    (8,875 )     (10,554 )
Decrease in income taxes payable
    (1,925 )     (3,392 )
Decrease in net pension and postretirement assets
    2,903       3,047  
Decrease in other current and long-term assets
    (422 )     3,438  
Decrease in other current and long-term liabilities
    (4,536 )     (2,397 )
Total adjustments
    (48,890 )     (40,331 )
Net cash used for operating activities
    (33,085 )     (18,552 )
Cash flows from investing activities:
               
Proceeds from sales and disposals of equipment
    82       292  
Acquisitions of intangible assets
    (136 )     (121 )
Additions to property, plant, and equipment
    (16,632 )     (23,544 )
Acquisition of new businesses
    (45,540 )     (449 )
Net cash used for investing activities
    (62,226 )     (23,822 )
Cash flows from financing activities:
               
Borrowings on debt
    291,000       125,500  
Principal payments on debt
    (195,016 )     (89,000 )
Proceeds from exercise of stock options
    3,943       3,715  
Excess tax benefits from share based compensation
    22       128  
Net cash provided by financing activities
    99,949       40,343  
Effect of exchange-rate changes on cash
    (938 )     243  
Net increase (decrease) in cash and cash equivalents
    3,700       (1,788 )
Cash and cash equivalents at beginning of period
    60,705       66,520  
Cash and cash equivalents at end of period
  $ 64,405     $ 64,732  
                 
Supplemental disclosure of investing activities:
 
               
Fair value of assets acquired in current year acquisitions
  $ 50,913     $ 3,059  
Additional consideration paid (received) on prior year acquisitions
    540       (1,851 )
Liabilities assumed from current year acquisitions
    (3,822 )     (759 )
Gain on bargain purchase
    (2,091 )      
Acquisition of new businesses, net of gain
  $ 45,540     $ 449  

See notes to condensed consolidated financial statements

 
Page 6 of 33

 


CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands)
                               
   
 
 
Common
Stock
   
Additional
Paid in
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income
   
Treasury
Stock
 
                               
December 31, 2007
  $ 47,715     $ 79,550     $ 807,413     $ 93,327     $ (113,220 )
Net earnings
                109,390                
Pension and postretirement  adjustment, net
                      (87,313 )      
Foreign currency translation adjustments, net
                      (78,743 )      
Adjustment for SFAS No. 158 measurement date change, net
                (2,494 )     178        
Dividends paid
                (14,381 )            
Stock options exercised, net
    188       6,050                   5,439  
Share-based compensation
          9,278                   4,385  
Other
          (378 )                 378  
December 31, 2008
    47,903       94,500       899,928       (72,551 )     (103,018 )
Net earnings
                15,805                
Pension and postretirement  adjustment, net
                      177        
Foreign currency translation adjustments, net
                      (12,976 )      
Dividends declared
                (3,624 )            
Stock options exercised, net
    139       3,661                   166  
Share based compensation
          3,341                   204  
Other
          (201 )                 201  
March 31, 2009
  $ 48,042     $ 101,301     $ 912,109     $ (85,350 )   $ (102,447 )


See notes to condensed consolidated financial statements

 
Page 7 of 33

 
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 65 manufacturing facilities and 65 metal treatment service facilities.

The unaudited condensed consolidated financial statements include the accounts of Curtiss-Wright Corporation and its majority-owned subsidiaries.  All significant intercompany 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, estimate 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 2008 Annual Report on Form 10-K.  The results of operations for interim periods are not necessarily indicative of trends or of the operating results for a full year.  In addition, the financial statements have been adjusted for the transfer of our Indal Technologies business unit from the Motion Control segment to the Flow Control segment, accordingly all segment data has been modified.
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
ADOPTION OF NEW STANDARDS
 
Effective January 1, 2008, the Corporation adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In accordance with Financial Accounting Standards Board Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, the Corporation adopted fair value accounting for all non-financial assets and non-financial liabilities as of January 1, 2009.  SFAS No. 157 enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. SFAS No. 157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
 
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.

 
Page 8 of 33

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



Effective January 1, 2009, the Corporation adopted Statement of Financial Accounting Standards No. 141(Revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) changed the accounting treatment for certain specific items, including, but not limited to: acquisition costs are generally expensed as incurred; non-controlling interests are valued at fair value at the acquisition date; acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies; in-process research and development are recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination are generally expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. SFAS No. 141(R) also includes several new disclosure requirements. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date was on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, as well as recognizing adjustments to uncertain tax positions through earnings on all acquisitions regardless of the acquisition date. The impact of the adoption of this statement resulted in the gain on a bargain purchase for the acquisition of Nu-Torque of $2.1 million.  See Note 2 for additional information.
 
Effective January 1, 2009, the Corporation adopted SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an amendment to ARB No. 51 (“SFAS No. 160”).  SFAS No. 160 amends the accounting and reporting for non-controlling interests in a consolidated subsidiary and the deconsolidation of a subsidiary.  Included in this statement is the requirement that non-controlling interests be reported in the equity section of the balance sheet.  SFAS No. 160 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008.  The adoption of this statement did not have a material impact on the Corporation’s results of operations or financial condition.
 
Effective January 1, 2009, the Corporation adopted SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS No. 161”).  SFAS No. 161 requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.  SFAS 161 is effective for financial statements issued after November 15, 2008.  The adoption of this statement required the Corporation to provide additional disclosures, see Note 7.
 
Effective January 1, 2009, the Corporation adopted FASB Staff Position (“FSP”) 142-3, Determination of the Useful Life of the Intangible Assets (“FSP 142-3”).  FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, Goodwill and Other Intangible Assets.  This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions.  FSP 142-3 was effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008.  The adoption of this statement did not have a material impact on the Corporation’s results of operations or financial condition.
 
In April 2009, FASB issued FSP 141(R)-1 (“FSP 141(R)-1”), Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP 141(R)-1 will amend the provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies

 
Page 9 of 33

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



in a business combination under SFAS No. 141(R). FSP 141(R)-1 will carry forward the requirements in SFAS No. 141(R), Business Combinations, for acquired contingencies, thereby requiring that such contingencies be recognized at fair value on the acquisition date if fair value can be reasonably estimated during the allocation period. Otherwise, entities would typically account for the acquired contingencies in accordance with SFAS No. 5, Accounting for Contingencies. FSP 141(R)-1 will have the same effective date as SFAS No. 141(R), and therefore is effective prospectively to business combinations for which the acquisition date was on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of this statement did not have a material impact on the Corporation’s results of operations or financial condition.
 
STANDARDS ISSUED BUT NOT YET EFFECTIVE
 
In December 2008, the FASB issued FSP 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (“FSP 132(R)-1”), amending FASB Statement No. 132(R), Employers’ Disclosures about Pensions and Other Postretirement Benefits, effective for fiscal years ending after December 15, 2009.  FSP 132(R)-1 requires an employer to disclose investment policies and strategies, categories, fair value measurements, and significant concentration risk among its postretirement benefit plan assets.  The adoption of this statement will have an impact on the Corporation’s disclosure requirements and the Corporation is currently evaluating the impact of these disclosures on the financial statements.
 
 
In April 2009, FASB issued FSP 107-1 and APB 28-1 (“FSP 107 and APB 280-1”) Interim Disclosures about Fair Value of Financial Instruments. FSP 107-1 and APB 28-1 enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP  107-1 and APB 28-1 relates to fair value disclosures for any financial instruments that are not currently reflected on a company's balance sheet at fair value. Prior to the effective date of this FSP 107-1 and APB 28-1, fair values for these assets and liabilities have only been disclosed once a year.  FSP 107-1 and APB 28-1 will now require these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The disclosure requirement under this FSP is effective for our interim reporting period ending after June 15, 2009.  The adoption of this statement will have an impact on the Corporation’s disclosure requirements and the Corporation is currently evaluating the impact of these disclosures on the financial statements.
 
2.           ACQUISITIONS

The Corporation acquired two businesses during the three months ended March 31, 2009, as described in more detail below.  The acquisitions have been accounted for as a purchase under the guidance of SFAS No. 141(R), 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.  One of the acquisitions resulted in an excess of the fair value of assets acquired over the purchase price and was accounted for as a gain in the income statement under the revised accounting standard. The Corporation has allocated the purchase price, including the value of identifiable intangibles with a finite life supported by third party appraisals. Purchase price allocations 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.
 

 
Page 10 of 33

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




Flow Control Segment

Nu-Torque

On January 16, 2009, the Corporation acquired certain assets of the Nu-Torque division (“Nu-Torque”) of Tyco Valves & Controls LP.  The purchase price of the acquisition, subject to customary adjustments as provided for in the Asset Purchase Agreement (“APA”), was $5.0 million in cash paid at closing, and the assumption of certain liabilities of Nu-Torque.  Management funded the purchase from the Corporation’s revolving credit facility.

The acquisition has been accounted for as a bargain purchase under SFAS No. 141(R).  The purchase price of the acquisition has been preliminarily allocated to the net tangible and intangible assets acquired, with the excess of the fair value of assets acquired over the purchase price recorded as a gain.

The Corporation has estimated that $0.8 million of the acquired intangible assets will be tax deductible.



(In  thousands)
     
Accounts receivable
  $ 848  
Inventory
    4,179  
Property, plant, and equipment
    161  
Other current assets
    47  
Intangible assets
    2,900  
Current and non-current liabilities
    (1,044 )
Net tangible and intangible assets
    7,091  
Purchase price
    5,000  
Gain on Bargain Purchase
  $ 2,091  


Nu-Torque is a designer and manufacturer of electric and hydraulic valve actuation and control devices primarily for Navy ships.  Nu-Torque is located in Redmond, Washington and has 37 employees.  Revenues of the acquired business were $7.9 million for the fiscal year ended September 30, 2008.


EST Group, Inc.

On March 5, 2009, the Corporation acquired all the issued and outstanding stock of EST Group, Inc. (“EST”), and certain assets and liabilities from Township Line Realty, L.P. (“TLR”) for $40 million in cash.  Under the terms of the Purchase Agreement, the Corporation deposited $4.2 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 fifty percent (50%) of the escrow will be released after twelve months subject to amounts held back for pending claims.  In addition, a separate escrow of $0.9 million was established to indemnify the Corporation for a pending product warranty claim outstanding at the time of acquisition.  This holdback will be released to either the Corporation or seller upon resolution of the warranty claim.  Management funded the purchase from the Corporation’s revolving credit facility.

 
Page 11 of 33

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



The purchase price of the acquisition has been preliminarily 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
  $ 3,369  
Inventory
    4,277  
Property, plant, and equipment
    7,647  
Other current assets
    1,168  
Intangible assets
    10,600  
Other assets
    227  
Current and non-current liabilities
    (2,778 )
Net tangible and intangible assets
    24,510  
Purchase price
    40,000  
Goodwill
  $ 15,490  

The Corporation has estimated that the goodwill will be tax deductible and the Corporation will adjust these estimates based upon final analysis including input from third party appraisals.

EST provides highly engineered products and comprehensive repair services for heat management and cooling systems utilized in the energy and defense markets.  EST has 99 employees and is headquartered in Hatfield, PA with additional locations in Baytown, TX, Baton Rouge, LA, and a sales office in the Netherlands.  Revenues of the acquired business were $19.6 million for the fiscal year ended September 30, 2008.

3.           RECEIVABLES

Receivables at March 31, 2009 and December 31, 2008 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)
 
   
March 31, 2009
   
December 31, 2008
 
Billed Receivables:
           
Trade and other receivables
  $ 266,550     $ 286,123  
Less: Allowance for doubtful accounts
    (4,716 )     (4,824 )
Net billed receivables
    261,834       281,299  
Unbilled Receivables:
               
Recoverable costs and estimated earnings not billed
    141,166       135,511  
Less: Progress payments applied
    (19,243 )     (21,151 )
Net unbilled receivables
    121,923       114,360  
Receivables, net
  $ 383,757     $ 395,659  


 
Page 12 of 33

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



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)
 
   
March 31, 2009
   
December 31, 2008
 
Raw material
  $ 140,862     $ 126,799  
Work-in-process
    69,727       63,195  
Finished goods and component parts
    79,475       82,652  
Inventoried costs related to U.S. Government and other long-term contracts
    60,132       60,721  
Gross inventories
    350,196       333,367  
Less: Inventory reserves
    (34,263 )     (34,283 )
 Progress payments applied, principally related to long-term contracts
    (15,354 )     (17,576 )
Inventories, net
  $ 300,579     $ 281,508  


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 three months ended March 31, 2009 are as follows:

   
(In thousands)
 
   
Flow
Control
   
Motion
Control
   
Metal
Treatment
   
Consolidated
 
December 31, 2008
  $ 285,593     $ 294,835     $ 28,470     $ 608,898  
Goodwill from 2009 acquisitions
    15,490                   15,490  
Change in estimate to fair value of net assets acquired in prior year
          1,200             1,200  
Additional consideration of prior years’ acquisitions
          538       3       541  
Currency translation adjustment
    (1,732 )     (3,508 )     (110 )     (5,350 )
March 31, 2009
  $ 299,351     $ 293,065     $ 28,363     $ 620,779  

The purchase price allocations relating to the businesses acquired during 2009 and 2008 are based on estimates and have not yet been finalized. The Corporation will adjust these estimates based upon final analysis including input from third party appraisals, when deemed appropriate, and the determination of fair value when finalized, no later than twelve months from acquisition.


 
Page 13 of 33

 
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)                                                        
   
March 31, 2009
 
Gross
   
Accumulated Amortization
   
Net
Technology
  $ 124,611     $ (36,013 )   $ 88,598  
Customer related intangibles
    162,731       (42,308 )     120,423  
Other intangible assets
    37,673       (6,803 )     30,870  
Total
  $ 325,015     $ (85,124 )   $ 239,891  

   
(In thousands)
 
December 31, 2008
 
Gross
   
Accumulated Amortization
   
Net
 
Technology
  $ 121,948     $ (33,867 )   $ 88,081  
Customer related intangibles
    153,113       (38,440 )     114,673  
Other intangible assets
    37,965       (6,123 )     31,842  
Total
  $ 313,026     $ (78,430 )   $ 234,596  

The following table presents the changes in the net balance of intangibles assets during the three months ended March 31, 2009.

 
(In thousands)
 
Technology, net
   
Customer Related Intangibles, net
 
 
   
Other
Intangible
Assets, net
   
Total
 
 
 
December 31, 2008
  $ 88,081     $ 114,673       $ 31,842     $ 234,596  
Acquired during 2009
    3,400       9,200         900       13,500  
Amortization expense
    (2,232 )     (3,949 )       (696 )     (6,877 )
Change in estimate to fair value of net assets acquired in prior year
    (164 )     1,309         (1,240 )     (95 )
Net currency translation adjustment
    (487 )     (810 )       64       (1,233 )
March 31, 2009
  $ 88,598     $ 120,423       $ 30,870     $ 239,891  

The purchase price allocations relating to the businesses acquired during 2009 and 2008 are based on estimates and have not yet been finalized. The Corporation will adjust these estimates based upon final analysis, including input from third party appraisals, when deemed appropriate, and the determination of fair value when finalized, no later than twelve months from acquisition.


 
Page 14 of 33

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



7.           DERIVATIVE 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.  Statement of Financial Accounting Standards No.133, Accounting for Derivative Instruments and Hedging Activities, (“SFAS No. 133”), requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets based upon quoted market prices for comparable instruments.  In accordance with SFAS No. 133, 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.

As of March 31, 2009, the Corporation has valued its derivative instruments in accordance with SFAS No. 157.  The fair value of these instruments is $(0.1) million at March 31, 2009. 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 our foreign exchange derivative forwards are valued at a Level 2.  See tables below for information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Earnings.
 
 
Fair Values of Derivative Instruments
 
 
(In thousands)
 
   
Asset Derivatives
     Liability Derivatives  
   
March 31, 2009
     March 31, 2009  
 
Balance Sheet Location
   
Fair Value
 
Balance Sheet Location
   
Fair Value
 
Foreign exchange contracts:
         
Transactional
Other Current Liabilities
  $ 370  
Other Current Liabilities
  $ 422  
Forecasted
Other Current Liabilities
    10  
Other Current Liabilities
    13  
Total
    $ 380        $
 435
 
             
Derivatives Not Designated as Hedging Instruments under SFAS 133
 
Location of Loss Recognized in Income on Derivative
   
Amount of Loss Recognized in Income on Derivative
 
 
         
Three Months Ended March 31, 2009
 
 
Foreign exchange contracts:
           
Transactional
 
General and administrative Expenses
   $ 1,801   
Forecasted
 
General and administrative Expenses
    397   
Total
       $ 2,198   

 
Page 15 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 on the Corporation’s Condensed Consolidated Balance Sheets.  The following table presents the changes in the Corporation’s warranty reserves:

   
(In thousands)
 
   
2009
   
2008
 
Warranty reserves at January 1,
  $ 10,775     $ 10,774  
Provision for current year sales
    1,749       1,533  
Current year claims
    (977 )     (707 )
Change in estimates to pre-existing warranties
    (775 )     (780 )
Increase due to acquisitions
    281       -  
Foreign currency translation adjustment
    (155 )     97  
Warranty reserves at March 31,
  $ 10,898     $ 10,917  
                 
9.           FACILITIES RELOCATION AND RESTRUCTURING

In connection with the acquisitions of VMETRO and Mechetronics in 2008, the Corporation established a restructuring accrual of $8.4 million in accordance with EITF No. 95-3 Recognition of Liabilities in Connection with a Purchase Business Combination.  These acquisitions are consolidated into the Motion Control segment.  The accrual was established as of December 31, 2008 for $7.1 million, while the remaining balance was recorded in the first quarter of 2009 for $1.3 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 March 31, 2009, the Corporation has not finalized its plans associated with the restructuring and has estimated the costs noted above.  These costs are subject to adjustment upon finalization of the plan, and will be accounted for as an adjustment to the purchase price of the acquisition.  The Corporation intends to complete the majority of these activities by the third quarter of 2009.

In the first quarter of 2009, the Corporation committed to a plan to consolidate existing operations through a reduction in force and consolidation of operating locations both domestically and internationally.  This plan will impact our Flow Control, Motion Control, and Metal Treatment segments.  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 for the current year.  The Corporation incurred business consolidation costs of $2.2 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 statement of earnings with the majority of the costs affecting the cost of sales, general and administrative expenses, and selling and research and development costs for $1.1 million, $0.8 million, and $0.3 million, respectively.  The liability is included in other current liabilities.  As of March 31, 2009, the Corporation has not finalized its plans associated with the restructuring and expects to complete the majority of these activities by December 31, 2009.

 
Page 16 of 33

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



A summary by segment of the components of facilities relocation and corporate restructuring charges for acquisitions and ongoing operations and an analysis of related activity in the accrual as of March 31, 2009 is as follows:
 
Severance and Benefits
     
Facility Closing Costs
   
Relocation Costs
     
Total
 
Flow Control
                 
December 31, 2008
  $     $     $     $  
Provisions
    774       29        
 
  803  
Payments
    (285 )                 (285  
Net currency translation adjustment
                       
March 31, 2009
  $ 489     $ 29     $     $ 518  
                                 
 Total expected and incurred to date  
$
774     
 529
     $ 870     
2,173
 
                                 
Motion Control
                               
December 31, 2008
  $ 3,616     $ 1,902     $ 628     $ 6,146  
Provisions
    2,145       369       50       2,564  
Payments
    (1,669 )     (230 )     (78 )     (1,977  
Net currency translation adjustment
    (177 )     (39 )           (216  
March 31, 2009
  $ 3,915     $ 2,002     $ 600     $ 6,517  
                                 
 Total expected and incurred to date   6,873     
2,436
    678     
9,987
 
                                 
Metal Treatment
                               
December 31, 2008
  $     $     $     $  
Provisions
    120                   120  
Payments
    (120 )                 (120  
Net currency translation adjustment
                       
March 31, 2009
  $     $     $     $  
                                 
 Total expected and incurred to date   120     
 
         
120
 
                                 
Total Curtiss-Wright
                               
December 31, 2008
  $ 3,616     $ 1,902     $ 628     $ 6,146  
Provisions
    3,039       398       50       3,487  
Payments
    (2,074 )     (230 )     (78 )     (2,382  
Net currency translation adjustment
    (177 )     (39 )           (216  
March 31, 2009
  $ 4,404     $ 2,031     $ 600     $ 7,035  
                                 
 Total expected and incurred to date   7,767     
2,965
    1,548     
12,280
 
                                 


 
Page 17 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 2008 Annual Report on Form 10-K.  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 months ended March 31, 2009 and 2008 were:

 
  (In thousands)
Three Months ended March 31,
       
2009
   
2008
 
 
Service cost
  $ 5,746     $ 5,744    
Interest cost
    5,518       5,332    
Expected return on plan assets
    (7,258 )     (7,558 )  
Amortization of:
                 
Prior service cost
    158       130    
Unrecognized actuarial loss
    128       149    
Net periodic benefit cost
  $ 4,292     $ 3,797    
Curtailment loss
    83       -    
Total periodic benefit cost
  $ 4,375     $ 3,797    
                   

During the three months ended March 31, 2009, the Corporation made no contributions to the Curtiss-Wright Pension Plan, and expects to make no contributions in 2009.  In addition, contributions of $0.9 million were made to the Corporation’s foreign benefit plans during the first quarter of 2009.  Contributions to the foreign plans are expected to be $3.7 million in 2009.

The curtailment charge indicated above represents an event accounted for under SFAS No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits (“SFAS No. 88”).  In response to softening demand in commercial aerospace, the Motion Control segment implemented a reduction in workforce at a subsidiary in Mexico to align staffing with anticipated volume.  Payments for the dismissal of employees are required under Federal Labor Law in Mexico and are accounted for as a defined benefit under SFAS No. 88.

Other Postretirement Benefit Plans
The components of the net postretirement benefit cost for the Curtiss-Wright and EMD postretirement benefit plans for the three months ended March 31, 2009 and 2008 were:

 
  (In thousands)
Three Months ended March 31,
       
2009
   
2008
   
Service cost
  $ 155     $ 169  
Interest cost
    418       452  
Amortization of unrecognized actuarial gain
    (191 )     (129 )
Net periodic postretirement benefit cost
  $ 382     $ 492  

During the three months ended March 31, 2009, the Corporation has paid $0.6 million to the postretirement plans.  During 2009, the Corporation anticipates contributing $1.9 million to the postretirement plans.

 
Page 18 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)
 
 
Three Months Ended
 
 
March 31,
 
   
2009
   
2008
 
Basic weighted average shares outstanding
    44,994       44,584  
Dilutive effect of stock options and deferred stock compensation
    472       642  
Diluted weighted average shares outstanding
    45,466       45,226  

As of MarAs of March 31, 2009 and 2008, there were 1,439,000 and 357,000 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.  In light of recent managerial changes, the Corporation has reviewed the current management structure and has determined that there are three reportable segments as follows: Flow Control, Motion Control, and Metal Treatment.

   
(In thousands)
Three Months Ended March 31, 2009
 
   
Flow Control
   
Motion Control
   
Metal Treatment
   
Segment Totals
   
Corporate & Other (1)
   
Consolidated Totals
 
Revenue from external customers
  $ 230,372     $ 140,709     $ 52,711     $ 423,792     $     $ 423,792  
Intersegment revenues
    22       1,582       373       1,977       (1,977 )      
Operating income
    13,331       14,266       6,614       34,211       (3,068 )     31,143  

   
(In thousands)
Three Months Ended March 31, 2008
 
   
Flow Control
   
Motion Control
   
Metal Treatment
   
Segment Totals
   
Corporate & Other (1)
   
Consolidated Totals
 
Revenue from external customers
  $ 220,319     $ 145,475     $ 67,585     $ 433,379     $     $ 433,379  
Intersegment revenues
    32       101       241       374       (374 )      
Operating income
    14,222       13,707       13,100       41,029       (302 )     40,727  

   
(In thousands)
Identifiable Assets
 
   
Flow Control
   
Motion Control
   
Metal Treatment
   
Segment Totals
   
Corporate & Other
   
Consolidated Totals
 
March 31, 2009
  $ 1,048,943     $ 758,221     $ 227,503     $ 2,034,667     $ 43,235     $ 2,077,902  
December 31, 2008
    979,097       778,331       235,413       1,992,841       49,189       2,042,030  
 
(1) Operating expense for Corporate and Other includes pension expense, environmental remediation and administrative expenses, legal, and other expenses.

 
Page 19 of 33

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



Adjustments to reconcile to earnings before income taxes:

      (In thousands)
   
Three months ended
   
March 31,
   
 2009
 
2008
Total segment operating income
  $ 34,211     $ 41,029  
Corporate and administrative
    (3,068 )     (302 )
Other income, net
    301       474  
Interest expense
    (6,940 )     (7,583 )
Earnings before income taxes
  $ 24,504     $ 33,618  

13.           COMPREHENSIVE INCOME

Total comprehensive income for the three months ended March 31, 2009 and 2008 are as follows:
 
(In thousands)
 
   
Three Months Ended
 
   
March 31,
 
   
2009
   
2008
 
Net earnings
  $ 15,805     $ 21,779  
Equity adjustment from foreign currency translations
    (12,976 )     789  
Defined benefit pension and post-retirement plans
    177       127  
Total comprehensive income
  $ 3,006     $ 22,695  

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.

14.           CONTINGENCIES AND COMMITMENTS

The Corporation’s environmental obligations have not changed significantly from December 31, 2008. The aggregate environmental obligation was $21.9 million at March 31, 2009 and $22.2 million at December 31, 2008. All environmental reserves exclude any potential recovery from insurance carriers or third-party legal actions.

The Corporation, through its Flow Control segment, has several Nuclear Regulatory Commission (“NRC”) licenses necessary for the continued operation of its commercial nuclear operations. In connection with these licenses, the NRC requires 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 cost to decommission the refurbishment facility, which is planned for 2017, is $4.3 million and is included in our environmental liabilities.

The Corporation enters into standby letters of credit agreements 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 March 31, 2009 and December 31, 2008, the Corporation had contingent liabilities on outstanding letters of credit of $44.0 million and $54.0 million, respectively.

 
Page 20 of 33

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



In January of 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 has recorded a $6.5 million reserve related to the lawsuit and has filed an appeal to the verdict.  The Corporation has determined that it is probable that the punitive damages verdict will be reversed on appeal therefore no reserve has been recorded for that portion.

The Corporation is 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.





 
Page 21 of 33

 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
PART I – ITEM 2
MANAGEMENT’S DISCUSSION and ANALYSIS
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, 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 "believes," "expects," "may," "will," "should," “could,” "anticipates," 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 resu