Company Quick10K Filing
Quick10K
Curtiss Wright
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$113.64 43 $4,870
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-31 Earnings, Exhibits
8-K 2019-05-15 Other Events
8-K 2019-05-10 Shareholder Vote
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-02-26 Earnings, Exhibits
8-K 2018-12-12 Other Events
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-10-17 Enter Agreement, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-05-18 Other Events
8-K 2018-05-10 Shareholder Vote
SMFG Sumitomo Mitsui Financial Group 49,610
HMLP Hoegh Lng Partners 373
LAKE Lakeland Industries 103
ALIM Alimera Sciences 67
BGI Birks Group 17
XCO Exco Resources 0
FXC Invesco Currencyshares Canadian Dollar Trust 0
TWX Time Warner 0
BAJA Baja Custom Design 0
C765 Global Macro Trust 0
CW 2019-06-30
Part 1- Financial Information
Item 1. Financial Statements
Part I- Item 2
Part I - Item 2
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 exhibit10120190630.htm
EX-10.2 exhibit10220190630.htm
EX-31.1 exhibit31120190630.htm
EX-31.2 exhibit31220190630.htm
EX-32 exhibit3220190630.htm

Curtiss Wright Earnings 2019-06-30

CW 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2019

or

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.)
 130 Harbour Place Drive, Suite 300
 
 
Davidson,
North Carolina
 
28036
(Address of principal executive offices)
 
(Zip Code)

(704) 869-4600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
CW
New York Stock Exchange

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                          No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes                          No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.






Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes     No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, par value $1.00 per share: 42,730,098 shares (as of July 31, 2019).





CURTISS-WRIGHT CORPORATION and SUBSIDIARIES

TABLE of CONTENTS


PART I – FINANCIAL INFORMATION
PAGE
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
Item 1A.
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
 
Item 6.
 
 
 
 
 

Page 3







PART 1- FINANCIAL INFORMATION
Item 1. Financial Statements
CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands, except per share data)
2019
 
2018
 
2019
 
2018
Net sales
 
 
 
 
 
 
 
Product sales
$
532,253

 
$
511,676

 
$
1,003,852

 
$
956,363

Service sales
106,743

 
108,622

 
213,458

 
211,457

Total net sales
638,996

 
620,298

 
1,217,310

 
1,167,820

Cost of sales
 
 
 
 
 
 
 
Cost of product sales
342,726

 
324,184

 
654,682

 
623,495

Cost of service sales
66,226

 
69,614

 
135,711

 
136,634

Total cost of sales
408,952

 
393,798

 
790,393

 
760,129

Gross profit
230,044

 
226,500

 
426,917

 
407,691

Research and development expenses
18,900

 
15,054

 
36,141

 
30,995

Selling expenses
30,693

 
32,665

 
62,170

 
64,185

General and administrative expenses
74,766

 
76,705

 
150,876

 
145,937

Operating income
105,685

 
102,076

 
177,730

 
166,574

Interest expense
7,960

 
9,566

 
15,232

 
17,770

Other income, net
5,871

 
3,971

 
11,349

 
8,654

Earnings before income taxes
103,596

 
96,481

 
173,847

 
157,458

Provision for income taxes
(23,524
)
 
(21,693
)
 
(38,182
)
 
(39,027
)
Net earnings
$
80,072

 
$
74,788

 
$
135,665

 
$
118,431

 
 
 
 
 
 
 
 
Net earnings per share:
 
 
 
 
 
 
 
Basic earnings per share
$
1.87

 
$
1.69

 
$
3.17

 
$
2.68

Diluted earnings per share
$
1.86

 
$
1.68

 
$
3.15

 
$
2.66

 
 
 
 
 
 
 
 
Dividends per share
0.17

 
0.15

 
0.32

 
0.30

Weighted-average shares outstanding:
 
 
 
 
 
 
 
Basic
42,758

 
44,124

 
42,776

 
44,144

Diluted
43,024

 
44,553

 
43,038

 
44,604

 
 
 
 
 
 
 
 
See notes to condensed consolidated financial statements

Page 4


CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands)


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Net earnings
$
80,072

 
$
74,788

 
$
135,665

 
$
118,431

Other comprehensive income (loss)
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax (1)
$
540

 
$
(43,771
)
 
$
8,782

 
$
(28,360
)
Pension and postretirement adjustments, net of tax (2)
1,749

 
3,062

 
3,432

 
5,684

Other comprehensive income (loss), net of tax
2,289

 
(40,709
)
 
12,214

 
(22,676
)
Comprehensive income
$
82,361

 
$
34,079

 
$
147,879

 
$
95,755


(1) The tax benefit included in other comprehensive income for foreign currency translation adjustments for the three and six months ended June 30, 2019 was immaterial. The tax benefit included in other comprehensive loss for foreign currency translation adjustments for the three and six months ended June 30, 2018 was $2.0 million and $1.2 million, respectively.

(2) The tax expense included in other comprehensive income for pension and postretirement adjustments for the three and six months ended June 30, 2019 was $0.6 million and $1.1 million, respectively. The tax expense included in other comprehensive income for pension and postretirement adjustments for the three and six months ended June 30, 2018 was $0.9 million and $1.8 million, respectively.

 
See notes to condensed consolidated financial statements

Page 5


CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except per share data)

 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
216,344

 
$
276,066

Receivables, net
636,058

 
593,755

Inventories, net
436,190

 
423,426

Other current assets
48,060

 
50,719

Total current assets
1,336,652

 
1,343,966

Property, plant, and equipment, net
375,582

 
374,660

Goodwill
1,112,781

 
1,088,032

Other intangible assets, net
433,517

 
429,567

Operating lease right-of-use assets, net
135,190

 

Other assets
32,918

 
19,160

Total assets
$
3,426,640

 
$
3,255,385

Liabilities
 

 
 

Current liabilities:
 
 
 
Current portion of long-term and short-term debt
$

 
$
243

Accounts payable
173,791

 
232,983

Accrued expenses
138,278

 
166,954

Income taxes payable
8,521

 
5,811

Deferred revenue
243,053

 
236,508

Other current liabilities
74,226

 
44,829

Total current liabilities
637,869

 
687,328

Long-term debt
761,476

 
762,313

Deferred tax liabilities, net
49,929

 
47,121

Accrued pension and other postretirement benefit costs
97,334

 
101,227

Long-term operating lease liability
117,789

 

Long-term portion of environmental reserves
16,411

 
15,777

Other liabilities
93,536

 
110,838

Total liabilities
1,774,344

 
1,724,604

Contingencies and commitments (Note 14)


 


Stockholders’ equity
 
 
 
Common stock, $1 par value,100,000,000 shares authorized as of June 30, 2019 and December 31, 2018; 49,187,378 shares issued as of June 30, 2019 and December 31, 2018; outstanding shares were 42,715,831 as of June 30, 2019 and 42,772,417 as of December 31, 2018
49,187

 
49,187

Additional paid in capital
116,835

 
118,234

Retained earnings
2,339,703

 
2,191,471

Accumulated other comprehensive loss
(302,490
)
 
(288,447
)
Common treasury stock, at cost (6,471,547 shares as of June 30, 2019 and 6,414,961 shares as of December 31, 2018)
(550,939
)
 
(539,664
)
Total stockholders’ equity
1,652,296

 
1,530,781

Total liabilities and stockholders’ equity
$
3,426,640

 
$
3,255,385

 
 
 
 
See notes to condensed consolidated financial statements

Page 6


CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended
 
June 30,
(In thousands)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net earnings
$
135,665

 
$
118,431

Adjustments to reconcile net earnings to net cash provided by operating activities
 
 
 
Depreciation and amortization
51,600

 
51,257

Gain on divestitures

 
(2,149
)
Gain on fixed asset disposals
(6,080
)
 
(897
)
Deferred income taxes
1,450

 
5,554

Share-based compensation
6,980

 
7,801

Change in operating assets and liabilities, net of businesses acquired and divested:
 
 
 
Receivables, net
(37,621
)
 
(57,522
)
Inventories, net
(11,080
)
 
(43,625
)
Progress payments
(356
)
 
6,718

Accounts payable and accrued expenses
(87,430
)
 
(38,621
)
Deferred revenue
5,278

 
17,865

Income taxes payable
2,872

 
(7,712
)
Pension and postretirement liabilities, net
311

 
(48,265
)
Other current and long-term assets and liabilities
(21,203
)
 
17,850

Net cash provided by operating activities
40,386

 
26,685

Cash flows from investing activities:
 
 
 
Proceeds from sales and disposals of long lived assets
8,920

 
4,328

Consideration from divestitures

 
(268
)
Acquisition of intangible assets
(147
)
 
(1,500
)
Additions to property, plant, and equipment
(33,471
)
 
(19,852
)
Acquisition of businesses, net of cash acquired
(50,075
)
 
(212,737
)
Additional consideration paid on prior year acquisitions

 
(460
)
Net cash used for investing activities
(74,773
)
 
(230,489
)
Cash flows from financing activities:
 
 
 
Borrowings under revolving credit facility
7,318

 
367,762

Payment of revolving credit facility
(7,561
)
 
(366,953
)
Repurchases of common stock
(25,065
)
 
(46,115
)
Proceeds from share-based compensation
5,411

 
6,360

Dividends paid
(6,420
)
 
(6,623
)
Other
(395
)
 
(365
)
Net cash used for financing activities
(26,712
)
 
(45,934
)
Effect of exchange-rate changes on cash
1,377

 
(6,484
)
Net decrease in cash and cash equivalents
(59,722
)
 
(256,222
)
Cash and cash equivalents at beginning of period
276,066

 
475,120

Cash and cash equivalents at end of period
$
216,344

 
$
218,898

Supplemental disclosure of non-cash activities:
 

 
 

Capital expenditures incurred but not yet paid
$
85

 
$
425

See notes to condensed consolidated financial statements

Page 7




CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands)

 
For the six months ended June 30, 2019
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
December 31, 2018
$
49,187

 
$
118,234

 
$
2,191,471

 
$
(288,447
)
 
$
(539,664
)
Cumulative effect from adoption of ASU 2018-02


 

 
26,257

 
(26,257
)
 

Net earnings

 

 
135,665

 

 

Other comprehensive income, net of tax

 

 

 
12,214

 

Dividends declared

 

 
(13,690
)
 

 

Restricted stock

 
(5,491
)
 

 

 
5,491

Stock options exercised

 
(1,822
)
 

 

 
7,233

Share-based compensation

 
6,575

 

 

 
405

Repurchase of common stock

 

 

 

 
(25,065
)
Other

 
(661
)
 

 

 
661

June 30, 2019
$
49,187

 
$
116,835

 
$
2,339,703

 
$
(302,490
)
 
$
(550,939
)

 
For the three months ended June 30, 2019
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
March 31, 2019
$
49,187

 
$
114,696

 
$
2,266,902

 
$
(304,779
)
 
$
(540,426
)
Net earnings

 

 
80,072

 

 

Other comprehensive income, net of tax

 

 

 
2,289

 

Dividends declared

 

 
(7,271
)
 

 

Stock options exercised

 
(1,303
)
 

 

 
2,038

Share-based compensation

 
3,442

 

 

 
43

Repurchase of common stock

 

 

 

 
(12,594
)
June 30, 2019
$
49,187

 
$
116,835

 
$
2,339,703

 
$
(302,490
)
 
$
(550,939
)

Page 8




CURTISS-WRIGHT CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands)

 
For the six months ended June 30, 2018
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
December 31, 2017
$
49,187

 
$
120,609

 
$
1,944,324

 
$
(216,840
)
 
$
(369,480
)
Cumulative effect from adoption of ASC 606

 

 
(2,274
)
 

 

Net earnings

 

 
118,431

 

 

Other comprehensive loss, net of tax

 

 

 
(22,676
)
 

Dividends declared

 

 
(13,231
)
 

 

Restricted stock

 
(6,923
)
 

 

 
6,923

Stock options exercised

 
(1,535
)
 

 

 
7,896

Share-based compensation

 
7,599

 

 

 
201

Repurchase of common stock

 

 

 

 
(46,115
)
Other

 
(725
)
 

 

 
725

June 30, 2018
$
49,187

 
$
119,025

 
$
2,047,250

 
$
(239,516
)
 
$
(399,850
)

 
For the three months ended June 30, 2018
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
March 31, 2018
$
49,187

 
$
116,221

 
$
1,979,051

 
$
(198,807
)
 
$
(366,677
)
Net earnings

 

 
74,788

 

 

Other comprehensive loss, net of tax

 

 

 
(40,709
)
 

Dividends declared

 

 
(6,589
)
 

 

Restricted stock

 
(95
)
 

 

 
95

Stock options exercised

 
(298
)
 

 

 
507

Share-based compensation

 
3,197

 

 

 
12

Repurchase of common stock

 

 

 

 
(33,787
)
June 30, 2018
$
49,187

 
$
119,025

 
$
2,047,250

 
$
(239,516
)
 
$
(399,850
)
 
 
 
 
 
 
 
 
 
 
See notes to condensed consolidated financial statements



Page 9

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





1.           BASIS OF PRESENTATION

Curtiss-Wright Corporation and its subsidiaries (the "Corporation" or the "Company") is a global, diversified manufacturing and service company that designs, manufactures, and overhauls precision components and provides highly engineered products and services to the aerospace, defense, power generation, and general industrial markets.

The unaudited condensed consolidated financial statements include the accounts of Curtiss-Wright and its majority-owned subsidiaries. All intercompany transactions and accounts have been eliminated.

The unaudited condensed consolidated financial statements of the Corporation have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted as permitted by such rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of these financial statements.

Management is required 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. Actual results may differ from these estimates. The most significant of these estimates includes the estimate of costs to complete using the over-time revenue recognition accounting method, 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, fair value estimates around assets and assumed liabilities from acquisitions, estimates for the valuation and useful lives of intangible assets, legal reserves, and the estimate of future environmental costs. Changes in estimates of contract sales, costs, and profits are recognized using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. Accordingly, the effect of the changes on future periods of contract performance is recognized as if the revised estimate had been the original estimate. During the three and six months ended June 30, 2019 and 2018, there were no significant changes in estimated contract costs. 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 2018 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.

Recent accounting pronouncements adopted

ASU 2016-02 - Leases - On January 1, 2019, the Corporation adopted ASC 842, Leases, using the optional transition method of adoption which permits the entity to continue presenting all periods prior to January 1, 2019 under previous lease accounting guidance. In conjunction with the adoption, the Corporation elected the package of practical expedients which permits the entity to forgo reassessment of conclusions reached regarding lease existence and lease classification under previous guidance, as well as the practical expedient to not separate non-lease components. Further, the Corporation made an accounting policy election to account for short-term leases in a manner consistent with the methodology applied under previous guidance. The adoption of this standard resulted in an increase of approximately $151 million in both total assets and total liabilities in the Corporation’s Condensed Consolidated Balance Sheet as of January 1, 2019.

ASU 2018-02 - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income - On January 1, 2019, the Corporation adopted ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits the reclassification of tax effects stranded in accumulated other comprehensive income to retained earnings as a result of the 2017 Tax Cuts and Jobs Act (the Tax Act). The adoption of this standard resulted in a reclassification of $26 million from accumulated other comprehensive loss to retained earnings in the Corporation’s Condensed Consolidated Balance Sheet as of January 1, 2019.


2.           REVENUE

The Corporation recognizes revenue when control of a promised good and/or service is transferred to a customer in an amount that reflects the consideration that the Corporation expects to be entitled to in exchange for that good and/or service.


Page 10

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



Performance Obligations

The Corporation identifies a performance obligation for each promise in a contract to transfer a distinct good or service to the customer. As part of its assessment, the Corporation considers all goods and/or services promised in the contract, regardless of whether they are explicitly stated or implied by customary business practices. The Corporation’s contracts may contain either a single performance obligation, including the promise to transfer individual goods or services that are not separately distinct within the context of the respective contracts, or multiple performance obligations. For contracts with multiple performance obligations, the Corporation allocates the overall transaction price to each performance obligation using standalone selling prices, where available, or utilizes estimates for each distinct good or service in the contract where standalone prices are not available.

The Corporation’s performance obligations are satisfied either at a point-in-time or on an over-time basis. Revenue recognized on an over-time basis for both the three months and six months ended June 30, 2019 accounted for approximately 48% of total net sales. Revenue recognized on an over-time basis for both the three months and six months ended June 30, 2018 accounted for approximately 45% of total net sales. Typically, over-time revenue recognition is based on the utilization of an input measure used to measure progress, such as costs incurred to date relative to total estimated costs. Revenue recognized at a point-in-time for both the three months and six months ended June 30, 2019 accounted for approximately 52% of total net sales. Revenue recognized at a point-in-time for both the three months and six months ended June 30, 2018 accounted for approximately 55% of total net sales. Revenue for these types of arrangements is recognized at the point in time in which control is transferred to the customer, typically based upon the terms of delivery.

Contract backlog represents the remaining performance obligations that have not yet been recognized as revenue. Backlog includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Total backlog was approximately $2.2 billion as of June 30, 2019, of which the Corporation expects to recognize approximately 90% as net sales over the next 12 -36 months. The remainder will be recognized thereafter.

Disaggregation of Revenue

The following table presents the Corporation’s total net sales disaggregated by end market and customer type:
Total Net Sales by End Market and Customer Type
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In thousands)
2019
 
2018
 
2019
 
2018
Defense
 
 
 
 
 
 
 
Aerospace
$
104,426

 
$
99,654

 
$
183,213

 
$
178,808

Ground
26,394

 
20,777

 
47,151

 
43,296

Naval
149,853

 
132,347

 
280,941

 
235,835

Total Defense Customers
$
280,673

 
$
252,778

 
$
511,305

 
$
457,939

 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
Aerospace
$
108,000

 
$
104,617

 
$
211,222

 
$
204,021

Power Generation
93,171

 
102,316

 
189,652

 
200,635

General Industrial
157,152

 
160,587

 
305,131

 
305,225

Total Commercial Customers
$
358,323

 
$
367,520

 
$
706,005

 
$
709,881

 
 
 
 
 
 
 
 
Total
$
638,996

 
$
620,298

 
$
1,217,310

 
$
1,167,820

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Certain amounts in the prior year have been reclassed to conform to the current year presentation.

Contract Balances

Timing of revenue recognition and cash collection may result in billed receivables, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the Condensed Consolidated Balance Sheet. The Corporation’s contract assets primarily relate to its rights to consideration for work completed but not billed as of the reporting date. Contract assets are

Page 11

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



transferred to billed receivables when the rights to consideration become unconditional. This is typical in situations where amounts are billed as work progresses in accordance with agreed-upon contractual terms or upon achievement of contractual milestones. The Corporation’s contract liabilities primarily consist of customer advances received prior to revenue being earned. Revenue recognized during the six months ended June 30, 2019 and 2018 included in the contract liabilities balance at the beginning of the year was approximately $133 million and $113 million, respectively. Contract assets and contract liabilities are reported in the "Receivables, net" and "Deferred revenue" lines, respectively, within the Condensed Consolidated Balance Sheet.

3.           ACQUISITIONS

The Corporation continually evaluates potential acquisitions that either strategically fit within the Corporation’s existing portfolio or expand the Corporation’s portfolio into new product lines or adjacent markets.  The Corporation has completed a number of acquisitions that have been accounted for as business combinations and have resulted in the recognition of goodwill in the Corporation's financial statements.  This goodwill arises because the acquisition purchase price reflects the future earnings and cash flow potential in excess of the earnings and cash flows attributable to the current product and customer set at the time of acquisition.  Thus, goodwill inherently includes the know-how of the assembled workforce, the ability of the workforce to further improve the technology and product offerings, and the expected cash flows resulting from these efforts. Goodwill may also include expected synergies resulting from the complementary strategic fit these businesses bring to existing operations.

The Corporation allocates the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. In the months after closing, as the Corporation obtains additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and as the Corporation learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment.  The Corporation will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

During the six months ended June 30, 2019, the Corporation acquired one business for an aggregate purchase price of $50 million, which is described in more detail below. During the six months ended June 30, 2018, the Corporation acquired one business for an aggregate purchase price of $213 million, which is described in more detail below.

The Condensed Consolidated Statement of Earnings for the six months ended June 30, 2019 includes $4 million of total net sales and $1 million of net losses from the Corporation's 2019 acquisition. The Condensed Consolidated Statement of Earnings for the six months ended June 30, 2018 includes $22 million of total net sales and $3 million of net losses from the Corporation's 2018 acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the six months ended June 30, 2019 and 2018.

(In thousands)
 
2019
 
2018
Accounts receivable
 
$
2,300

 
$
8,143

Inventory
 
322

 
49,508

Property, plant, and equipment
 
648

 
3,203

Other current and non-current assets
 
479

 
47

Intangible assets
 
26,000

 
141,100

Operating lease right-of-use assets, net
 
1,393

 

Current and non-current liabilities
 
(3,252
)
 
(6,734
)
Net tangible and intangible assets
 
27,890

 
195,267

Purchase price, net of cash acquired
 
50,075

 
212,737

Goodwill
 
$
22,185

 
$
17,470

 
 
 
 
 
Goodwill deductible for tax purposes
 
$
22,185

 
$
17,470



2019 Acquisition


Page 12

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



Tactical Communications Group (TCG)

On March 15, 2019, the Corporation acquired 100% of the membership interest of TCG for $50.1 million, net of cash acquired. The Purchase Agreement contains a purchase price adjustment mechanism and representations and warranties customary for a transaction of this type, including a portion of the purchase price deposited in escrow as security for potential indemnification claims against the seller. TCG is a designer and manufacturer of tactical data link software solutions for critical military communications systems. The acquired business operates within the Defense segment. The acquisition is subject to post-closing adjustments with the purchase price allocation not yet complete.

2018 Acquisition

Dresser-Rand Government Business (DRG)

On April 2, 2018, the Corporation acquired certain assets and assumed certain liabilities of DRG for $212.7 million in cash. The Asset Purchase Agreement contains a purchase price adjustment mechanism and representations and warranties customary for a transaction of this type. DRG is a designer and manufacturer of mission-critical, high-speed rotating equipment solutions and also acts as the sole supplier of steam turbines and main engine guard valves on all aircraft carrier programs. The acquired business operates within the Corporation's Power segment.

4.           RECEIVABLES

Receivables primarily include amounts billed to customers, unbilled charges on long-term contracts consisting of amounts recognized as sales but not billed, and other receivables.  Substantially all amounts of unbilled receivables are expected to be billed and collected within one year. An immaterial amount of unbilled receivables are subject to retainage provisions. The amount of claims and unapproved change orders within our receivables balances are immaterial.

The composition of receivables is as follows:
(In thousands)
June 30, 2019
 
December 31, 2018
Billed receivables:
 
 
 
Trade and other receivables
$
415,774

 
$
390,306

Less: Allowance for doubtful accounts
(9,003
)
 
(7,436
)
Net billed receivables
406,771

 
382,870

Unbilled receivables (Contract Assets):
 
 
 
Recoverable costs and estimated earnings not billed
243,403

 
225,810

Less: Progress payments applied
(14,116
)
 
(14,925
)
Net unbilled receivables
229,287

 
210,885

Receivables, net
$
636,058

 
$
593,755



5.           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. Long-term contract inventory includes an immaterial amount of claims or other similar items subject to uncertainty concerning their determination or realization. Inventories are valued at the lower of cost or market.

The composition of inventories is as follows:

Page 13

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



(In thousands)
June 30, 2019
 
December 31, 2018
Raw materials
$
191,678

 
$
214,442

Work-in-process
91,848

 
74,536

Finished goods
143,360

 
143,016

Inventoried costs related to U.S. Government and other long-term contracts
70,684

 
54,195

Gross inventories
497,570

 
486,189

Less:  Inventory reserves
(53,808
)
 
(55,776
)
Progress payments applied
(7,572
)
 
(6,987
)
Inventories, net
$
436,190

 
$
423,426



Inventoried costs related to long-term contracts include capitalized contract development costs related to certain aerospace and defense programs of $43.6 million and $44.4 million as of June 30, 2019 and December 31, 2018, respectively. These capitalized costs will be liquidated as units are produced.  As of June 30, 2019 and December 31, 2018, $32.5 million and $18.7 million, respectively, are scheduled to be liquidated under existing firm orders.

6.           GOODWILL

The changes in the carrying amount of goodwill for the six months ended June 30, 2019 are as follows:
(In thousands)
Commercial/Industrial
 
Defense
 
Power
 
Consolidated
December 31, 2018
$
442,015

 
$
448,871

 
$
197,146

 
$
1,088,032

Acquisitions

 
22,185

 

 
22,185

Adjustments

 
(208
)
 

 
(208
)
Foreign currency translation adjustment
155

 
2,489

 
128

 
2,772

June 30, 2019
$
442,170

 
$
473,337

 
$
197,274

 
$
1,112,781



7.           OTHER INTANGIBLE ASSETS, NET
 
The following tables present the cumulative composition of the Corporation’s intangible assets:
 
 
June 30, 2019
 
December 31, 2018
(In thousands)
 
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Technology
 
$
245,480

 
$
(133,102
)
 
$
112,378

 
$
238,212

 
$
(123,156
)
 
$
115,056

Customer related intangibles
 
378,846

 
(204,767
)
 
174,079

 
358,832

 
(193,455
)
 
165,377

Programs (1)
 
144,000

 
(9,000
)
 
135,000

 
144,000

 
(5,400
)
 
138,600

Other intangible assets
 
41,123

 
(29,063
)
 
12,060

 
40,340

 
(29,806
)
 
10,534

Total
 
$
809,449

 
$
(375,932
)
 
$
433,517

 
$
781,384

 
$
(351,817
)
 
$
429,567

 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Programs include values assigned to major programs of acquired businesses and represent the aggregate value associated with the customer relationships, contracts, technology, and trademarks underlying the associated program. 

During the six months ended June 30, 2019, the Corporation acquired intangible assets of $26.0 million. The Corporation acquired Customer-related intangibles of $18.9 million, Technology of $6.3 million, and Other intangible assets of $0.8 million, which have a weighted average amortization period of 14.6 years, 15.0 years, and 8.0 years, respectively.

Total intangible amortization expense for the six months ended June 30, 2019 was $22.6 million as compared to $21.1 million in the comparable prior year period.  The estimated amortization expense for the five years ending December 31, 2019 through 2023 is $45.2 million, $43.4 million, $41.5 million, $39.0 million, and $35.3 million, respectively.

8.           LEASES


Page 14

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



The Corporation conducts a portion of its operations from leased facilities, which include manufacturing and service facilities, administrative offices, and warehouses. In addition, the Corporation leases vehicles, machinery, and office equipment under operating leases. Our leases have remaining lease terms of 1 year to 25 years, some of which include options for renewals, escalations, or terminations.

The components of lease expense were as follows:
 
Three Months Ended
 
Six Months Ended
(In thousands)
June 30, 2019
 
June 30, 2019
Operating lease cost
$
7,146

 
$
15,358

 
 
 
 
Finance lease cost:
 
 
 
Amortization of right-of-use assets
$
199

 
$
396

Interest on lease liabilities
125

 
253

Total finance lease cost
$
324

 
$
649


Supplemental cash flow information related to leases was as follows:
 
Six Months Ended
(In thousands)
June 30, 2019
Cash used for operating activities:
 
Operating cash flows from operating leases
$
(15,207
)
Operating cash flows from finance leases
(253
)
Non-cash activity:
 
Right-of-use assets obtained in exchange for operating lease obligations
$
1,711



Supplemental balance sheet information related to leases was as follows:
(In thousands, except lease term and discount rate)
As of June 30, 2019
Operating Leases
 
Operating lease right-of-use assets, net
$
135,190

 
 
Other current liabilities
$
23,328

Long-term operating lease liability
117,789

Total operating lease liabilities
$
141,117

 
 
Finance Leases
 
Property, plant, and equipment
$
15,561

Accumulated depreciation
(5,014
)
Property, plant, and equipment, net
$
10,547

 
 
Other current liabilities
$
777

Other liabilities
11,431

Total finance lease liabilities
$
12,208

 
 
Weighted average remaining lease term
 
Operating leases
8.1 years

Finance leases
10.2 years

Weighted average discount rate
 
Operating leases
3.85
%
Finance leases
4.05
%


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




Maturities of lease liabilities were as follows:
 
As of June 30, 2019
(In thousands)
Operating Leases
Finance Leases
2019
$
14,448

$
660

2020
27,560

1,342

2021
24,553

1,375

2022
18,358

1,410

2023
16,527

1,445

Thereafter
64,403

8,892

Total lease payments
$
165,849

$
15,124

Less: imputed interest
(24,732
)
(2,916
)
Total
$
141,117

$
12,208



In November 2018, the Corporation entered into a build-to-suit lease of approximately $27 million for the construction of a new facility for DRG in Charleston, South Carolina. The lease has not been reflected in the Corporation’s condensed consolidated financial statements as of June 30, 2019 as the Corporation has not yet obtained the right to control the use of the facility.

9.           FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Forward Foreign Exchange and Currency Option Contracts
 
The Corporation has foreign currency exposure primarily in the United Kingdom, Europe, and Canada.  The Corporation uses financial instruments, such as forward and 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.
 
Interest Rate Risks and Related Strategies
 
The Corporation’s primary interest rate exposure results from changes in U.S. dollar interest rates. The Corporation’s policy is to manage interest cost using a mix of fixed and variable rate debt. The Corporation periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Corporation exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The Corporation’s foreign exchange contracts and interest rate swaps are considered Level 2 instruments which are based on market based inputs or unobservable inputs and corroborated by market data such as quoted prices, interest rates, or yield curves.

Effects on Condensed Consolidated Balance Sheets

As of June 30, 2019 and December 31, 2018, the fair values of the asset and liability derivative instruments were immaterial.

Effects on Condensed Consolidated Statements of Earnings
 
Undesignated hedges

The location and amount of gains or (losses) recognized in income on forward exchange derivative contracts not designated for hedge accounting for the three and six months ended June 30, were as follows:


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



 
 
Three Months Ended
 
Six Months Ended
(In thousands)
 
June 30,
 
June 30,
Derivatives not designated as hedging instrument
 
2019
 
2018
 
2019
 
2018
Forward exchange contracts:
 
 
 
 
 
 
 
 
General and administrative expenses
 
$
(2,158
)
 
$
(2,871
)
 
$
1,431

 
$
(2,518
)

Debt

The estimated fair value amounts were determined by the Corporation using available market information that is primarily based on quoted market prices for the same or similar issuances as of June 30, 2019.  Accordingly, all of the Corporation’s debt is valued as a Level 2 financial instrument.  The fair values described below 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.

 
June 30, 2019
 
December 31, 2018
(In thousands)
Carrying Value
 
Estimated Fair Value
 
Ca