-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jgqTudMWsfzSOgKcvudM4C0+nXX+oHMH3EQFVMZIdGTrErRnriASXJ2ehE/x/tiL N3HEmuSiNVExriIH1XvnHQ== 0000025445-94-000005.txt : 19940128 0000025445-94-000005.hdr.sgml : 19940128 ACCESSION NUMBER: 0000025445-94-000005 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931229 ITEM INFORMATION: 7 FILED AS OF DATE: 19940126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRANE CO /DE/ CENTRAL INDEX KEY: 0000025445 STANDARD INDUSTRIAL CLASSIFICATION: 3490 IRS NUMBER: 131952290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 34 SEC FILE NUMBER: 001-01657 FILM NUMBER: 94502826 BUSINESS ADDRESS: STREET 1: 100 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033637300 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported)December 29, 1993 CRANE CO. (Exact name of registrant as specified in its Charter) AMENDMENT NO. 1 Delaware 1-1657 13-1952290 (State or other juris- (Commission (IRS Employer diction of incorporation) File Number) Identification No.) 100 First Stamford Place, Stamford, CT 06902 (Address of principal executive offices) (Zip Code) (203)363-7300 Registrant's telephone number, including area code (Not Applicable) (Former name or former address, if changed since last report) Item 7 of the report on Form 8-K filed by Crane Co. on January 12, 1994 is hereby amended in its entirety to read as follows: Item 7. Financial Statements and Exhibits Exhibit 1 Copy of the Stock Purchase Agreement dated December 29, 1993 among the Registrant, Burks Pumps, Inc. and the individuals listed in Item 2. (previously submitted). Exhibit 2 Audited 1992 Financial Statements for Burks Pumps, Inc. Exhibit 3 Consent of Price Waterhouse. Exhibit 4 Unaudited Financial Statements for the nine months ended September 30, 1992 and 1993 for Burks Pumps, Inc. Exhibit 5 Proforma financial information relative to Burks Pumps, Inc. 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 January 25, 1994 By:P.R. Hundt P. R. Hundt Vice President By:M. L. Raithel M. L. Raithel Controller-Chief Accounting Officer EXHIBIT 2 BURKS PUMPS, INC. Report and Consolidated Financial Statements December 31, 1992 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Burks Pumps, Inc. and the Partners of Harbour Group Investments, L.P. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of changes in stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Burks Pumps, Inc. and its subsidiaries as of December 31, 1992, and the results of their operations and their cash flows for the year in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. As explained in Note 13, on December 29, 1993, Crane Co. acquired the outstanding common stock of Burks Pumps, Inc. PRICE WATERHOUSE St. Louis, Missouri February 12, 1993, except as to Note 13, which is as of December 29, 1993 BURKS PUMPS, INC. Consolidated Balance Sheet
December 31, 1992 Assets Current assets: Cash $ 205 Accounts receivable, net 9,077,885 Inventories 12,267,305 Prepaid expenses and other 300,081 Deferred income taxes 686,130 ---------- Total current assets 22,536,704 Property, plant and equipment, net 8,410,905 Intangible assets, net 11,522,235 Other assets, net 242,249 ---------- $42,712,093 =========== Liabilities ans stockholders' equity Current liabilities: Current portion of long-term debt $ 341,472 Accounts payable 3,358,098 Accrued liabilities 4,433,421 ----------- Total current liabilities 8,132,991 ----------- Long-term debt 8,688,583 Subordinated long-term debt-related party 13,500,000 Other long-term liabilities and deferred credit 1,123,985 Commitments and contingencies (Note 11) - Redeemable common stock warrants (Note 10) 2,186,636 Stockholders' equity: Common stock, $.01 par value; 1,000,000 shares authorized; 117,728 shares issued and outstanding 1,177 Additional paid-in capital 9,822,992 Retained earnings - Cumulative translation adjustment (13,620) Stockholders' notes receivable (730,651) ----------- Total stockholders' equity 9,079,898 ----------- $42,712,093 =========== See accompanying Notes to Consolidated Financial Statements
BURKS PUMPS, INC. Consolidated Statement of Income
For the year ended December 31, 1992 Net sales $52,640,441 Cost of sales 35,490,853 ----------- Gross profit 17,149,588 Selling, general and administrative expenses 11,569,093 ----------- Operating income 5,580,495 ----------- Other expenses: Interest expense 2,763,604 Other, net 315,000 ----------- 3,078,604 Income from continuing operations before provision for income taxes 2,501,891 Provision for income taxes 1,170,657 ----------- Income from continuing operations 1,331,234 Discontinued operations (Note 3): Loss from discontinued Water Systems Division operations, after applicable income taxes of $170,045 (457,775) Loss on sale of Water Systems Division (118,195) ------------ Net income $ 755,264 ============ See accompanying Notes to Consolidated Financial Statements
BURKS PUMPS, INC. Consolidated Statement of Changes in Stockholders' Equity For the Year Ended December 31, 1992
Additional Cumulative Stockholders' Common paid-in Retained translation notes stock capital earnings adjustment receivable Total Balance December 31, 1991 $1,177 $10,730,574 $ 523,790 $ - $(730,651) $10,524,890 Net income 755,264 755,264 Accretion of common stock warrants (907,582) (1,279,054) (2,186,636) Foreign currency translation adjustment (13,620) (13,620) ------ ----------- ----------- ---------- --------- ----------- Balance December 31, 1992 $1,177 $ 9,822,992 $ - $ (13,620) $(730,651) $ 9,079,898 ====== =========== =========== =========== ========= =========== See accompanying Notes to Consolidated Financial Statements
BURKS PUMPS, INC. Consolidated Statement of Cash Flows
For the year ended December 31, 1992 Cash flows from operating activities: Net income $ 755,264 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,682,583 Amortization 974,580 Change in cumulative translation adjustment account (13,620) Write-off of Water Systems Division intangible assets 687,730 Changes in assets and liabilities, excluding sale of the Water Systems Division: Decrease in accounts receivable, net 1,836,999 Decrease in inventories 1,812,700 Decrease in prepaid expenses and other 31,518 Increase in deferred taxes (350,455) Decrease in accounts payable (1,749,975) Decrease in accrued liabilities (332,356) Decrease in other long-term liabilities (198,167) ----------- Net cash provided by operating activities 5,136,801 ----------- Cash flows from investing activities: Sale of Water Systems Division 6,787,778 Increase in accounts receivable from sale of Water Systems Division (2,079,778) Proceeds from Water Systems Division non-competition agreement 350,000 Purchase of Barnes Pumps Canada, Inc. (594,247) Capital expenditures, net (487,942) ----------- Net cash provided by investing activities 3,975,811 ----------- Cash flows from financing activities: Payments of long-term debt (5,298,364) Net payments under revolving credit agreement (3,783,251) ----------- Net cash used by financing activities (9,081,615) Net increase in cash 30,997 Cash at beginning of period 174,306 ----------- Cash at end of period $ 205,303 =========== (continued) See accompanying Notes to Consolidated Financial Statements
BURKS PUMPS, INC. Consolidated Statement of Cash Flows (Continued)
For the year ended December 31, 1992 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $3,090,713 Income taxes 854,266 Supplemental schedule of noncash activities: Equipment acquired through capital leases $ 310,369 See accompanying Notes to Consolidated Financial Statements
BURKS PUMPS, INC. Notes to Consolidated Financial Statements 1. Organization Burks Pumps, Inc. (the Company or Burks), a Delaware corporation, is 93% owned by Harbour Group Investments, L.P. (HGI, L.P.), a Missouri limited partnership. The remaining 7% of outstanding stock is held by members of Burks and HGI, L.P. management. The Company is engaged in the manufacture and sale of specialty industrial systems pumps, wastewater pumping equipment, pumps for military applications and engineered cleaning equipment, and centrifugal pumps. As more fully described in Note 3, on September 30, 1992 the Company sold its Water Systems Division. Concurrent with the sale, the Company acquired the net assets of Barnes Pumps Canada, Inc. (BPC). As more fully described in Note 4, on November 22, 1991, the Company acquired substantially all of the net assets of AMW Industries, Inc. (AMW). The Company operates manufacturing facilities in Decatur, Illinois; Piqua, Ohio, and Bramalea, Canada, and formerly in Conway, Arkansas. 2. Summary of significant accounting policies The significant accounting policies followed by Burks are described below and are in conformity with generally accepted accounting principles: Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Barnes Pumps, Inc. and Barnes Pumps Canada, Inc. Results of operations for AMW and Barnes Pumps Canada, Inc. have been included since their respective dates of acquisition. All significant intercompany transactions and balances are eliminated. Results of discontinued operations have been presented separately as described in Note 3. Revenue recognition Revenue from the sale of the Company's products is recognized upon shipment to the customer. Costs and related expenses to manufacture the Company's products are recorded as costs of sales when the related revenue is recognized. Cash and cash equivalents For purposes of the consolidated statement of cash flows, the Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents. A book cash overdraft on the Company's disbursement account in the amount of $314,058 at December 31, 1992 is included in accounts payable. BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 2 Concentrations of credit risk The Company sells its products to a wide range of industries in which its pumps are utilized. In addition, most of the Company's business activity is with customers located within North America. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and historically such losses have been within management's expectations. At December 31, 1992, the Company had no significant concentrations of credit risk. Inventories Inventories, which include the cost of materials, direct labor and manufacturing overhead, are stated at the lower of cost, determined using the last-in, first-out (LIFO) method for substantially all inventories, or market. If the FIFO method (which approximates replacement cost) had been used in determining cost for all inventories, inventories would have been approximately the same at December 31, 1992 due to a LIFO reserve of $520,496 being less than the reserves for excess and obsolete inventories used in determining replacement cost. Obsolete or unsalable inventories are reflected at their estimated realizable values. Property, plant and equipment Property, plant and equipment is recorded at cost and is depreciated using the straight-line method over the estimated useful lives of the assets which range from 3 to 31.5 years. Properties held under capital leases are recorded at the present value of the non-cancelable lease payments over the term of the lease and are amortized over the shorter of the lease term or the estimated useful lives of the assets. Expenditures for repairs, maintenance and renewals are charged to income as incurred. Expenditures which improve an asset or extend its estimated useful life are capitalized. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Intangible assets The excess of the purchase price over the fair value of net assets acquired in a business combination (goodwill) is capitalized and amortized on a straight-line basis over 40 years. Amortization charged to income for the year ended December 31, 1992 was $315,036. Accumulated amortization at December 31, 1992 was $1,397,089. Costs incurred in obtaining intellectual property rights (principally engineering drawings) have been deferred and are being amortized on a straight-line basis over 40 years. BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 3 Amortization charged to income for the year ended December 31, 1992 was $42,956. Accumulated amortization at December 31, 1992 was $118,143. Costs incurred in connection with non-competition agreements have been deferred and are being amortized on a straight-line basis over the lives of the agreements. Amortization charged to income for the year ended December 31, 1992 was $516,000. Accumulated amortization at December 31, 1992 was $1,429,000. Other assets Costs incurred in obtaining financing have been deferred and are being amortized over the life of the related obligation. Amortization charged to income for the year ended December 31, 1992 was $80,000. Accumulated amortization at December 31, 1992 was $167,500. Income taxes The Company files a consolidated federal income tax return which includes its wholly-owned subsidiaries. The provision for income taxes is based on consolidated income and expenses of the Company for financial reporting purposes. Deferred income taxes are provided for timing differences between financial and income tax reporting. In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which establishes financial accounting and reporting standards for income taxes that result from an enterprise's activities during the current and preceding years. It requires an asset and liability approach for financial accounting and reporting for income taxes. This statement will be adopted by the Company for its year ending December 31, 1993; management has estimated the cumulative effect of adoption of the new statement on the Company at January 1, 1993 to be a charge of approximately $200,000. Foreign currency translation The accounts of Barnes Pumps Canada, Inc., are measured using the Canadian dollar as the functional currency. Assets and liabilities of the Canadian operations are translated into United States dollars at period-end exchange rates. Operating results are translated at the average exchange rates in effect during the year. Net unrealized gains or losses on translation of foreign currency financial statements are recorded in stockholders' equity, as a cumulative translation adjustment, and will be included in income only upon sale or liquidation of underlying assets. Earnings per share information Given the historical organization and capital structure of the Company, earnings per share information is not considered meaningful or relevant and has not been presented in the BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 4 accompanying consolidated financial statements or the notes thereto. Other postemployment benefits In December 1990, the FASB issued Statement of Financial Accounting Standards No. 106, "Employer's Accounting for Postretirement Benefits Other than Pensions (OPEB)," which establishes financial and reporting standards for OPEB liabilities. It requires companies to record on an accrual basis the costs of OPEB liabilities, such as health care costs. This statement will be effective for the Company for its year ending December 31, 1995. Management has estimated that the new statement will result in an additional obligation of approximately $1 million. Management has not determined whether the obligation will be recognized in the year in which the statement is adopted or whether it will be amortized on a straight-line basis over the average remaining service period of active plan participants, not to exceed twenty years. In November 1992, the FASB issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which establishes accounting standards for employers who provide benefits to former or inactive employees after employment but before retirement. This statement will be effective for the Company for its year ending December 31, 1995. Management does not anticipate that adoption of the new statement will have a significant effect on the Company's financial position or results of operations. 3. Sale of Water Systems Division On September 30, 1992 the Company sold its Water Systems Division for a preliminary sale price of $6,787,778, which approximated the historical carrying value of the assets sold. The loss on sale of discontinued operations represents income tax expense of $118,195, related primarily to differences between the book and tax bases of the inventory sold. In connection with the sale, the Company received $350,000 related to a non-competition agreement which was accounted for as a deferred credit to be amortized to income over the three year life of the agreement. The 1992 consolidated statement of income disaggregates sales and expenses of discontinued operations from captions applicable to continuing operations. The net loss from discontinued operations during the nine-month period ended September 30, 1992 includes the write-off of the net book value of certain intangible assets related to the Water Systems Division which no longer have value to the Company. BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 5 The following is summarized financial information of the Water Systems Division for the nine-month period ended September 30, 1992:
1992 Net sales $16,045,000 Gross profit 2,761,000 Operating income 700,000 Interest expense 300,000 Other expenses - write-off of ceratin intangible assets 687,730 Provision for income taxes 170,045 Net loss (457,775)
Concurrent with the sale of the Water Systems Division, the Company acquired certain net assets, principally inventory, of Barnes Pumps Canada, Inc., a firm engaged in the manufacture and sale of wastewater pumps in Canada, for a purchase price of $594,247. The acquisition was accounted for as a purchase and the purchase price approximated the fair value of the assets acquired. The pro forma effects of this acquisition on the Company's results of operations and financial position for 1992 are not material. 4. Acquisition of AMW Industries, Inc. On November 22, 1991, the Company acquired the net assets of AMW for a purchase price of $8,797,957. The acquisition was accounted for as a purchase and was financed through the Company's existing debt agreements, as amended. The purchase price was preliminarily assigned to the net assets acquired based on their estimated fair value at the date of acquisition. The purchase price allocation was finalized in 1992. Such finalization reflects the industrial pump line relocation and consolidation expenses ofapproximately $2,000,000. In connection with finalizing the AMW purchase price allocation, the fixed assets retained by Burks were written up to their estimated fair value as of the date of acquisition, with the remaining excess purchase price of $1,215,000 reflected as goodwill. In addition, included in the purchase price and in connection with the acquisition, the Company paid $225,000 related to a non-competition agreement. BURKS PUMPS, INC. Notes to Consolidated Financial Statments Page 6 5. Financing Long-term debt consists of the following:
December 31, 1992 Unsubordinated debt: Notes payable to bank under a Revolving Credit and Term Loan Agreement dated April 2, 1990, as amended, collateralized by property, plant and equipment, accounts receivable and inventories: Term note - repaid during 1992; interest was paid monthly at the bank's base rate (defined as the greater of (i) the prime rate, or (ii) the Federal Funds Rate plus 1/2%) plus 2% $ - Revolving credit note - principal due in full on December 31, 1996; interest payable monthly at the bank's base rate plus 1-1/2% (7-1/2% at December 31, 1992) 8,067,700 Capital lease obligations 962,355 Subordinated debt: Note payable to insurance company - principal due in semiannual installments of $1,700,000 commencing December 1, 1994 with a final instalment of $1,800,000 on December 1, 1997; interest due semiannually at 13.35%, subordinated to notes payable to bank 12,000,000 Note payable to Harbour Group Investments, L.P. - principal due on or before December 31, 1996, interest due quarterly at 12%, subordinated to notes payable to bank and insurance company 1,500,000 ---------- 22,530,055 Less - Current portion of long-term debt, including $341,472 of capital lease obligations at December 31, 1992 (341,472) ---------- $22,188,583 ===========
BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 7 Maturities of long-term debt, including capital leases, for the five years subsequent to December 31, 1992 are as follows: 1993 $ 341,472 1994 2,004,391 1995 3,574,217 1996 13,061,096 1997 3,548,879 ----------- $22,530,055 =========== On April 2, 1990, the Company entered into a Revolving Credit and Term Loan Agreement (the Agreement) with a bank. On November 21, 1991, the Company amended the Agreement to provide for the acquisition of AMW. The amendment increased the remaining term loan from $2.575 million at November 21, 1991, to $5 million and increased quarterly principal payments from $300,000 to $500,000. Borrowings available under the revolving credit facility increased from $14 million to $14.5 million. In addition, the amendment adjusted the covenants included in the original Agreement. During 1992, the $5 million term loan was repaid with proceeds from the sale of the Water Systems Division. The Agreement, as amended, contains restrictive covenants relating to working capital, debt to tangible net worth, interest expense, capital expenditures, cash dividends, incurrence of additional indebtedness and sale of assets and prohibits any guaranty, endorsement or contingent liability with respect to the obligation or liability of any other person. The Company was in compliance with these restrictive covenants at December 31, 1992, or waivers have been obtained for all covenants for which the Company was not in compliance. The Agreement requires neither a commitment fee nor compensating account balance. Borrowings under the Agreement are secured by property, plant and equipment, inventories and receivables. On August 1, 1990 the Company entered into a Note Agreement (Note Agreement) with an insurance company which replaced the previous note agreement. The Note Agreement with the insurance company for the senior subordinated notes contains covenants which are less restrictive than the Agreement. On November 21, 1991, the Note Agreement was amended to provide for the acquisition of AMW. The amendment adjusted the repayment terms and covenants included in the original Note Agreement. The Company was in compliance with these covenants at December 31, 1992, or waivers have been obtained for all covenants for which the Company was not in compliance. As more fully described in Note 10, the insurance company was granted warrants under the Note Agreement to purchase 13,303 shares of the Company's outstanding common stock. BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 8 The Company has renegotiated certain of the covenants in its financing agreements in order to reflect the sale of the Water Systems Division. 6. Lease obligations The Company leases its Anaheim, California facility under a non- cancelable lease which provides for payment by the Company of property taxes and insurance. The lease has a five-year renewal option at the end of the lease term (1995). The Company does not presently utilize the facility for manufacturing operations, and is subleasing the facility. Payments to be received under such subleases approximate lease payments made by the Company. The Company leases certain of its machinery and equipment under non-cancelable lease agreements. These agreements extend for a seven-year term. The Company also leases its computer system and related software under a non-cancelable lease with a five-year term. The leases are reflected in the financial statements as capitalized leases in accordance with the requirements of Statement of Financial Accounting Standards No. 13, "Accounting for Leases."
Minimum lease payments under long-term capital leases at December 31, 1992 are as follows: 1993 $ 445,181 1994 358,217 1995 194,122 1996 71,262 1997 23,404 ---------- Total minimum lease payments 1,092,186 Less amount representing interest (129,831) ---------- Present value of net minimum lease payments, including current portion of $341,472 $ 962,355 ========== Minimum rental payments under existing non-cancelable operating leases at December 31, 1992 are as follows: 1993 $ 33,528 1994 11,445 ---------- Total minimum payments $ 44,973 ========== Rental expense on operating leases for the year ended December 31, 1992 was approximately $258,939.
BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 9 7. Income taxes The provision for income taxes is summarized as follows:
1992 Current: Federal $1,076,437 Foreign 52,612 State 232,869 ---------- 1,361,918 ========== Deferred: Federal 107,569 State (10,590) --------- 96,979 ========= $1,458,897
Included in current assets at December 31, 1992 are deferred income taxes of $686,130, which primarily reflect the timing differences relating to the allowance for doubtful accounts, inventory reserves and additional inventory costs capitalized for tax purposes. The provision for income taxes for the year ended December 31, 1992 differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:
Statutory U.S. rate 34% Increase in rate resulting from: State/local taxes, net 7% Taxable gain on sale of Water Systems Division 6% Non-deductible goodwill amortization and write-off 14% Fixed asset bases differences due to purchase accounting 5% --- Effective tax rate 66% ===
BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 10 8. Related parties Harbour Group Ltd., an affiliate of HGI, L.P. charges the Company for direct management and administrative services provided to the Company based on actual, direct costs of such services. These charges totaled $283,010 for the year ended December 31, 1992. Certain members of management have purchased shares of the Company's stock at prices determined by the Board of Directors. The purchase price has been financed by promissory notes payable to the Company, $730,651 outstanding at December 31, 1992, with the shares pledged as security. The insurance company with whom Burks has a note payable and outstanding common stock warrants is a limited partner of Harbour Group Investments, L.P. 9. Retirement plans The Company offers its employees one retirement savings plan under Section 401(k) of the Internal Revenue Code. Each employee may elect to enter into a written salary deferral agreement under which a portion their salary, ranging from 0-15%, subject to aggregate limits required under the Internal Revenue Code, may be contributed to the plan. The Company may match a part of the employee's contribution up to a maximum Company contribution of 5% of the employee's salary, and all plan administrative expenses are borne by the Company. During the year ended December 31, 1992 plan expenses, including administrative costs and employer contributions, were $296,223. The Company has a defined benefit pension plan for union employees at the Decatur location. Benefits under the union employee plan are based on years of service. The Company's policy is to fund the minimum amount necessary to avoid a funding deficiency. BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 11 Net periodic pension benefit related to the Company's defined benefit plans for 1992 is comprised of the following:
1992 Service cost $ 9,476 Interest cost on projected benefit obligation 25,701 Actual return on plan assets (43,737) Net amortization and deferral (7,952) -------- Net periodic pension benefit $(16,512) ======== The funded status of the Company's defined benefit plan covering employees at December 31, 1992 is as follows: 1992 Accumulated benefit obligation: Vested benefits $ 333,883 Nonvested benefits 8,395 --------- $ 342,278 Plan assets at fair value $ 586,173 Projected benefit obligation (342,278) --------- Overfunded projected benefit obligation 243,895 Unrecognized initial net asset (133,705) Unrecognized net gain (56,016) --------- Prepaid pension cost $ 54,174 =========
The expected long-term rate of return on plan assets was 8% at December 31, 1992. The expected discount rate used in determining the actuarial present value of the accumulated benefit obligations was 8% for the plan at December 31, 1992. Plan assets are invested in a diversified portfolio that primarily consists of equity and debt securities. The method of valuation used to calculate the costs of the plan for pension benefits is the unit credit actuarial cost method. Death and disability benefits are valued under the one-year term actuarial cost method. 10. Redeemable common stock warrants Under terms of the Note Agreement with the insurance company, the insurance company was granted warrants to purchase 13,303 shares of the Company's outstanding common stock for an aggregate purchase price of $.10 per share. BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 12 The warrants expire December 1, 1997 and none have been exercised as of December 31, 1992. The warrants allow the insurance company to require the Company to purchase the warrants at any time between September 30, 1992 (the date of the sale of the Water Systems Division) and December 1, 1997 at a specified formula price. At the date of issuance, the warrants were determined to be equity warrants; however, no amount was assigned thereto as their value was estimated to be nominal. The estimated put value of the warrants has increased from a nominal amount at December 31, 1991 to $2,186,636 at December 31, 1992. The warrants have been accreted to their estimated put value through charges to retained earnings and additional paid-in capital of $1,279,054 and $907,582, respectively. 11. Commitments and contingencies The Company is a party to certain lawsuits. Management and legal counsel do not expect the outcome of any litigation to have a material adverse affect on the Company's financial position or results of operations. See Note 13 for further discussion. 12. Supplemental balance sheet information
December 31, 1992 Accounts receivable: Trade receivables $6,815,212 Less: Allowance for doubtful accounts (583,119) Water Systems Division sale receivable 2,079,778 Other receivables 766,014 ---------- $9,077,885 ========== Inventories: Raw materials $ 2,422,316 Work in process 2,204,718 Finished goods 7,640,271 ----------- $12,267,305 ===========
BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 13
1992 Property, plant and equipment: Machinery and equipment $ 8,119,634 Buildings and improvements 3,320,743 Land 167,850 Property held under capital lease 2,145,025 ----------- 13,753,252 Less: Accumulated depreciation (including $1,250,580 related to property held under capital leases) (5,631,495) ----------- 8,121,757 Construction-in-progress 31,434 Property held for sale, net 257,714 ----------- $ 8,410,905 =========== Intangible assets: Goodwill, net $ 9,740,804 Intellectual property rights, net 1,600,431 Non-competition agreements, net 181,000 ----------- $11,522,235 =========== Other assets: Deferred financing costs, net $ 232,500 Other 9,749 ----------- $ 242,249 =========== Accrued liabilities: Accrued payroll and commissions $ 593,967 Warranty reserve 772,927 Accrued professional services 402,325 Accrued vacation 334,339 Accrued interest 231,654 Accrued property taxes 233,275 Accrued advertising 107,846 Accrued workers compensation 73,566 Relocation and consolidation reserve 1,110,542 Accrued income taxes 215,039 Other 357,941 ----------- $ 4,433,421 =========== Other long-term liabilities and deferred credit: Post-employment group insurance $ 348,835 Product liability reserve 454,319 Non-competition agreement, net 320,831 ----------- $ 1,123,985 ===========
BURKS PUMPS, INC. Notes to Consolidated Financial Statements Page 14 13. Subsequent event On December 29, 1993, Crane Co. acquired the outstanding common stock of Burks Pumps, Inc. for approximately $70 million. Coincident with the sale of the Company, approximately $6 million of the proceeds were placed in escrow to cover potential expenses related to environmental and other contingencies. The Company is presently in the process of testing and evaluating any potential environmental matters at its production facilities. Due to the preliminary stage of the Company's testing and evaluation process, the December 31, 1992 Company financial statements do not reflect any liabilities associated with environmental matters. EXHIBIT 3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Form 8-K of Crane Co. dated December 29, 1993 of our report dated February 12, 1993, except as to Note 13 which is as of December 29, 1993, relative to Burks Pumps, Inc.'s financial statements for the year ended December 31, 1992. PRICE WATERHOUSE St. Louis, Missouri January 20, 1994 EXHIBIT 4 CRANE CO. BURKS PUMPS, INC. Statement of Income (in thousands)
9 Months Ended 9/30/93 9/30/92 (Unaudited) Net Sales $41,998 $39,249 Operating Costs and Expenses: Cost of Sales 28,850 26,451 Selling, General and Administrative 8,918 8,038 ------- ------- 37,768 34,489 Operating Profit 4,230 4,760 Other Expenses: Interest Expense - Net (1,723) (2,101) Miscellaneous - Net (161) (158) ------- ------- (1,884) (2,259) Income from Continuing Operations 2,346 2,501 Provision for Income Taxes 970 1,009 ------- ------- Income from Continuing Operations 1,376 1,492 Discontinued Operations: Loss from Discontinued Operations, After Applicable Income Taxes of $114 - (172) ------- ------- Net Income $ 1,376 $ 1,320 ======= =======
CRANE CO. BURKS PUMPS, INC. Balance Sheet (in thousands)
9/30/93 9/30/92 (Unaudited) Assets Current Assets: Cash and Cash Equivalents $ 59 $ - Accounts Receivable - Net 6,357 9,780 Inventories, at lower of cost, principally LIFO, or market: Net Inventory 12,857 13,282 Prepaid Expenses 112 109 Other Current Assets 722 394 ------- ------- Total Current Assets 20,107 23,565 Intangible Assets 11,147 11,296 Property, Plant and Equipment: Cost 15,436 15,437 Less Accumulated Depreciation 7,080 6,123 ------- ------- 8,356 9,314 Other Assets 168 255 Cost in Excess of Net Assets Acquired - - ------- ------- Total Assets $39,778 $44,430 ======= =======
CRANE CO. BURKS PUMPS, INC. Balance Sheet (in thousands)
9/30/93 9/30/92 (Unaudited) Liabilities and Shareholders' Equity Current Liabilities: Current Maturities of Long-Term Debt $ 1,874 $ 2,324 Accounts Payable 2,918 4,760 Accrued Liabilities 3,790 3,483 ------- ------- Total Current Liabilities 8,582 10,567 Long-Term Debt 5,694 7,697 Long-Term Debt - Related Parties 12,000 13,500 Redeemable Common Stock Warrants 2,323 2,187 Other Long-Term Liabilities 951 822 Shareholders' Equity: Common Shares 1 1 Capital Surplus 10,803 10,386 Shareholders Note Receivable (576) (730) ------- ------- Total Common Shareholders' Equity 10,228 9,657 ------- ------- $39,778 $44,430 ======= =======
EXHIBIT 5 CRANE CO. - PROFORMA Statement of Income (in thousands, except per share amounts)
12/31/92 12/31/92 Crane Co. Burks Pro-Forma Pro-Forma & Subs Pumps Adjustments 12/31/92 Net Sales $1,306,977 $52,640 $ - $1,359,617 Operating Costs and Expenses Cost of Sales 1,027,408 35,491 1,880 1,064,779 Selling, General and Administrative 194,881 11,568 - 206,449 Special Charge 39,444 - - 39,444 ---------- ------- ------- --------- 1,261,733 47,059 1,880 1,310,672 Operating Profit (Loss) 45,244 5,581 (1,880) 48,945 Other Income (Deductions): Interest Expense - Net (9,485) (2,764) (389) (12,638) Miscellaneous Income(Expense) - Net 2,930 (315) - 2,615 ---------- ------- ------- ---------- (6,555) (3,079) (389) (10,023) ---------- ------- ------- ---------- Income (Loss) Before Taxes 38,689 2,502 (2,269) 38,922 Provision For Income Taxes (Benefit) 14,403 1,171 (463) 15,111 ---------- ------- ------- --------- Income (Loss) from Continuing Operations 24,286 1,331 (1,806) 23,811 Discontinued Operations: Earnings (Loss) from Discontinued Operations, After Applicable Income Taxes of $170 - (458) - (458) Loss on Sale of Water Systems Division - (118) - (118) ---------- ------- ------- ---------- Net Income $ 24,286 $ 755 $(1,806) $ 23,235 ========== ======= ======= ========== Net Income Per Share $.79 $.75 ==== ====
CRANE CO. - PROFORMA Statement of Income (in thousands, except per share amounts)
9/30/93 9/30/93 Crane Co. Burks Pro-Forma Pro-Forma & Subs Pumps Adjustments 9/30/93 (Unaudited) Net Sales $987,930 $41,998 $ - $1,029,928 Operating Costs and Expenses Cost of Sales 781,548 28,850 1,610 812,008 Selling, General and Administrative 139,918 8,918 - 148,836 -------- ------- ------ ---------- 921,466 37,768 1,610 960,844 Operating Profit (Loss) 66,464 4,230 (1,610) 69,084 Other Income (Deductions): Interest Expense - Net (4,790) (1,723) 82 (6,431) Miscellaneous Income(Expense) - Net 938 (161) - 777 -------- ------- ------ ---------- (3,852) (1,884) 82 (5,654) -------- ------- ------ ---------- Income (Loss) Before Taxes 62,612 2,346 (1,528) 64,430 Provision For Income Taxes (Benefit) 23,358 970 (279) 24,049 -------- ------- ------- ----------- Income (Loss) from Continuing Operations $39,254 $ 1,376 $(1,249) $ 39,381 ======== ======= ======= =========== Net Income (Loss) Per Share $1.30 $1.30 ===== ===== Average Shares Outstanding 30,233 30,233
CRANE CO. - PROFORMA Balance Sheet (in thousands, except per share amounts)
9/30/93 9/30/93 Crane Co. Burks Pro-Forma Pro-Forma & Subs Pumps Adjustments 9/30/93 9/30/93 (Unaudited) Assets Current Assets: Cash and Cash Equivalents $ 44,365 $ 59 $ - $ 44,424 Accounts Receivable 179,810 6,357 - 186,167 Inventories, at lower of cost, principally LIFO, or market: Net Inventory 170,252 12,857 800 183,909 Other Current Assets 9,635 834 - 10,469 -------- ------- ------- --------- Total Current Assets 404,062 20,107 800 424,969 Intangible Assets, Net - 11,147 (9,455) 1,692 Property, Plant and Equipment: Gross P.P.& E. 387,318 15,436 7,080) 395,674 Accumulated Depreciation 219,083 7,080 (7,080) 219,083 -------- ------- -------- -------- Net Property, Plant & Equipment 168,235 8,356 - 176,591 Other Assets 28,280 168 - 28,448 Cost in Excess of Net Assets Acquired 60,899 - 52,652 113,551 -------- ------- -------- -------- Total Assets $661,476 $39,778 $ 43,997 $745,251 ======== ======= ======== ========
CRANE CO. - PROFORMA Balance Sheet (in thousands,except per share amounts)
9/30/93 9/30/93 Crane Co. Burks Pro-Forma Pro-Forma & Subs Pumps Adjustments 9/30/93 (Unaudited) Liabilities and Shareholders' Equity Current Liabilities: Current Maturities of Long-Term Debt $ 6,039 $ 1,874 $ (1,500) $ 6,413 Loans Payable 41,740 - 69,824 111,564 Accounts Payable 71,131 2,918 - 74,049 Accrued Liabilities 72,918 3,790 - 76,708 Taxes on Income 52 - - 52 -------- ------- -------- -------- Total Current Liabilities 191,880 8,582 68,324 268,786 Long-Term Debt 105,492 5,694 (5,694) 105,492 Long-Term Debt - Related Parties - 12,000 (12,000) - Reserves and Other Liabilities 19,701 951 3,240 23,892 Accrued Postretirment Benefits 40,214 - 2,218 42,432 edeemable Common Stock Warrants - 2,323 - 2,323 ccrued Pension Liability 7,701 - - 7,701 Deferred Income Tax 6,097 - (1,863) 4,234 Shareholders' Equity: Common Shares 30,031 1 (1) 30,031 Capital Surplus 13,992 10,803 (10,803) 13,992 Retained Earnings 258,993 - - 258,993 Currency Translation Adjustment (12,625) - - (12,625) Shareholders Note Receivable - (576) 576 - --------- ------- -------- -------- Total Common Shareholders' Equity 290,391 10,228 (10,228) 290,391 --------- ------- -------- -------- $ 661,476 $39,778 $ 43,997 $745,251 ========= ======= ======== ========
12/31/92 9/30/93 Pro-Forma Adjustments Amount Amount 1) Amortization of the excess of purchase price over net assets acquired of $52,652 million over 40 years - charged to cost of sales $ 1,316 $ 987 To reverse amortization of preacquisition goodwill (236) (177) ------- ------ 1,080 810 2) Increase (Decrease) in net interest cost as a result of acquisition based on Crane's investment and borrowing rates for the respective periods 389 (82) 3) Record step-up basis of inventory (flow through cost of goods sold) 800 800 4) Record postretirment benefits upon acquisition 2,218 5) Record restructuring/reorganization cost 3,240 6) Pay down Burks debt upon acquisition Current maturities of long-term debt (1,500) Long-term debt (5,694) Long-term debt - related parties (12,000) 7) Record deferred tax on acquisition (1,863) 8) Purchase price 69,824 9) Excess of the purchase price over net assets upon acquisition ($52,652 less $9,455) 43,197 10) Reclass excess purchase price over net assets from intangible asset on Burks Pumps books 9,455 11) Reclass accumulated depreciation 7,080
-----END PRIVACY-ENHANCED MESSAGE-----