Unassociated Document

 
 

 
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 September 30, 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)

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 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, 45,611,769 shares (as of October 31, 2009).

 
 
Page 1 of 34
 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

TABLE of CONTENTS




     
PAGE
       
PART I – FINANCIAL INFORMATION
  
       
       
Item 1.
Unaudited Financial Statements:
  
       
   
Condensed Consolidated Statements of Earnings
3
       
   
Condensed Consolidated Balance Sheets
4
       
   
Condensed Consolidated Statements of Cash Flows
5
       
   
Condensed Consolidated Statements of Stockholders’ Equity
6
       
   
Notes to Condensed Consolidated Financial Statements
7 - 21
       
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22 - 31
       
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
32
       
Item 4.
Controls and Procedures
32
       
       
       
PART II – OTHER INFORMATION
  
       
       
Item 1.
Legal Proceedings
33
       
Item 1A.
Risk Factors
33
       
Item 5.
Other Information
33
       
Item 6.
Exhibits
33
       
Signatures
  
34

 
 
Page 2 of 34
 


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
  
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
  
(UNAUDITED)
  
(In thousands except per share data)
  
                         
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
                         
   
2009
    
2008
    
2009
    
2008
  
                         
Net sales
   $ 435,750     $ 435,699     $ 1,306,913     $ 1,322,542  
Cost of sales
     293,435       287,908       884,256       879,048  
Gross profit
     142,315       147,791       422,657       443,494  
                                 
Research and development costs
     13,824       10,955       40,148       36,808  
Selling expenses
     25,407       25,839       78,685       80,021  
General and administrative expenses
     66,866       62,807       192,700       188,076  
Operating income
     36,218       48,190       111,124       138,589  
                                 
Other income, net
     309       371       657       1,069  
Interest expense
     (5,923 )     (6,611 )     (19,405 )     (21,370 )
                                 
Earnings before income taxes
     30,604       41,950       92,376       118,288  
Provision for income taxes
     10,489       14,427       32,002       41,909  
                                 
Net earnings
   $ 20,115     $ 27,523     $ 60,374     $ 76,379  
                                 
Basic earnings per share
   $ 0.44     $ 0.61     $ 1.34     $ 1.71  
Diluted earnings per share
   $ 0.44     $ 0.60     $ 1.32     $ 1.68  
                                 
Dividends per share
   $ 0.08     $ 0.08     $ 0.24     $ 0.24  
                                 
Weighted average shares outstanding:
                                
Basic
     45,356       44,779       45,165       44,672  
Diluted
     45,828       45,505       45,617       45,369  
                                 



See notes to condensed consolidated financial statements

 
 
Page 3 of 34
 


 
CONDENSED CONSOLIDATED BALANCE SHEETS
  
(UNAUDITED)
  
(In thousands)
  
   
September 30,
    
December 31,
  
   
2009
    
2008
  
Assets
            
Current Assets:
            
Cash and cash equivalents
   $ 72,499     $ 60,705  
Receivables, net
     399,547       395,659  
Inventories, net
     308,181       281,508  
Deferred tax assets, net
     38,385       37,314  
Other current assets
     41,663       26,833  
Total current assets
     860,275       802,019  
Property, plant, and equipment, net
     400,271       364,032  
Goodwill
     639,375       608,898  
Other intangible assets, net
     239,232       234,596  
Deferred tax assets, net
     16,355       23,128  
Other assets
     10,372       9,357  
Total Assets
   $ 2,165,880     $ 2,042,030  
                 
Liabilities
                
Current Liabilities:
                
Short-term debt
   $ 77,649     $ 3,249  
Accounts payable
     109,147       140,954  
Dividends payable
     3,653       -  
Accrued expenses
     92,304       103,973  
Income taxes payable
     4,515       8,213  
Deferred revenue
     162,925       138,753  
Other current liabilities
     40,404       56,542  
Total current liabilities
     490,597       451,684  
Long-term debt
     470,645       513,460  
Deferred tax liabilities, net
     27,866       26,850  
Accrued pension and other postretirement benefit costs
     141,533       125,762  
Long-term portion of environmental reserves
     18,971       20,377  
Other liabilities
     45,372       37,135  
Total Liabilities
     1,194,984       1,175,268  
Contingencies and Commitments (Note 14)
                
                 
Stockholders' Equity
                
Common stock, $1 par value
     48,214       47,903  
Additional paid-in capital
     106,788       94,500  
Retained earnings
     949,388       899,928  
Accumulated other comprehensive loss
     (38,135 )     (72,551 )
      1,066,255       969,780  
Less:  Cost of treasury stock
     (95,359 )     (103,018 )
Total Stockholders' Equity
     970,896       866,762  
Total Liabilities and Stockholders' Equity
   $ 2,165,880     $ 2,042,030  
                 

See notes to condensed consolidated financial statements

 
 
Page 4 of 34
 

CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
   
Nine Months Ended
September 30,
  
   
2009
    
2008
  
Cash flows from operating activities:
            
Net earnings
   $ 60,374     $ 76,379  
Adjustments to reconcile net earnings to net cash
provided by operating activities:
                
Depreciation and amortization
     57,276       56,071  
Net loss on sales and disposals of long lived assets
     882       259  
Gain on bargain purchase
     (1,937 )     -  
Deferred income taxes
     808       (381 )
Share-based compensation
     9,334       8,284  
Changes in operating assets and liabilities, net of
businesses acquired:
                
Decrease (increase) in receivables
     16,563       (12,289 )
Increase in inventories
     (8,412 )     (51,995 )
(Decrease) increase in progress payments
     (12,750 )     10,021  
Decrease in accounts payable and accrued expenses
     (49,087 )     (35,258 )
Increase in deferred revenue
     23,625       24,458  
Decrease in income taxes payable
     (16,409 )     (13,630 )
Increase in net pension and postretirement liabilities
     16,245       8,906  
(Increase) decrease in other current and long-termassets
     (166 )     1,750  
(Decrease) increase in other current and long-termliabilities
     (15,307 )     2,200  
Total adjustments
     20,665       (1,604 )
Net cash provided by operating activities
     81,039       74,775  
Cash flows from investing activities:
                
Proceeds from sales and disposals of long lived assets
     2,933       8,000  
Acquisitions of intangible assets
     (321 )     (192 )
Additions to property, plant, and equipment
     (61,026 )     (70,511 )
Acquisition of new businesses
     (50,764 )     (7,731 )
Net cash used for investing activities
     (109,178 )     (70,434 )
Cash flows from financing activities:
                
Borrowings of debt
     585,210       314,500  
Principal payments on debt
     (553,734 )     (307,046 )
Proceeds from exercise of stock options
     10,450       9,842  
Dividends paid
     (7,261 )     (7,180 )
Excess tax benefits from share based compensation
     264       1,507  
Net cash provided by financing activities
     34,929       11,623  
Effect of exchange-rate changes on cash
     5,004       (5,210 )
Net increase in cash and cash equivalents
     11,794       10,754  
Cash and cash equivalents at beginning of period
     60,705       66,520  
Cash and cash equivalents at end of period
   $ 72,499     $ 77,274  
                 
Supplemental disclosure of investing activities:
                
Fair value of assets acquired in current year acquisitions
   $ 56,749      $ 10,764  
Additional consideration paid (received) on prior year acquisitions
     80       (1,474 )
Liabilities assumed from current year acquisitions
     (4,125 )     (1,559 )
Gain on bargain purchase
     (1,937 )     -  
Cash acquired
     (3 )     -  
    $ 50,764     $ 7,731  
See notes to condensed consolidated financial statements
  
 
 
 
Page 5 of 34
 

 
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 pension and postretirement 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
     –       –       60,374       –       –  
Pension and postretirement
adjustments, net
     –       –       –       576       –  
Foreign currency translation
adjustments, net
     –       –       –       33,840       –  
Dividends declared
     –       –       (10,914 )     –       –  
Stock options exercised, net
     311       6,704       –       –       3,400  
Share-based compensation
     –       5,893       –       –       3,950  
Other
             (309 )                     309  
September 30, 2009
   $ 48,214     $ 106,788     $ 949,388     $ (38,135 )   $ (95,359 )
                                         





See notes to condensed consolidated financial statements

 
 
Page 6 of 34
 
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 66 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.

Correction of Immaterial Error Related to Prior Periods
 
In the third quarter of 2009, the Corporation recorded a pre-tax adjustment of $3.8 million to increase pension expense on the Curtiss-Wright Pension and Restoration Plans, due to a calculation error made by our external actuary, affecting both the 2008 and 2009 valuations ($2.0 and $1.8 million, respectively).  This error did not affect the results of operations in any operating segment as pension expense is recorded within the Corporate & Other line as disclosed in Note 12 to the Condensed Consolidated Financial Statements.

The Corporation concluded that the impact of this error on the current and prior periods was not material to the Corporation’s 2009 or 2008 consolidated balance sheets, statements of earnings, statement of cash flows or footnote disclosures.

 
Page 7 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



RECENTLY ISSUED ACCOUNTING STANDARDS

ADOPTION OF NEW STANDARDS

Subsequent Events
 
In May 2009, new guidance was issued on subsequent events, which established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, it provides the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  The new guidance was effective for interim or annual financial periods ending after June 15, 2009.  The adoption of this guidance requires the Corporation to provide additional disclosures if material subsequent events occur.  The Corporation has evaluated the period from September 30, 2009 through November 6, 2009 and has determined that there are no material subsequent events.

Fair Value Disclosures and Measurements
 
In April 2009, new guidance was issued on interim disclosures about fair value instruments, which enhances consistency in financial reporting by increasing the frequency of fair value disclosures.  The new guidance 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 new guidance, fair values for these assets and liabilities were only disclosed once a year.  The new guidance requires 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 adoption of this guidance required the Corporation to provide additional disclosures, see Note 7 to the Condensed Consolidated Financial Statements.

Effective January 1, 2008, the Corporation adopted new accounting guidance on fair value measurements.  The new guidance defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  The new guidance was effective for the Corporation for all non-financial assets and non-financial liabilities as of January 1, 2009.  It 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 and 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.

Non-controlling Interests in Consolidated Financial Statements
 
Effective January 1, 2009, the Corporation adopted new accounting guidance on non-controlling interests in consolidated financial statements.  The new guidance amends the accounting and reporting for non-controlling interests in a consolidated subsidiary and the deconsolidation of a subsidiary.  Included in this guidance is the requirement that non-controlling interests be reported in the equity section of the balance sheet.  The new guidance is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008.  The adoption of this guidance did not have an impact on the Corporation’s results of operations or financial condition.

 
 
Page 8 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



Disclosures about Derivative Instruments and Hedging Activities
 
Effective January 1, 2009, the Corporation adopted new accounting guidance on disclosures about derivative instruments and hedging activities.  The new guidance 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.  The new guidance is effective for financial statements issued after November 15, 2008.  The adoption of this guidance required the Corporation to provide additional disclosures, see Note 7 to the Condensed Consolidated Financial Statements.

Determination of the Useful Life of Intangible Assets
 
Effective January 1, 2009, the Corporation adopted new guidance on the determination of the useful life of intangible assets.  The new guidance amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized 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.  The new guidance was effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008.  The adoption of this guidance did not have a material impact on the Corporation’s results of operations or financial condition.

Business Combinations
 
Effective January 1, 2009, the Corporation adopted new accounting guidance on business combinations.  The new guidance 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.  The new guidance also includes several new disclosure requirements and 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 guidance resulted in the gain on a bargain purchase for the acquisition of Nu-Torque of $1.9 million.  See Note 2 to the Condensed Consolidated Financial Statements for additional information.

In April 2009, new guidance was issued on accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies, which amends the provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination.  The new guidance will carry forward the requirements 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 guidance on accounting for contingencies.  The new guidance applies 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 guidance did not have a material impact on the Corporation’s results of operations or financial condition.


 
 
Page 9 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



STANDARDS ISSUED BUT NOT YET EFFECTIVE

Employers’ Disclosures about Postretirement Benefit Plan Assets
 
In December 2008, new guidance was issued on employers’ disclosures about pension and other postretirement benefit plan assets and is effective for fiscal years ending after December 15, 2009.  The new guidance 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 guidance will have an impact on the Corporation’s disclosure requirements.  The Corporation is currently evaluating the impact of these disclosures on the financial statements.
 
2.           ACQUISITIONS AND DISPOSITION OF LONG-LIVED ASSETS

The Corporation acquired four businesses and disposed of one product line during the nine months ended September 30, 2009.  Two of the acquired businesses are described in more detail below.  The two remaining acquisitions had an aggregate purchase price of $5.5 million and were purchased by our Flow Control segment.  The disposition of a product line in our Flow Control segment for $2.5 million was not reported as discontinued operations as the amounts are not considered significant.

The acquisitions have been accounted for as a purchase under the guidance for business combinations, where the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired is 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 condensed consolidated statement of earnings under the revised accounting standard and recorded in general and administrative expenses. The Corporation has allocated the purchase price, including the value of identifiable intangibles with a finite life based upon final analysis, including input from 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.

Flow Control Segment

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. for $40.0 million in cash.  Under the terms of the Stock 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 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.

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:


 
 
Page 10 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




(In thousands)
      
Accounts receivable
   $ 3,369  
Inventory
     4,119  
Property, plant, and equipment
     7,332  
Other current assets
     1,168  
Intangible assets
     12,500  
Other assets
     227  
Current and non-current liabilities
     (2,778 )
Net tangible and intangible assets
     25,937  
Purchase price
     40,000  
Goodwill
   $ 14,063  

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 had 99 employees as of the date of the acquisition 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.

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 was $5.3 million in cash after giving effect to post-closing customary adjustments as provided for in the Asset Purchase Agreement 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 the guidance for business combinations.  The purchase price of the acquisition has been 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
   $ 853  
Inventory
     4,329  
Property, plant, and equipment
     161  
Other current assets
     47  
Intangible assets
     2,900  
Current and non-current liabilities
     (1,021 )
Net tangible and intangible assets
     7,269  
Purchase price
     5,332  
Gain on Bargain Purchase
   $ 1,937  

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, WA and had 37 employees as of the date of the acquisition.  Revenues of the acquired business were $7.9 million for the fiscal year ended September 30, 2008.

 
 
Page 11 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



3.           RECEIVABLES

Receivables at September 30, 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)
  
   
September 30,
2009
    
December 31, 2008
  
Billed Receivables:
            
Trade and other receivables
   $ 264,700     $ 286,123  
Less: Allowance for doubtful accounts
     (3,768 )     (4,824 )
Net billed receivables
     260,932       281,299  
Unbilled Receivables:
                
Recoverable costs and estimated earnings not billed
     151,570       135,511  
Less: Progress payments applied
     (12,955 )     (21,151 )
Net unbilled receivables
     138,615       114,360  
Receivables, net
   $ 399,547     $ 395,659  

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)
  
   
September 30,
2009
    
December 31, 2008
  
Raw material
   $ 144,571     $ 126,799  
Work-in-process
     77,649       63,195  
Finished goods and component parts
     77,069       82,652  
Inventoried costs related to U.S. Government and other long-term contracts
     58,632       60,721  
Gross inventories
     357,921       333,367  
Less: Inventory reserves
     (36,717 )     (34,283 )
 Progress payments applied, principally related to long-term contracts
     (13,023 )     (17,576 )
Inventories, net
   $ 308,181     $ 281,508  



 
 
Page 12 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



5.           GOODWILL

The Corporation accounts for acquisitions by assigning the purchase price to tangible and intangible assets and liabilities. Assets acquired and liabilities assumed are recorded at their fair values, and the excess of the purchase price over the amounts assigned is recorded as goodwill.

The changes in the carrying amount of goodwill for the nine months ended September 30, 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
     16,479       −       −       16,479  
Change in estimate to fair value of net assets acquired in prior year
     (36 )     (169 )     −       (205 )
Additional consideration of prior years’ acquisitions
     946       −       3       949  
Other adjustments
     (457 )     −       −       (457 )
Currency translation adjustment
     5,543       7,778       390       13,711  
September 30, 2009
   $ 308,068     $ 302,444     $ 28,863     $ 639,375  

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.

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)
  
September 30, 2009
  
Gross
    
Accumulated Amortization
    
Net
  
Technology
   $ 128,227     $ (40,994 )   $ 87,233  
Customer related intangibles
     169,335       (50,183 )     119,152  
Other intangible assets
     42,301       (9,454 )     32,847  
Total
   $ 339,863     $ (100,631 )   $ 239,232  

   
(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  

 
 
Page 13 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




The following table presents the changes in the net balance of intangibles assets during the nine months ended September 30, 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       11,100       5,050       19,550  
Amortization expense
     (6,293 )     (10,536 )     (3,195 )     (20,024 )
Change in estimate to fair value of net assets acquired in prior year
     (159 )     1,308       (1,055 )     94  
Net currency translation adjustment
     2,204       2,607       205       5,016  
September 30, 2009
   $ 87,233     $ 119,152     $ 32,847     $ 239,232  

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.

7.           FAIR VALUE OF FINANCIAL INSTRUMENTS

U.S. Generally Accepted Accounting Principles require certain disclosures regarding the fair value of financial instruments. Due to the short maturities of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, the net book value of these financial instruments is deemed to approximate fair value.

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.  Guidance on accounting for derivative instruments and hedging activities requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets based upon quoted market prices for comparable instruments.  In accordance with this guidance, 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.

The net fair value of these instruments is $0.05 million at September 30, 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 Condensed Consolidated Balance Sheets and derivative gains and losses in the Condensed Consolidated Statements of Earnings.
 

 
 
Page 14 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




 
Fair Values of Derivative Instruments
  
 
(In thousands)
  
 
Asset Derivatives
  
Liability Derivatives
  
 
September 30, 2009
  
September 30, 2009
  
 
Balance Sheet Location
  
Fair Value
  
Balance Sheet Location
  
Fair Value
  
Foreign exchange contracts:
                
Transactional
Other Current Liabilities
   $ -  
Other Current Liabilities
   $ 155  
Forecasted
Other Current Liabilities
     209  
Other Current Liabilities
     -  
                     
Total
     $ 209       $ 155  

(In thousands)
  
Derivatives Not Designated as Hedging Instruments
Location of Gain (Loss) Recognized in Income on Derivatives
  
Amount of Gain (Loss) Recognized in Income on Derivatives
  
     
Three Months Ended September 30, 2009
  
Foreign exchange contracts:
        
Transactional
General and Administrative Expenses
   $ (2,232 )
Forecasted
General and Administrative Expenses
     925  
Total
     $ (1,307 )

     
Nine Months Ended September 30, 2009
  
Foreign exchange contracts:
        
Transactional
General and Administrative Expenses
   $ 320  
Forecasted
General and Administrative Expenses
     1,287  
Total
     $ 1,607  

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 September 30, 2009.  Based upon the fair value hierarchy, all of our fixed rate debt is valued at a Level 2.  The estimated fair values of the Corporation’s fixed rate debt instruments at September 30, 2009 aggregated $363.5 million compared to a carrying value of $350.0 million.  The carrying amount of the variable interest rate debt approximates fair value because the interest rates are reset periodically to reflect current market conditions.
 

 
 
Page 15 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



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.

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
     5,850       5,232  
Increase due to acquisitions
     127       -  
Current year claims
     (2,983 )     (3,190 )
Change in estimates to pre-existing warranties
     (1,477 )     (1,705 )
Foreign currency translation adjustment
     393       (305 )
Warranty reserves at September 30,
   $ 12,685     $ 10,806  

9.           FACILITIES RELOCATION AND RESTRUCTURING

In connection with the acquisitions of VMETRO and Mechetronics in 2008, the Corporation established a restructuring accrual of $7.6 million in accordance with guidance on the recognition of liabilities in connection with a purchase business combination.  These acquisitions are consolidated into the Motion Control segment.  The accrual was established in the fourth quarter of 2008 for $7.1 million, while the remaining balance was recorded in the first nine months of 2009 for $0.5 million based upon further analysis of the restructuring activities.  The restructuring accrual consists of costs to exit the activities of certain facilities, including lease cancellation costs and external legal and consulting fees, as well as costs to relocate or involuntarily terminate certain employees of the acquired business.  As of September 30, 2009, the Corporation has not completed 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 fourth quarter of 2009.

In the first quarter of 2009, the Corporation committed to a plan to consolidate existing operations through reductions 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 programs undertaken in connection with the development of the Corporation’s budget and operating plan for the current year.  The Corporation incurred business consolidation costs in 2009 of $4.1 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, selling and research and development costs for $2.4 million, $1.2 million, $0.4 million and $0.1 million, respectively.  The liability is included in other current liabilities.  As of September 30, 2009, the Corporation has not completed its plans associated with the restructuring and expects to complete the majority of these activities by December 31, 2009.


 
 
Page 16 of 34
 
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 September 30, 2009 is as follows:

   
Severance and Benefits
    
Facility Closing Costs
    
Relocation Costs
    
Total
  
Flow Control
                        
December 31, 2008
   $ –     $ –     $ –     $ –  
Provisions
     860       100       306       1,266  
Payments
     (635 )     (100 )     (306 )     (1,041 )
Net currency translation adjustment
     –       –       –       –  
September 30, 2009
   $ 225     $ –     $ –     $ 225  
                                 
Total expected and incurred to date
   $ 860     $ 100     $ 656     $ 1,616  
                                 
                                 
Motion Control
                                
December 31, 2008
   $ 3,616     $ 1,901     $ 628     $ 6,145  
Provisions
     3,167       (144 )     50       3,073  
Payments
     (3,836 )     (992 )     (114 )     (4,942 )
Net currency translation adjustment
     (26 )     18       –       (8 )
September 30, 2009
   $ 2,921     $ 783     $ 564     $ 4,268  
                                 
Total expected and incurred to date
   $ 7,893     $ 2,071     $ 678     $ 10,642  
                                 
                                 
Metal Treatment
                                
December 31, 2008
   $ –     $ –     $ –     $ –  
Provisions
     282       –       –       282  
Payments
     (282 )     –       –       (282 )
Net currency translation adjustment
     –       –       –       –  
September 30, 2009
   $ –     $ –     $ –     $ –  
                                 
Total expected and incurred to date
   $ 282     $ –     $ –     $ 282  
                                 
Total Curtiss-Wright
                                
December 31, 2008
   $ 3,616     $ 1,901     $ 628     $ 6,145  
Provisions
     4,309       (44 )     356       4,621  
Payments
     (4,753 )     (1,092 )     (420 )     (6,265 )
Net currency translation adjustment
     (26 )     18       –       (8 )
September 30, 2009
   $ 3,146     $ 783     $ 564     $ 4,493  
                                 
Total expected and incurred to date
   $ 9,035     $ 2,171     $ 1,334     $ 12,540  


 
 
Page 17 of 34
 
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 and nine months ended September 30, 2009 and 2008 were:

   
(In thousands)
  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Service cost
   $ 8,510     $ 5,990     $ 20,452     $ 17,480  
Interest cost
     6,863       5,108       18,262       15,774  
Expected return on plan assets
     (7,280 )     (7,549 )     (21,731 )     (22,667 )
Amortization of:
                                
Prior service cost
     164       217       484       477  
Unrecognized actuarial loss
     1,326       246       1,785       544  
Net periodic benefit cost
   $ 9,583     $ 4,012     $ 19,252     $ 11,608  
Curtailment/Settlement loss
     -       -       83       -  
Total periodic benefit cost
   $ 9,583     $ 4,012     $ 19,335     $ 11,608  
                                 

Net periodic benefit cost for the three months ended September 30, 2009 includes a $3.8 million correction of an immaterial error.  For more information regarding the correction, please refer to Note 1 to the Condensed Consolidated Financial Statements.

During the nine months ended September 30, 2009, the Corporation made no contributions to the Curtiss-Wright Pension Plan, and expects to make no contributions in 2009.  Due to recent changes to funding regulations, we no longer expect to make contributions in 2010.  However, we do expect to make significant contributions in the range of $15 to 20 million in 2011. In addition, contributions of $2.5 million were made to the Corporation’s foreign benefit plans during the first nine months 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 guidance on employers’ accounting for settlements and curtailments of defined benefit pension plans and termination of benefits.  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.

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 nine months ended September 30, 2009 and 2008 were:

 
Page 18 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




   
(In thousands)
  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Service cost
   $ 178     $ 175     $ 488     $ 513  
Interest cost
     382       429       1,219       1,333  
Amortization of unrecognized actuarial gain
     (235 )     (172 )     (617 )     (431 )
Net periodic benefit cost
   $ 325     $ 432     $ 1,090     $ 1,415  

During the nine months ended September 30, 2009, the Corporation has paid $1.3 million on the postretirement plans.  During 2009, the Corporation anticipates contributing $2.0 million to the postretirement plans.

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
Nine months Ended
  
   
September 30,
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Basic weighted-average shares outstanding
     45,356       44,779       45,165       44,672  
Dilutive effect of share-based compensation awards and deferred stock compensation
     472       726       452       697  
Diluted weighted-average shares outstanding
     45,828       45,505       45,617       45,369  

At September 30, 2009 and 2008, there were 681,000 and 352,000 stock options outstanding, respectively, that could potentially dilute earnings per share in the future, and were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2009 and 2008 as they would have been anti-dilutive for those periods.

12.           SEGMENT INFORMATION

The Corporation manages and evaluates its operations based on the products and services it offers and the different markets it serves.  Based on this approach, the Corporation has three reportable segments: Flow Control, Motion Control, and Metal Treatment.

 
  
(In thousands)
Three Months Ended September 30, 2009
  
   
Flow Control
    
Motion Control
    
Metal Treatment
    
Segment Total
    
Corporate & Other (1)
    
Consolidated
  
Revenue from external customers
   $ 237,931     $ 148,303     $ 49,516     $ 435,750     $ −     $ 435,750  
Intersegment revenues
     7       997       193       1,197       (1,197 )     −  
Operating income (expense)
     22,274       16,512       4,354       43,140       (6,922 )     36,218  


 
 
Page 19 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




 
  
(In thousands)
Three Months Ended September 30, 2008
  
   
Flow Control
    
Motion Control
    
Metal Treatment
    
Segment Total
    
Corporate & Other (1)
    
Consolidated
  
Revenue from external customers
   $ 226,951     $ 143,148     $ 65,600     $ 435,699     $ −     $ 435,699  
Intersegment revenues
     −       1,572       255       1,827       (1,827 )     −  
Operating income (expense)
     24,260       15,002       13,407       52,669       (4,479 )     48,190  

 
  
(In thousands)
Nine Months Ended September 30, 2009
  
   
Flow Control
    
Motion Control
    
Metal Treatment
    
Segment Total
    
Corporate & Other (1)
    
Consolidated
  
Revenue from external customers
   $ 710,717     $ 444,760     $ 151,436     $ 1,306,913     $ −     $ 1,306,913  
Intersegment revenues
     29       2,805       1,156       3,990       (3,990 )     −  
Operating income (expense)
     57,333       50,291       15,426       123,050       (11,926 )     111,124  

 
  
(In thousands)
Nine Months Ended September 30, 2008
  
   
Flow Control
    
Motion Control
    
Metal Treatment
    
Segment Total
    
Corporate & Other (1)
    
Consolidated
  
Revenue from external customers
   $ 684,403     $ 434,813     $ 203,326     $ 1,322,542     $ −     $ 1,322,542  
Intersegment revenues
     32       3,332       722       4,086       (4,086 )     −  
Operating income (expense)
     60,386       44,084       41,436       145,906       (7,317 )     138,589  

   
(In thousands)
Identifiable Assets
  
   
Flow Control
    
Motion Control
    
Metal Treatment
    
Segment Total
    
Corporate & Other
    
Consolidated
  
September 30, 2009
   $ 1,118,043     $ 761,041     $ 227,397     $ 2,106,481     $ 59,399     $ 2,165,880  
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, legal, and other expenses.
 

Adjustments to reconcile to earnings before income taxes:

   
(In thousands)
  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Total segment operating income
   $ 43,140     $ 52,669     $ 123,050     $ 145,906  
Corporate and other
     (6,922 )     (4,479 )     (11,926 )     (7,317 )
Other income, net
     309       371       657       1,069  
Interest expense
     (5,923 )     (6,611 )     (19,405 )     (21,370 )
Earnings before income taxes
   $ 30,604     $ 41,950     $ 92,376     $ 118,288  


 
 
Page 20 of 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



13.           COMPREHENSIVE INCOME

Total comprehensive income for the three and nine months ended September 30, 2009 and 2008 are as follows:
   
(In thousands)
  
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Net earnings
   $ 20,115     $ 27,523     $ 60,374     $ 76,379  
Equity adjustment from foreign currency translations, net
     9,479       (31,410 )     33,840       (29,905 )
Defined benefit pension and post-retirement plan, net
     723       420       576       635  
Total comprehensive income
   $ 30,317     $ (3,467 )   $ 94,790     $ 47,109  

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 $20.8 million at September 30, 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 September 30, 2009 and December 31, 2008, the Corporation had contingent liabilities on outstanding letters of credit of $39.5 million and $54.0 million, respectively.

In January of 2007, a former executive was awarded approximately $9.0 million in punitive and compensatory damages related to a gender bias lawsuit filed in 2003.  The Corporation has recorded a $6.5 million reserve related to the lawsuit, including legal fees, and appealed the verdict.  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 has filed a Petition for Certification with the Supreme Court of New Jersey requesting review of the Appellate Division’s decision.  Both parties have submitted their required pleadings, and the Supreme Court of New Jersey is currently deliberating on whether to accept or decline Plaintiff’s Petition for Certification.

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 34
 
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
PART I – ITEM 2
MANAGEMENT’S DISCUSSION and ANALYSIS of
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 results described by the forward-looking statements will be achieved. Such statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such 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. Important factors that could cause the actual results to differ materially from those in these forward-looking statements include, among other items: