-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GwERhfI1mkMC5iOKVq3m5zQUlJvggUKWprHO7BQ/FymC9SK0j3+b+3ca2++EMC2y rT84UNELqay3F9L89PRG8g== 0000025445-97-000009.txt : 19970812 0000025445-97-000009.hdr.sgml : 19970812 ACCESSION NUMBER: 0000025445-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970808 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRANE CO /DE/ CENTRAL INDEX KEY: 0000025445 STANDARD INDUSTRIAL CLASSIFICATION: 5031 IRS NUMBER: 131952290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01657 FILM NUMBER: 97654330 BUSINESS ADDRESS: STREET 1: 100 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033637300 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1997 Commission File Number 1-1657 CRANE CO. (Exact name of registrant as specified in its charter) Delaware 13-1952290 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 First Stamford Place, Stamford, Ct. 06902 (Address of principal executive office) (Zip Code) (203) 363-7300 (Registrant's telephone number, including area code) (Not Applicable) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period 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 The number of shares outstanding of the issuer's classes of common stock, as of July 31, 1997: Common stock, $1.00 Par Value - 45,904,700 shares Part I - Financial Information Item 1. Financial Statements Crane Co. Consolidated Statements of Income (in thousands except per share amounts) (unaudited)
Periods Ended June 30, Three Months Six Months 1997 1996 1997 1996 Net Sales $ 518,763 $ 466,231 $ 986,096 $902,694 Operating Costs and Expenses: Cost of sales 375,794 339,605 713,954 659,587 Selling, general and administrative 77,902 70,999 152,716 141,485 Depreciation & amortization 13,815 12,050 27,179 24,072 467,511 422,654 893,849 825,144 Operating Profit 51,252 43,577 92,247 77,550 Other Income (Deductions): Interest income 388 647 1,080 1,180 Interest expense (5,986) (5,768) (11,943) (11,630) Miscellaneous - net 216 (3,437) 232 (2,601) (5,382) (8,558) (10,631) (13,051) Income Before Taxes 45,870 35,019 81,616 64,499 Provision for Income Taxes 16,648 12,915 29,749 24,187 Net Income $ 29,222 $ 22,104 $ 51,867 $ 40,312 Net Income Per Share $ .63 $ .48 $ 1.12 $ .88 Average Shares Outstanding 46,632 45,968 46,502 45,878 Dividends Per Share $ .125 $ .125 $ .25 $ .25 See Notes to Consolidated Financial Statements
-2- Part I - Financial Information Item 1. Financial Statements (Cont'd) Crane Co. Consolidated Balance Sheets (in thousands)
June 30, December 31, 1997 1996 1996 (unaudited) Assets Current Assets: Cash and cash equivalents $ 8,254 $ 22,494 $ 11,579 Accounts receivable 291,924 255,184 253,729 Inventories: Finished goods 119,491 121,805 124,490 Finished parts and subassemblies 36,910 35,199 35,507 Work in process 48,606 33,791 43,894 Raw materials 68,147 55,435 63,383 273,154 246,230 267,274 Other current assets 7,619 7,091 7,432 Total Current Assets 580,951 530,999 540,014 Property, Plant and Equipment: Cost 572,075 521,344 547,566 Less accumulated depreciation 306,798 280,478 289,219 265,277 240,866 258,347 Other Assets 29,549 27,080 29,879 Intangibles 53,312 57,359 55,862 Cost in excess of net assets acquired 214,748 167,601 204,753 $ 1,143,837 $ 1,023,905 $ 1,088,855 See Notes to Consolidated Financial Statements -3-
Part I - Financial Information Item 1. Financial Statements (Cont'd) Crane Co. Consolidated Balance Sheets (Cont'd) (in thousands)
June 30, December 31, 1997 1996 1996 (unaudited) Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt $ 1,106 $ 760 $ 1,251 Loans payable 28,964 18,115 23,937 Accounts payable 124,222 101,040 105,082 Accrued liabilities 111,575 116,559 116,488 U.S. and foreign taxes on income 10,160 14,143 7,095 Total Current Liabilities 276,027 250,617 253,853 Long-Term Debt 267,363 265,180 267,795 Deferred Income Taxes 30,301 27,609 29,774 Other Liabilities 25,365 21,876 25,126 Accrued Postretirement Benefits 42,908 43,153 43,155 Accrued Pension Liability 6,205 8,382 6,483 Preferred Shares, Par Value $.01 Authorized - 5,000 Shares - - - Common Shareholders' Equity: Common shares 45,832 45,547 45,660 Capital surplus 31,368 20,199 29,756 Retained earnings 431,080 352,384 394,621 Currency translation adjustment (12,612) (11,042) (7,368) Total Common Shareholders' Equity 495,668 407,088 462,669 $ 1,143,837 $ 1,023,905 $ 1,088,855 See Notes to Consolidated Financial Statements -4-
Part I - Financial Information Item 1. Financial Statements (Cont'd) Crane Co. Consolidated Statements of Cash Flows (in thousands) (unaudited)
Six Months Ended June 30, 1997 1996 Cash flows from operating activities: Net income $ 51,867 $ 40,312 Depreciation 18,415 17,279 Amortization 8,764 7,050 Deferred taxes (478) (833) Cash used for operating working capital (19,047) (10,227) Other (713) (917) Total from operating activities 58,808 52,664 Cash flows from investing activities: Capital expenditures (21,703) (16,710) Payments for acquisitions (24,057) - Proceeds from divestitures - 1,554 Proceeds from disposition of capital assets 857 1,391 Purchase of equity investment - - Total used for investing activities (44,903) (13,765) Cash flows from financing activities: Equity: Dividends paid (11,428) (11,356) Reacquisition of shares (8,056) (1,522) Stock options exercised 4,049 4,160 Net Equity (15,435) (8,718) Debt: Proceeds from issuance of long-term debt - - Repayments of long-term debt (3,102) (11,905) Net increase (decrease) in short-term debt 2,070 (1,237) Net Debt (1,032) (13,142) Total used for financing activities (16,467) (21,860) Effect of exchange rate on cash and cash equivalents (763) (21) Increase (decrease) in cash and cash equivalents (3,325) 17,018 Cash and cash equivalents at beginning of period 11,579 5,476 Cash and cash equivalents at end of period $ 8,254 $ 22,494 Detail of Cash (Used for) Provided From Operating Working Capital: Accounts receivable $ (31,435) $ (15,569) Inventories (5,119) (1,877) Other current assets 763 (353) Accounts payable 19,108 4,830 Accrued liabilities (5,627) 1,343 U.S. and foreign taxes on income 3,263 1,399 Total $ (19,047) $ (10,227) Supplemental disclosure of cash flow information: Interest paid $ 11,227 $ 11,418 Income taxes paid $ 24,460 $ 22,530 See Notes to Consolidated Financial Statements -5-
Part I - Financial Information Item 1. Financial Statements (Cont'd) Notes to Consolidated Financial Statements 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim period presented. These interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements in the company's Annual Report on Form 10-K for the year ended December 31, 1996. 2. Sales and operating profit by segment are as follows:
Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 (in thousands) Net Sales: Fluid Handling $ 102,158 $ 91,974 $ 190,273 $ 184,204 Aerospace 85,118 57,168 167,012 115,489 Engineered Materials 58,604 53,166 114,976 103,904 Crane Controls 33,576 32,457 65,329 66,240 Merchandising Systems 50,358 47,410 92,824 91,482 Wholesale Distribution 188,241 186,528 355,142 345,948 Other 3,442 1,892 6,396 4,472 Intersegment Elimination (2,734) (4,364) (5,856) (9,045) Total $ 518,763 $ 466,231 $ 986,096 $ 902,694 Operating Profit (Loss): Fluid Handling $ 7,438 $ 5,726 $ 13,527 $ 10,764 Aerospace 21,895 16,426 41,693 31,709 Engineered Materials 7,582 7,671 14,696 12,911 Crane Controls 3,278 2,619 5,207 6,096 Merchandising Systems 10,127 7,251 17,868 13,117 Wholesale Distribution 6,470 8,297 9,853 11,857 Other 207 (38) 523 13 Corporate (5,890) (4,475) (11,273) (9,047) Intersegment Elimination 145 100 153 130 Total $ 51,252 $ 43,577 $ 92,247 $ 77,550 -6-
Part I - Financial Information Item 1. Financial Statements (Cont'd) Notes to Consolidated Financial Statements (Cont'd) 3. Restatements Share and per share data for the three and six months ending June 30, 1996 has been restated to reflect the three-for-two stock split effected on December 12, 1996. 4. Inventories Inventories are stated at the lower of cost or market, principally on the last-in, first-out (LIFO) method of inventory valuation. Replacement cost would be higher by $51,757,000 at June 30, 1997, $52,377,000 at June 30, 1996, and $49,260,000 at December 31, 1996. 5. Earning Per Share The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, (SFAS128). The company plans to adopt SFAS128 for both interim and annual periods after December 15, 1997, as required by the statement. Pro forma amounts as if the statement had been adopted for the second quarter of 1997 are as follows: Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 Basic Earnings Per Share $ .64 $ .49 $1.14 $ .89 Fully Diluted Earnings Per Share $ .63 $ .48 $1.12 $ .88
-7- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three and Six Months Ended June 30, 1997 and 1996 [CAPTION] Results From Operations: Second Quarter of 1997 Compared to Second Quarter of 1996: Net income for the quarter ended June 30, 1997 set a second quarter record, rising 32 percent to $29.2 million, or $.63 per share from the $22.1 million, or $.48 per share, reported for the 1996 second quarter. Operating profit for the second quarter increased 18 percent to $51.3 million on a sales gain of 11 percent to $518.8 million. Fluid Handling sales rose 11 percent and operating profit increased 30 percent in the quarter compared with the prior year. The MOVATS valve diagnostic and service business, acquired in April, contributed $8 million in sales in the quarter. Sales were also higher in the specialty marine Norwegian steel valve and Australian steel valve operations. Pump product line sales were adversely affected by delays in project orders. Fluid Handling operating profits in the quarter increased from the prior year due to the MOVATS acquisition and improved operational performance in North American operations. Profitability was negatively impacted by production problems in Norway and adverse product mix and lower demand in the U.K. valve operation. The company expects MOVATS to have less of an impact on sales and profitability for the remainder of the year due to seasonality. Aerospace sales increased 49 percent in the quarter with Interpoint, the high density power converter business acquired in October of 1996, contributing more than half the increase. Excluding the acquisition, sales rose 23 percent because of continued high aircraft production levels and airline utilization rates. Operating profit in the second quarter improved 33 percent due to the higher sales volume and, excluding Interpoint, margins improved even though product development costs were $2.2 million higher in the 1997 second quarter compared with the 1996 second quarter. Order backlog, exclusive of Interpoint, was more than 11 percent higher than the prior year backlog. Engineered Materials sales increased 10 percent but operating profit declined one percent, compared with the 1996 second quarter. While all businesses contributed to the sales growth, Kemlite was the main contributor as its fiberglass reinforced plastic panel products continued to displace aluminum in the recreational vehicle and truck trailer market. Overall margins declined to 12.9 percent of sales from 14.4 percent in 1996 as Kemlite was impacted by the costs of integrating the Sequentia transportation product line, acquired in March, into its Joliet production facility. In addition, Resistoflex profits were lower than the extremely strong results in 1996 due -8- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three and Six Months Ended June 30, 1997 and 1996 primarily to lower large project related business. For the group as a whole, order backlog was down 9 percent from the prior year level reflecting the low project orders at Resistoflex partially offset by a stronger transportation market at Kemlite. Crane Controls sales increased 3 percent on strong shipments of air suspension valves at Barksdale. Operating profit improved 25 percent primarily due to successful cost reduction efforts at Ferguson. Controls order backlog stood 11 percent higher at the close of the 1997 second quarter compared with the 1996 second quarter. Merchandising Systems sales were up 6 percent in the quarter compared with last year because of the mid March 1997 Polyvend vending machine acquisition, which contributed nearly $5 million in sales. Operating profit increased 40 percent and profit margins improved to 20.1 percent from 15.3 percent in the same period last year due to productivity gains and sales of higher margin products at both National Vendors and NRI, GmbH. The company expects further cost reductions in the coming months as the integration of the Polyvend manufacturing operation into National Vendor's St. Louis facility is completed. Order backlog was in line with the prior year. Wholesale Distribution sales increased one percent as sales gains at Huttig and Valve Systems and Controls were partially offset by sales declines at Crane Supply due to lower levels of commercial and industrial building in Canada. Operating profit fell 22 percent because of higher material costs at Huttig's wood molding manufacturing business and the impact of lower sales at Crane Supply on profits and margins. Operating results at Huttig's distribution business were essentially equal to the 1996 level. Order backlog at June 30, 1997 was 6 percent below the prior year level. In the second quarter of 1996, the company incurred miscellaneous expense of $3.4 million due principally to litigation costs in connection with the successful defense of a False Claims Act related to the CF&I Steel Corporation which was spun off in 1985. This compared to miscellaneous income of $216,000 in the 1997 second quarter. On July 1, 1997 the company announced the acquisition of MALLCO Lumber & Building Materials Inc. MALLCO is a leading wholesale distributor of lumber, doors and engineered wood products in Phoenix, and throughout the state of Arizona. MALLCO, whose sales in 1996 were approximately $70 million, will be integrated with Huttig's existing millwork and lumber distribution businesses serving the same geographic markets. -9- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three and Six Months Ended June 30, 1997 and 1996 [CAPTION] Results From Operations: Six Months Ended June 30, 1997 Compared to Six Months Ended June 30 , 1996: Net income for the first six months increased 29 percent to $51.9 million, or $1.12 per share, compared to $40.3 million, or $.88 per share, last year. Operating income for the first six months rose 19 percent to $92.2 million on a sales increase of 9 percent to $986.1 million. Fluid Handling sales improved 3 percent and operating profit rose 26 percent compared to 1996. Sales increased due to the MOVATS acquisition and strong shipments at the company's Australian valves operation. These gains were partially offset by lower shipments of cast steel valves. Operating profit improved as North American valves operations benefited from the MOVATS acquisition and productivity gains in the manufacture of bronze and quarter turn valves. Aerospace sales increased 45 percent for the first six months with Interpoint and Grenson, acquired in the fourth quarter of 1996, contributing nearly two-thirds of the increase. Excluding the acquisitions, sales rose 17 percent on the continued strength of aircraft production and utilization levels. Operating profit increased 31 percent as a result of the higher sales and acquisitions. Profit margins declined to 25 percent of sales compared to 27.5 percent last year due to the inclusion of Interpoint. Profit margins would have been slightly higher without Interpoint even though product development costs were $4.4 million higher than the prior year. Engineered Materials sales rose 11 percent and operating profit rose 14 percent compared with the 1996 first half. All operations experienced higher shipments with significant contributions from Kemlite and Resistoflex. Kemlite sales improved 14 percent on strong demand in the recreational vehicle market and the Sequentia acquisition. Resistoflex sales gained 9 percent because of significant project wins in the early part of the year. For the group as a whole, profit margins improved slightly to 12.8 percent of sales compared to 12.4 percent. -10- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three and Six Months Ended June 30, 1997 and 1996 [CAPTION] Results From Operations: Six Months Ended June 30, 1997 Compared to Six Months Ended June 30 , 1996: Crane Controls operating profit decreased 15 percent on a one percent sales decline. All operations reported lower sales except for Barksdale which benefited from strong air suspension valve shipments. Profit margins for the group were 8 percent of sales, down from 9.2 percent last year. Merchandising Systems sales increased 1.5 percent because of the Polyvend acquisition which contributed $5.1 million in sales. This was partially offset by lower domestic shipments to national accounts and independent operators at National Vendors. Operating profit improved 36 percent compared with the first half of 1996. Profit margins for the group improved nearly five percentage points to 19.2 percent of sales as a result of operating efficiencies and sales of higher margin products. Wholesale Distribution sales improved 2.7 percent but operating profit declined 17 percent. Huttig's distribution business was the major contributor to the sales gain, benefiting from strong housing activity in New England, California and Florida. This was partially offset by a decline in sales at Crane Supply due to a weak industrial market in Ontario. The weak sales at Crane Supply coupled with higher raw material costs at Huttig's manufacturing business led to the decline in operating profit. [CAPTION] Liquidity and Capital Resources: During the first half of 1997 the company generated $58.8 million of cash from operating activities compared to $52.7 million in 1996. In addition, the company paid $24.1 million in cash for the Polyvend, Sequentia and MOVATS acquisitions, and repurchased 168,500 shares of Crane Co. stock in the open market at a cost of $4.9 million. Net debt increased to $289.2 million at June 30, 1997, a $7.8 million increase from the start of the year due to the acquisitions. Net debt to capital was 36.8 percent at June 30, 1997. The current ratio was 2.1 with working capital totaling $304.9 million at June 30, 1997 compared to $280.4 million at June 30, 1996. Due to seasonality, the company's working capital requirements peak at midyear. -11- Part II - Other Information Item 1. Legal Proceedings During the period covered by this report, there have been no material developments in any of the legal proceedings described in the company's Annual Report on Form 10-K for the year ended December 31, 1996. Item 6. Exhibits and Reports on Form 8-K 11.Computation of earnings per share for the quarters and six months ended June 30, 1997 and 1996. 27.Article 5 of Regulation S-X Financial Data Schedule for the second quarter. -12- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CRANE CO. REGISTRANT Date August 8, 1997 By /s/ D.S. Smith D.S. SMITH Vice President-Finance and Chief Financial Officer Date August 8, 1997 By /s/ M.L. Raithel M.L. RAITHEL Controller -13- EXHIBIT 11 Crane Co. Computation of Net Income per Common Share (in thousands except per share amounts)
Three Months Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 Primary Net Income Per Share: Net income available to shareholders $29,222 $ 22,104 $51,867 $40,312 Average primary shares outstanding 46,632 45,968 46,502 45,878 Net Income $ .63 $ .48 $ 1.12 $ .88 Fully Diluted - Income Per Share: Net income $29,222 $ 22,104 $51,867 $40,312 Average primary shares outstanding 46,632 45,968 46,502 45,878 Add Adjustment for further dilutive effect of stock options (ending market price higher than average market price used in primary shares calculation) 128 - 222 2 Average fully diluted shares outstanding 46,760 45,968 46,724 45,880 Net income $ .62 $ .48 $ 1.10 $ .88
-14- EX-27 2 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q
5 1,000 6-MOS DEC-31-1997 Jun-30-1997 8,254 0 291,924 0 273,154 580,951 572,075 306,798 1,143,837 276,027 267,363 45,832 0 0 449,836 1,143,837 986,096 986,096 735,540 893,849 232 0 10,863 81,616 29,749 51,867 0 0 0 51,867 1.12 1.10
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