-----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, GST5IG6UblMXzfj0Raoe20AyUCfQp6+pCM3pwrsZ06dQNC6INHaDt9mwWhjo2SOV NslDwSVFtmx9DgIdaEngMQ== 0000025445-99-000003.txt : 19990517 0000025445-99-000003.hdr.sgml : 19990517 ACCESSION NUMBER: 0000025445-99-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRANE CO /DE/ CENTRAL INDEX KEY: 0000025445 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-LUMBER, PLYWOOD, MILLWORK & WOOD PANELS [5031] IRS NUMBER: 131952290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-22904 FILM NUMBER: 99621584 BUSINESS ADDRESS: STREET 1: 1000 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033637300 MAIL ADDRESS: STREET 1: 1000 FURST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 10-Q 1 QUARTERLY 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 March 31, 1999 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 April 30, 1999: Common stock, $1.00 Par Value - 67,997,249 shares Part I - Financial Information Item 1. Financial Statements Crane Co. and Subsidiaries Consolidated Statements of Income (In Thousands, Except Per Share Amounts) (Unaudited)
Three Months Ended March 31, 1999 1998 Net Sales $574,821 $526,817 Operating Costs and Expenses: Cost of sales 413,638 379,989 Selling, general and Administrative 88,062 80,172 Depreciation and amortization 16,280 14,281 ------- ------- 517,980 474,442 Operating Profit 56,841 52,375 Other Income (Expense): Interest income 1,369 542 Interest expense (7,922) (5,939) Miscellaneous - net 1,907 (78) ------ ------ (4,646) (5,475) Income Before Taxes 52,195 46,900 Provision for Income Taxes 18,529 17,001 -------- -------- Net Income $ 33,666 $ 29,899 ======== ======== Net Income Per Share: Basic $.49 $.44 Diluted .49 .43 Average Basic Shares Outstanding 68,218 68,387 Average Diluted Shares Outstanding 68,781 69,308 Dividends Per Share $.10 $.08 See Notes to Consolidated Financial Statements
-2- Part I - Financial Information Item 1. Financial Statements Crane Co. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share and Per Share Amounts) (Unaudited)
March 31, December 31, 1999 1998 1998 ---- ---- ---- Assets Current Assets Cash and cash equivalents $ 24,355 $ 48,908 $ 15,909 Accounts receivable 307,417 286,807 303,245 Inventories: Finished goods 153,546 118,683 146,898 Finished parts and subassemblies 60,008 49,241 58,644 Work in process 37,692 47,732 38,743 Raw materials 77,056 80,206 86,059 ------- ------- ------- 328,302 295,862 330,344 Other Current Assets 50,168 40,215 49,468 ------- ------- ------- Total Current Assets 710,242 671,792 698,966 Property, Plant and Equipment: Cost 639,462 592,296 645,383 Less accumulated depreciation 337,071 317,471 337,816 ------- ------- ------- 302,391 274,825 307,567 Other Assets 36,157 30,497 32,964 Intangibles 48,984 50,661 50,073 Cost in excess of net assets acquired 359,315 218,299 365,104 ---------- ---------- ---------- $1,457,089 $1,246,074 $1,454,674 ========== ========== ========== See Notes to Consolidated Financial Statements
-3- Part I - Financial Information Item 1. Financial Statements Crane Co. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share and Per Share Amounts) (Unaudited)
March 31, December 31, 1999 1998 1998 ---- ---- ---- Liabilities and Shareholders Equity Current Liabilities Current maturities of long-term debt $ 728 $ 981 $ 787 Loans payable 45,409 24,573 50,401 Accounts payable 144,703 134,728 132,376 Accrued liabilities 133,432 118,749 148,938 U.S. and foreign taxes on income 33,672 29,497 18,660 ------- ------- ------- Total Current Liabilities 357,944 308,528 351,162 Long-Term Debt 353,808 281,783 359,090 Deferred Income Taxes 26,610 21,739 26,184 Other Liabilities 23,788 26,783 28,235 Accrued Postretirement Benefits 40,273 41,152 40,814 Accrued Pension Liability 5,965 6,415 5,955 Preferred Shares, par value $.01 - - - 5,000,000 shares authorized Common Shareholders Equity: Common stock, par value $1.00 72,426 72,426 72,426 80,000,000 shares authorized, 72,426,139 shares issued Capital surplus 96,262 89,624 96,262 Retained earnings 602,565 486,280 574,797 Accumulated other comprehensive income (loss) (21,173) (16,442) (18,036) Common stock held in treasury (101,379) (72,214) (82,215) ------- ------- ------- Total Common Shareholders Equity 648,701 559,674 643,234 ---------- ---------- ---------- $1,457,089 $1,246,074 $1,454,674 ========== ========== ========== Common Stock Issued 72,426,139 72,426,139 72,426,139 Less Common Stock held in Treasury (4,621,593) (3,959,068) (3,930,245) ---------- ---------- ---------- Common Stock Outstanding 67,804,546 68,467,071 68,495,894 ========== ========== ========== See Notes to Consolidated Financial Statements
-4- Part I - Financial Information (Cont'd.) Item 1. Financial Statements Crane Co. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands) (Unaudited)
March 31, 1999 1998 Cash flows from Operating activities: Net income $33,666 $29,899 Depreciation 10,111 9,505 Amortization 6,169 4,776 Deferred income taxes 1,838 (306) Cash used for operating working capital 6,120 (4,189) Other (7,918) 2,009 ------ ------ Total provided by operating activities 49,986 41,694 Cash flows used for Investing activities: Capital expenditures (8,778) (10,970) Purchase of equity investment (2,008) - Proceeds from disposition of capital assets 4,807 116 ------- -------- Total used for investing activities (5,979) (10,854) Cash flows for Financing activities: Equity: Dividends paid (6,810) (5,703) Reacquisition of shares-open market (20,313) - Reacquisition of shares-stock incentive programs (656) (418) Stock options exercised 2,802 1,938 -------- ------- Net equity (24,977) (4,183) Debt: Proceeds from issuance of long-term debt - 20,935 Repayments of long-term debt (350) (14) Net decrease in short-term debt (9,095) (5,460) ------- ------ Net debt (9,445) 15,461 -------- ------ Total (used for) provided by financing activities (34,422) 11,278 Effect of exchange rate on cash and cash equivalents (1,139) (192) ------ ------ Increase in cash and cash equivalents 8,446 41,926 Cash and cash equivalents at beginning of period 15,909 6,982 ------- ------- Cash and cash equivalents at end of period $24,355 $48,908 ======= ======= Detail of Cash Provided by (Used for) Operating Activities Working capital Accounts receivable $ (5,306) $(15,246) Inventories 1,043 (5,097) Other current assets (751) (2,602) Accounts payable 12,982 12,311 Accrued liabilities (15,053) (9,891) U.S. and foreign taxes on income 13,205 16,336 -------- --------- Total $ 6,120 $ (4,189) ======== ========= Supplemental disclosure of cash flow information: Interest paid $5,770 $5,124 Income taxes paid 4,265 883 See Notes to Consolidated Financial Statements
-5- Part I - Financial Information (Cont'd.) Notes to Consolidated Financial Statements (Unaudited) 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. Certain prior year amounts have been reclassified to conform to the 1999 presentation. 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, 1998. 2. Sales and operating profit by segment are as follows:
Three Months Ended March 31, 1999 1998 ---- ---- (In thousands) Net Sales: Fluid Handling $105,300 $118,041 Aerospace 97,080 94,505 Engineered Materials 91,061 61,249 Crane Controls 30,160 35,002 Merchandising Systems 50,285 46,184 Wholesale Distribution 200,061 172,448 Other 3,395 3,206 Intersegment Elimination (2,521) (3,818) -------- -------- Total $574,821 $526,817 ======== ======== Operating Profit (Loss): Fluid Handling $ 3,845 $ 8,952 Aerospace 27,243 25,272 Engineered Materials 14,658 7,551 Crane Controls 584 2,982 Merchandising Systems 9,506 8,736 Wholesale Distribution 5,740 4,428 Other (145) (383) Corporate (4,553) (5,200) Intersegment Elimination (37) 37 ------- ------- Total $56,841 $52,375 ======= =======
-6- Part I - Financial Information (Cont'd.) Notes to Consolidated Financial Statements (Unaudited) 3. 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 $42.1 million at March 31, 1999, $47.7 million at March 31, 1998, and $42.8 million at December 31, 1998. 4. Intangibles Intangible assets are amortized on a straight-line basis over their estimated useful lives, which range form five to twenty years. Accumulated amortization was $22.8 million at March 31, 1999, $19.5 million at March 31, 1998 and $21.8 million at December 31, 1998 5. Cost in Excess of Net Assets Acquired Cost in excess of net assets acquired is amortized on a straight-line basis principally over 15 to 40 years. Accumulated amortization was $55.2 million at March 31, 1999, $39.6 million at March 31, 1998 and $50.9 million at December 31, 1998. 6. Total comprehensive income for the three months ended March 31, 1999 and 1998 was as follows:
Three Months Ended March 31, 1999 1998 ---- ---- (In Thousands) Net Income $33,666 $29,899 Other comprehensive income, net of tax Unrealized gain on equity investment 653 - Foreign currency translation adjustments (3,790) 108 ------- ------- Comprehensive Income $30,529 $30,007 ======= =======
-7- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 and 1998 This 10Q may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this 10Q, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 filed with the Securities and Exchange Commission Results from Operations First Quarter of 1999 Compared to First Quarter of 1998 Net income for the quarter ended March 31, 1999, set a first quarter record of $33.7 million, an increase of 13% from $29.9 million in the same period last year. Earnings per diluted share of $.49 was a 14% increase from the $.43 reported last year. Operating profit for the first quarter increased 9% to $56.8 million on a sales increase of 9% to $574.8 million. Operating margins for the quarter were unchanged at 9.9% of sales. Cash flow (net income plus depreciation and amortization) per diluted share increased 14% for the quarter to $.73 per share. The improved performance was led by Engineered Materials, where sales increased 49%, or $29.8 million, to $91.1 million and operating profit increased 94% to $14.7 million, compared to the first quarter of 1998. Kemlite's transportation, recreational vehicle and building products markets continued their strong growth, with sales up 14% and operating profit up 50% over 1998. The acquisitions of Sequentia (August 1998) and Plastic-Lined Piping Products (September 1998), consistent with Crane's strategy to make synergistic acquisitions that are accretive to earnings per share, added $26.0 million in sales and $3.3 million in operating profit for the quarter. These acquisitions continue to be integrated with Kemlite and Resistoflex, respectively. Operating profit margins increased to 16.1% of sales compared to 12.3% in 1998 as margins improved at Plumbing, Kemlite and Resistoflex. Order backlog decreased $4.5 million, to $29.1 million as Cortec's order backlog declined from unusually high levels in 1998. Aerospace sales increased 3%, or $2.6 million, to $97.1 million in the quarter with all businesses continuing to benefit from the strength of their market position across all segments of the aerospace industry. Operating profit increased 8%, or $2.0 million, to $27.2 million, with Hydro-Aire and ELDEC benefiting from higher general aviation, after-market and repair/overhaul sales. Operating margins improved further, to 28.1% compared to 26.7% in the first quarter of 1998. Order backlog decreased $46.1 million to $264.7 million. Merchandising Systems sales and operating profit were both up 9%, to $50.3 million and $9.5 million, respectively. Driven by shipments of new Euro-capable coin validators, NRI posted a 22% increase in sales and, due to lower costs, a -8- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 and 1998 79% increase in profit. National Vendors sales were up 7% due to higher export demand and higher sales to the domestic distributor market, but operating profit decreased versus the prior year's quarter due to investments in marketing and new product development. Operating margins were strong at 18.9% of sales, equal to the prior year. Order backlog decreased slightly from last year, to $19.7 million. Wholesale Distribution sales increased 16%, or $27.6 million, to $200.1 million and operating profit increased 30%, or $1.3 million, to $5.7 million. This strong result was due to Huttig, where sales were up 19%, or $27.9 million, and operating profit was up 35%, or $1.0 million. These increases were due to Huttig's acquisitions of Number One Supply and Consolidated Lumber in 1998 and its focus on consolidating smaller, under-performing branches into larger, profitable regional branches, as well as increasing sales of higher-margin products throughout the company. Crane Supply's sales decreased slightly due to negative currency fluctuations, however, operating profit measured in U.S. dollars increased 11% as costs remained under control. Operating profit margins improved to 2.9% of sales compared to 2.6% in 1998 with both Huttig and Crane Supply improving. Fluid Handling sales declined 11%, or $12.7 million, to $105.3 million. Operating profit decreased 57%, or $5.1 million, to $3.8 million. These declines were due to a 31% decline in Commercial bronze and iron valve shipments and a 26% decline in Cast Steel valve shipments. Commercial Valve's results were caused by a lack of shippable bronze valve product in the U.S. and market weakness in the U.K. Cast Steel's results were due to weak demand from the oil and gas industry. Partially offsetting this, the Quarter Turn and Wafer Check businesses achieved higher first quarter earnings and improved their operating margins. The Nuclear business was strong, as the Liberty Technologies acquisition (September 1998) was integrated with Crane's existing service organization. Operating profit margins were 3.7% versus 7.6% in 1998. Overall Fluid Handling order backlog totaled $79.0 million at March 31, 1999, versus $115.5 million in 1998. Crane Controls sales decreased 14%, or $4.8 million, to $30.2 million and operating profit declined 80%, or $2.4 million, to $.6 million. All business units except Dynalco, which benefited from the Liberty Technologies acquisition, reported lower sales and operating profits as a result of continued weak demand for their products from the oil and gas, chemical process and general industrial markets. Operating profit margins declined to 1.9% of sales from 8.5% in the first quarter of 1998. Order backlog slipped 4%, to $30.8 million. During the quarter, the company repurchased 801,700 shares of its stock in the open market at a total cost of $20.3 million. Also during the quarter, the company increased its shelf registration for unsecured debt securities with the U.S. Securities and Exchange Commission to $300 million. Net interest expense for the quarter ended March 31, 1999 increased 21%, due to acquisitions made in 1998. The effective tax rate decreased to 35.5% for the three months ended March 31, 1999 as opposed to 36.2% at March 31, 1998. -9- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 and 1998 Liquidity and Capital Resources During the three months of 1999 the company generated $50.0 million of cash from operating activities, compared to $41.7 million in 1998. Net debt totaled 36.7 percent of capital at March 31, 1999 compared to 31.6% in 1998. The current ratio was 2.0 with working capital totaling $352.3 million at March 31, 1999 compared to 2.2 and $363.3 million at March 31, 1998. The company had unused credit lines of $516.1 million at March 31, 1999. Year 2000 Readiness The Year 2000 issue relates to most computer software programs using two digits, rather than four, to define the applicable year for dates. Any of the company's information technology (IT) and non-information technology (non-IT) systems and its products may recognize a date using "00" as the year 1900, rather than the year 2000. This could result in system failures or miscalculations, causing disruptions in operations, including the inability to process transactions and engage in similar normal business activities within the company and with third parties. Crane has implemented a Year 2000 program for its IT and non-IT systems and its products consisting of four phases: 1) awareness, formation, planning and management, 2) inventory, analysis, compliance testing, prioritization and planning, 3) implementation and validation, and 4) Year 2000 compliance. The company's senior management and Board of Directors receive regular updates on the status of the company's Year 2000 program. In addition, the company has contacted significant vendors and customers in order to determine the risks to the company for a third party's failure to remediate its own Year 2000 issues. While information obtained from these contacts will be used to mitigate these risks, there can be no assurance that any third party systems or products will be Year 2000 compliant on a timely basis or that non-compliance by such third parties will not have a material adverse effect on the company. The company's Year 2000 Program was initiated in 1997. Virtually all mission-critical systems, including IT and non-IT systems, are in the implementation phase or are compliant. Non mission-critical systems are in various phases of the program. It is expected that all mission-critical systems will be implemented, tested and validated by September of 1999. Year 2000 costs incurred to date are approximately $21.3 million, of which $7.2 million was expensed and $14.1 million was capitalized. Estimated future costs to complete the Year 2000 program are $7.1 million, of which $3.9 million will be expensed as incurred and the remaining $3.2 million will be capitalized. These costs have been, and will continue to be, funded from normal operating cash flows of the business. No other information technology projects have been or are being delayed by this program. -10- Part I - Financial Information (Cont'd) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 and 1998 The company believes that completed and planned modifications and conversions of its software and hardware systems, its products and its efforts to verify the readiness and compliance of material third parties will allow it to meet its Year 2000 compliance schedule. However, the success of the Year 2000 compliance program is based on the availability of a variety of technical experts, expected successful software modifications being performed by third parties, timely delivery of new software and hardware systems, and other factors. A deficiency with respect to any of these factors could cause a failure in the company's Year 2000 program, in whole or in part. The failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations, which could have a material adverse effect on the company's results of operations, liquidity or financial condition. Due to the inherent uncertainty in the Year 2000 problem, particularly in regard to third party vendor and customer Year 2000 readiness, the company is unable to determine at this time whether the consequences of any Year 2000 disruptions or failures will have a material adverse effect on the company's results of operations, liquidity or financial condition. However, based on current information, the most reasonably likely worst case scenario would involve the temporary disruption of the company's ability to fulfill customer orders and no material adverse effect on the company's financial condition is expected from this specific scenario. Part II - Other Information Item 1. Legal Proceedings 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, 1998. Item 4. Submission of Matters to a vote of Security Holders A) The Annual Meeting of shareholders was held on April 5, 1999. B) The following two Directors were reelected to serve for three years until the Annual Meeting of 2002. Mr. E. Thayer Bigelow Vote for - 60,555,469 Vote withheld - 653,792 Mr. Charles J. Queenan, Jr. Vote for - 60,523,804 Vote withheld - 685,457 The following Director was newly elected to serve for three years until the Annual Meeting of 2002. Mr. John J. Lee Vote for - 60,549,550 Vote withheld - 659,711 -11- Part II - Other Information (cont'd) Item 4. Submission of Matters to a vote of Security Holders (cont'd) C) The shareholders approved the selection of Deloitte & Touche LLP as independent auditors for the company for 1999. Vote for - 60,718,609 Vote against - 230,356 Abstained - 260,296 D) The shareholders approved the proposal to increase the number of authorized shares of Common Stock to 200,000,000 from 80,000,000. Vote for - 45,154,003 Vote against - 15,588,051 Abstained - 467,207 Item 6. Exhibits and Reports on Form 8-K 11. Computation of earnings per share for the quarters March 31, 1999 and 1998. 27. Article 5 of Regulation S-X Financial Data Schedule for the first 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 May 14, 1999 By /s/ D.S. Smith ------------ -------------------------- D.S. SMITH Vice President and Chief Financial Officer Date May 14, 1999 By /s/ M.L. Raithel ------------ -------------------------- M.L. RAITHEL Controller -13- Crane Co. and Subsidiaries Exhibit 11 to Form 10-Q Computation of Net Income per Common Share (In Thousands, Except Per Share Amounts)
Three Months Ended March 31, 1999 1998 Basic Net Income Per Share: Net Income $33,666 $29,899 ======= ======= Average Basic Shares Outstanding 68,218 68,387 Basic Net Income Per Share $ .49 $ .44 ======= ======= Diluted Net Income Per Share: Net Income $33,666 $29,899 ======= ======= Average Basic Shares Outstanding 68,218 68,387 Add Diluted Effect of Stock Options 563 921 ------ ------ Average Diluted Shares Outstanding 68,781 69,308 ======= ======= Diluted Net Income Per Share $ .49 $ .43 ======= =======
-14- EX-27 2 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS DEC-31-1999 Mar-31-1999 24,355 0 314,222 6,805 328,302 710,242 639,462 337,071 1,457,089 357,944 353,808 72,426 0 0 576,275 1,457,089 574,821 574,821 517,980 517,980 (1,907) 0 6,553 52,195 18,529 33,666 0 0 0 33,666 .49 .49
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