0000025445-95-000007.txt : 19950815 0000025445-95-000007.hdr.sgml : 19950815 ACCESSION NUMBER: 0000025445-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRANE CO /DE/ CENTRAL INDEX KEY: 0000025445 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] 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: 95563381 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, 1995 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, 1995: Common stock, $1.00 Par Value - 30,517,164 shares Part I - Financial Information Item 1. Financial Statements Crane Co. and Subsidiaries Consolidated Statements of Income (In Thousands, Except Per Share Amounts) (Unaudited)
Periods Ended June 30, Three Months Six Months 1995 1994 1995 1994 Net Sales $ 451,479 $ 428,729 $ 884,057 $ 760,434 Operating Costs and Expenses: Cost of sales 332,763 324,769 656,221 584,523 Selling, general and administrative 67,875 62,894 136,472 111,710 Depreciation & amortization 11,942 12,142 23,846 20,450 412,580 399,805 816,539 716,683 Operating Profit 38,899 28,924 67,518 43,751 Other Income (Deductions): Interest income 255 1,740 623 2,451 Interest expense (7,037) (6,023) (14,030) (9,349) Miscellaneous - net 463 488 366 729 (6,319) (3,795) (13,041) (6,169) Income Before Taxes 32,580 25,129 54,477 37,582 Provision for Income Taxes 12,463 9,463 21,085 14,507 Net Income $ 20,117 $ 15,666 $ 33,392 $ 23,075 Net Income Per Share $.66 $.52 $1.10 $.77 Average Shares Outstanding 30,622 30,120 30,459 30,085 Dividends Per Share $.1875 $.1875 $.3750 $.3750 See Notes to Consolidated Financial Statements
-2- Part I - Financial Information Crane Co. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Per Share Amounts)
June 30, December 31, 1995 1994 1994 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 661 $ 2,894 $ 2,072 Accounts receivable, less allowance of $3,980 ($4,089 at June 30, 1994 and $3,693 at December 31, 1994) 252,894 248,207 234,695 Inventories at lower of cost, principally LIFO, or market; replacement cost would be higher by approximately $53,114, ($56,055 at June 30, 1994 and $52,739 at December 31, 1994) Finished goods 122,910 132,599 116,625 Finished parts and subassemblies 32,886 27,156 30,556 Work in process 39,549 41,097 39,286 Raw materials 53,223 51,447 50,598 248,568 252,299 237,065 Other current assets 7,861 13,712 6,407 Total Current Assets 509,984 517,112 480,239 Property, Plant and Equipment: Cost 520,126 517,167 513,348 Less accumulated depreciation 263,636 237,292 250,350 256,490 279,875 262,998 Other Assets 37,100 29,196 30,173 Intangibles, less accumulated amortization of $8,851 ($5,758 at June 30, 1994 and $7,716 at December 31, 1994) 61,358 67,241 63,434 Cost in excess of net assets acquired less accumulated amortization of $19,569 ($14,111 at June 30, 1994 and $16,730 at December 31, 1994) 170,941 174,692 171,201 $ 1,035,873 $ 1,068,116 $ 1,008,045 See Notes to Consolidated Financial Statements -3-
Part I - Financial Information
June 30, December 31, 1995 1994 1994 (Unaudited) Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt $ 1,196 $ 2,122 $ 1,272 Loans payable 20,428 58,990 20,986 Accounts payable 101,229 102,384 95,211 Accrued liabilities 118,071 113,568 119,382 U.S. and foreign taxes on income 8,256 7,069 7,444 Total Current Liabilities 249,180 284,133 244,295 Long-Term Debt 326,258 380,176 331,289 Deferred Income Taxes 32,306 25,442 32,440 Other Liabilities 19,059 23,277 20,159 Accrued Postretirement Benefits 43,172 43,086 43,066 Accrued Pension Liability 8,725 6,960 8,804 Preferred Shares, Par Value $.01 Authorized - 5,000 Shares - - - Common Shareholders' Equity: Common shares 30,506 30,034 30,047 Capital surplus 24,871 13,687 12,766 Retained earnings 309,746 273,355 296,268 Currency translation adjustment (7,950) (12,034) (11,089) Total Common Shareholders' Equity 357,173 305,042 327,992 $ 1,035,873 $ 1,068,116 $ 1,008,045 See Notes to Consolidated Financial Statements -4-
Part I - Financial Information (Cont'd.) Crane Co. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands) (Unaudited)
Six Months Ended June 30, 1995 1994 Cash flows from operating activities: Net income $ 33,392 $ 23,074 Depreciation 17,915 16,331 Amortization 5,931 4,119 Deferred taxes (697) 290 Cash used for operating working capital (22,181) (16,063) Other (3,020) (3,683) Total from operating activities 31,340 24,068 Cash flows from investing activities: Capital expenditures (13,609) (12,345) Payments for acquisitions (1,879) (161,424) Proceeds from divestitures - - Proceeds from disposition of capital assets 3,120 719 Purchase of equity investment (5,038) - Total used for investing activities (17,406) (173,050) Cash flows from financing activities: Equity: Dividends paid (11,365) (11,239) Reacquisition of shares (3,115) (42) Stock options exercised 7,323 794 Net Equity (7,157) (10,487) Debt: Proceeds from issuance of long-term debt - 230,105 Repayments of long-term debt (7,934) (74,748) Net decrease in short-term debt (311) (5,690) Net Debt (8,245) 149,667 Total(used for)provided from financing activities (15,402) 139,180 Effect of exchange rate on cash and cash equivalents 57 104 Decrease in cash and cash equivalents (1,411) (9,698) Cash and cash equivalents at beginning of period 2,072 12,592 Cash and cash equivalents at end of period $ 661 $ 2,894 Detail of Cash (Used for) Provided From Operating Working Capital: Accounts receivable $ (15,379) $ (23,850) Inventories (8,441) (85) Other current assets (1,379) (4,792) Accounts payable 4,406 18,192 Accrued liabilities (2,191) (3,994) U.S. and foreign taxes on income 803 (1,534) Total $ (22,181) $ (16,063) Supplemental disclosure of cash flow information: Interest paid $ 13,876 $ 10,088 Income taxes paid 19,279 12,737 See Notes to Consolidated Financial Statements -5-
Part I - Financial Information (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. 2. Sales and operating profit by segment are as follows:
Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 (In thousands) Net Sales: Fluid Handling $ 83,397 $ 79,306 $ 162,257 $ 144,777 Aerospace 53,440 48,785 104,489 67,523 Engineered Materials 50,026 53,868 103,964 102,568 Crane Controls 34,195 23,017 67,267 31,397 Merchandising Systems 51,984 39,861 99,607 76,599 Wholesale Distribution 179,580 185,941 348,686 340,744 Other 3,190 3,527 6,318 7,285 Intersegment Elimination (4,333) (5,576) (8,531) (10,459) Total $ 451,479 $ 428,729 $ 884,057 $ 760,434 Operating Profit (Loss): Fluid Handling $ 4,990 $ 4,611 $ 7,233 $ 7,884 Aerospace 14,344 7,435 26,252 10,978 Engineered Materials 5,345 6,909 12,020 12,423 Crane Controls 3,170 1,961 6,058 2,062 Merchandising Systems 8,780 6,463 15,396 10,999 Wholesale Distribution 5,921 4,445 7,749 5,851 Other (179) 253 42 (101) Corporate (3,610) (3,133) (7,310) (6,242) Intersegment Elimination 138 (20) 78 (103) Total $ 38,899 $ 28,924 $ 67,518 $ 43,751 3.Supplemental schedule on non-cash financing activities: Crane Co. purchased all of the capital stock of ELDEC Corporation in March 1994 for $77,300 and Mark Controls Corporation in April 1994 for $96,900. The fair value of assets and liabilities at the date of acquisition are presented as follows: Mark ELDEC Controls (in thousands) Fair value of assets acquired $138,951 $170,288 Cash paid for capital stock (77,300) (96,900) Assumption of liabilities $ 61,651 $ 73,388 -6-
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, 1995 and 1994 [CAPTION] Results From Operations: Second Quarter of 1995 Compared to Second Quarter of 1994: Net income for the quarter ended June 30, 1995 of $20.1 million or $.66 per share was a 28% increase from the $15.7 million or $.52 per share reported for the same period last year. Sales in the quarter were $451.5 million, up 5% from last year, and operating profit increased 35% to $38.9 million. Fluid Handling operating profit was up 8% in the quarter on a 5% increase in sales. Sales were up largely due to the inclusion of the Mark Controls valve businesses acquired in April 1994, strong demand in Crane Ltd. (U.K.) markets, and improvement at Westad. The favorable segment sales and operating profit comparisons were constrained by the impact of a decline in Canadian commercial construction markets on valve sales, and weak performance at the Pacific Valves and Flowseal businesses. Backlog in the domestic valve business is 60% higher than last year. Crane Pumps and Systems sales were down slightly due principally to the loss of a large private label customer, but operating profit and margins were up, the result of productivity improvements. Aerospace sales and operating profit were up significantly with improvements at all three of the segment's business units. ELDEC had its highest profit quarter since its acquisition in March of 1994. In the quarter, ELDEC made a $5 million, 47% equity investment in Powec, a Norwegian manufacturer of power conditioning products and systems. This will enhance ELDEC's initiative to expand its core power electronics business into the growing wireless telecommunications market. Hydro-Aire and Lear Romec earnings were up due to higher aftermarket sales and productivity improvements. Order levels remain strong for all three businesses. Engineered Materials sales and operating profit were down compared to the second quarter last year. The operating profit decrease was largely due to the impact on Kemlite of weaker demand from recreational vehicle manufacturers. Crane Plumbing sales and operating profit were hurt by the weak Canadian housing market as indicated by 35% lower housing starts than in the second quarter of 1994. Partially offsetting these negatives, CorTec's shipments and profits were significantly ahead of last year, and Resistoflex's operating profit was double last year due to implementation of a cost reduction program, and the increase in lined pipe and fitting sales. -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, 1995 and 1994 [CAPTION] Results From Operations: Second Quarter of 1995 Compared to Second Quarter of 1994: Crane Controls sales and operating profit were up in the quarterly comparisons primarily due to the inclusion this year of the businesses acquired as part of Mark Controls in late April 1994. All businesses in this segment are performing well, with the exception of Ferguson Europe, where recent restructuring efforts will result in favorable comparisons for the balance of the year. Reported results in this segment include goodwill charges of $3 million per year which reduce reported earnings but have no effect on cash flow returns. Merchandising Systems sales were up 30%, largely due to expanded distribution channels and the continued success with National Vendors' Cafe System "7". In addition, the Post Office contract was completed in the second quarter, which added $4 million to sales. The benefits of National Vendors' $25 million plant expansion and cost reduction project should begin in the second half of 1995. Notably for this segment, NRI operated at a profit in the quarter compared to a loss last year, due to a 26% increase in sales and the cost reduction program executed in 1993 and 1994. Wholesale Distribution sales were down 3% due to a decline in Huttig's distribution sales while operating profit was up 33% due to strong results at Crane Supply and improvement at Valve Systems. Net interest expense in the quarter increased $2.5 million compared to the prior year due to debt financed acquisitions. The effective tax rate increased to 38.3% in the second quarter of 1995 compared to 37.7% in 1994 due to a tax refund in the second quarter of 1994. -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, 1995 and 1994 [CAPTION] Results From Operations: Six Months Ended June 30, 1995 Compared to Six Months Ended June 30 , 1994: Net income for the first six months was up 45% to $33.4 million or $1.10 per share compared to $23.1 million or $.77 per share last year. Operating income for the first six months was up 54% to $67.5 million on a sales increase of 16% to $884.1 million. Fluid Handling sales were up 12% compared to 1994 due to the Mark Controls acquisition and an increase at Crane Ltd.(U.K.). Operating profit declined 8% from the prior year due to a loss at Cochrane's water treatment business and lower results at both Pacific Valves and Flowseal which more than offset improvement at the other businesses within the segment. Aerospace sales and operating profit were up significantly for the first six months due largely to the inclusion of ELDEC which was acquired in late March 1994, and improved operating results at both Hydro-Aire and Lear Romec. Engineered Materials sales were up slightly compared to June 1994, as strong sales at Cortec were partially offset by lower sales at Crane Plumbing. Operating profit decreased 3% due to a loss at Crane Plumbing, the result of the weak Canadian housing market and lower earnings at Kemlite due to higher material costs. Crane Controls sales and operating profit were up primarily due to the inclusion this year of the businesses acquired as part of Mark Controls in April 1994. On an operating basis, sales and operating profit were up 24% and 38%, respectively. Results of this segment are somewhat distorted by non-cash goodwill charges of $3 million per year which reduce earnings but have no effect on cash flow returns. Merchandising Systems sales were up 30% from last year to $99.6 million. This increase was due to the continued strong acceptance of National Vendors' new product introductions, higher sales due to a Post Office Contract and expanded distribution channels. National Vendors' profits were up significantly due to higher sales and production volume. NRI sales were up 31% from last year and the unit was profitable compared to a loss last year. Wholesale Distribution sales were up 2% due to Huttig's May 1994 acquisition of a specialty millwork manufacturer, and higher sales at Valve Systems and Crane Supply. These increases were offset by lower Huttig distribution sales. Operating profit was up 32% due to strong results at Crane Supply and improved results at Valve Systems which more than offset lower Huttig earnings. Huttig has incurred approximately $1 million in costs in the first six months of 1995 in connection with closing its distribution facility in New Jersey. -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, 1995 and 1994 [CAPTION] Results From Operations: Six Months Ended June 30, 1995 Compared to Six Months Ended June 30 , 1994: Net interest expense increased $6.5 million compared to the prior year due to debt financed acquisitions. The effective tax rate increased to 38.7% from 38.6% in 1994. [CAPTION] Liquidity and Capital Resources: During the first half of 1995 the company generated $31.3 million of cash from operating activities, compared to $24.1 million in 1994. Net debt totaled 49 percent of capital at June 30, 1995. The current ratio increased to 2.1 with working capital totaling $260.8 million in 1995 compared to $232.9 million in 1994. The company had unused credit lines of $394 million at June 30, 1995. -10- Part II - Other Information Item 1. Legal Proceedings: Neither the company, nor any subsidiary of the company has become a party to, nor has any of their property become the subject of any material legal proceeding other than ordinary routine litigation incidental to their businesses. The following proceeding is included herein because it has been reported in the media and was previously reported in the company's Annual Report for 1994 on Form 10K. On September 22, 1992 the company was served with a complaint filed in the U.S. District Court, Eastern District of Missouri naming the company and its former subsidiary CF&I Steel Corporation ("CF&I") as defendants and alleging violations of the False Claims Act in connection with the distribution of CF&I to the company's shareholders in 1985 (Civil Actions Nos. 91-0429-C-1 and 4:92CV005144JCH). On June 1, 1993 the federal court in the Eastern District of Missouri dismissed the Complaint for lack of standing of the plaintiff and the plaintiff appealed. In November, 1994 the Eighth Circuit Court of Appeals reinstated the action. The company's petition to the U.S. Supreme Court for a writ of certiorari was denied on or about June 19, 1995 and the case has been returned to the District Court for further proceedings. The case involves allegations of a continuing agreement and concert of action between the company and CF&I to distribute CF&I to the Company's shareholders, thereafter to terminate CF&I's pension plan so as to cause the Pension Benefit Guaranty Corporation ("PBGC") to assume CF&I's liability for unfunded pension liabilities (of allegedly $270 million) to prevent the PBGC from obtaining any reimbursement from the company, and to publish and file misleading information in furtherance of that objective. The plaintiffs seek treble damages and attorney's fees. The company believes the plaintiff has no standing, the False Claims Act does not apply and that the allegations are without merit. In all events the company will vigorously defend itself against this litigation and believes that the case will ultimately be dismissed. The following proceeding is not considered by the company to be material to its business or financial condition and are reported herein because of the requirements of the Securities and Exchange Commission with respect to the description of administrative or judicial proceedings by governmental authorities arising under federal, state or local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment: -11- As reported in the Annual Report for 1994 on Form 10-K, in a letter dated October 15, 1992 the office of the Attorney General of the State of Ohio advised CorTec, a division of Dyrotech Industries, Inc. which is a subsidiary of the company, that CorTec's plant facility in Washington Court House, Ohio had operated numerous air contaminant sources in its manufacturing process which emitted air pollutants for an extended period of time without the required state permits. The Ohio Attorney General's office also alleged that certain contaminant sources at the CorTec facility were installed without obtaining permits to install. The main air contaminant in question is styrene, a volatile organic compound that is alleged to be a carcinogen. CorTec recently constructed an air remediation system in its plant which included the installation of a hood, vent and incinerator to capture and incinerate the styrene emissions. The Ohio Attorney General's office previously proposed CorTec and the company sign a Consent Decree which would include general injunctive relief and civil penalties in the amount of $4.6 million which CorTec has refused to do. In a letter dated July 17, 1995 the Attorney General's office of the State of Ohio delivered a draft Complaint to CorTec (Court of Common Pleas, Fayette County, Ohio) alleging failure by CorTec to obtain various permits to install and to operate sources of contaminants and also alleging violations of air emissions standards for periods 1974 to 1993. Penalties of $25,000 per day for each violation are demanded in the draft Complaint. The Attorney General's office has requested a meeting to discuss a resolution of the matter by means of a Consent Order. CorTec believes it has adequate defenses to the allegations made by the Attorney General and it plans to vigorously resist paying any damages, fines, or penalties. Item 6. Exhibits and Reports on Form 8-K 10. Material Contracts (iii)A Compensatory Plans. There is incorporated by reference herein:(a)Exhibits 4(a) and 4(b)to Registrant's Registration Statement No. 33- 59389, Exhibits 4(b)(i) and (ii) to Registration Statement No. 33-59399, and Exhibit 4(b) to Registration Statement No. 33-59475 on form S-8 with respect to the Crane Co. Stock Option Plan, the Crane Co. Restricted Stock Award and the Crane Co. Non- Employee Director Restricted Stock Plan. 11.Computation of earnings per share for the quarters and six months ended June 30, 1995 and 1994. 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 14 1995 By D.S. SMITH D.S. SMITH Vice President-Finance and Chief Financial Officer Date August 14 1995 By M.L. RAITHEL M.L. RAITHEL Controller -13- Crane Co. and Subsidiaries Exhibit A to Form 10-Q Computation of Net Income per Common Share Three and Six Months Ended June 30, 1995 and 1994 (In Thousands, Except Per Share Amounts)
Three Months Six Months Ended Ended June 30, June 30, 1995 1994 1995 1994 Primary Net Income Per Share: Net income available to shareholders $20,117 $ 15,666 $33,392 $23,075 Average primary shares outstanding 30,622 30,120 30,459 30,085 Net Income $ .66 $ .52 $ 1.10 $ .77 Fully Diluted - Income Per Share: Net income $20,117 $ 15,666 $33,392 $23,075 Add back interest, net of tax, assuming the conversion of debentures - 6 - 12 Net income available to shareholders, assuming the conversion of debentures $20,117 $ 15,672 $33,392 $23,087 Average primary shares outstanding 30,622 30,120 30,459 30,085 Add Adjustment for further dilutive effect of stock options (ending market price higher than average market price used in primary shares calculation) 14 3 15 3 Shares reserved for conversion of debentures - 164 - 168 Average fully diluted shares outstanding 30,636 30,287 30,474 30,256 Net income $ .66 $ .52 $ 1.10 $ .76
-14- EX-27 2 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q
5 1,000 6-MOS DEC-31-1995 Jun-30-1995 661 0 252,894 0 248,568 509,985 520,126 263,636 1,035,873 249,180 0 30,506 0 0 326,666 1,035,873 884,057 884,057 676,200 816,539 366 893 13,407 54,477 21,085 33,392 0 0 0 33,392 1.10 1.10