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
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
Crane Co. and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
Periods Ended June 30,
Three Months Six Months
1995 1994 1995 1994
<S> <C> <C> <C> <C>
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
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
-2-
<PAGE>
<TABLE>
Part I - Financial Information
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
<CAPTION>
June 30, December 31,
1995 1994 1994
(Unaudited)
Assets
<S> <C> <C> <C>
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
<FN>
See Notes to Consolidated Financial Statements
-3-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information
<CAPTION>
June 30, December
31,
1995 1994 1994
(Unaudited)
Liabilities and Shareholders' Equity
<S> <C> <C> <C>
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
<FN>
See Notes to Consolidated Financial Statements
-4-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information (Cont'd.)
Crane Co. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months
Ended
June 30,
1995 1994
<S> <C> <C>
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-
</TABLE>
<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements
<TABLE>
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:
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
(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
<S> <C> <C>
(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-
</TABLE>
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-
<PAGE>
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-
<PAGE>
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-
<TABLE>
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)
<CAPTION>
Three Months Six Months Ended
Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
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
</TABLE>
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> Jun-30-1995
<CASH> 661
<SECURITIES> 0
<RECEIVABLES> 252,894
<ALLOWANCES> 0
<INVENTORY> 248,568
<CURRENT-ASSETS> 509,985
<PP&E> 520,126
<DEPRECIATION> 263,636
<TOTAL-ASSETS> 1,035,873
<CURRENT-LIABILITIES> 249,180
<BONDS> 0
<COMMON> 30,506
0
0
<OTHER-SE> 326,666
<TOTAL-LIABILITY-AND-EQUITY> 1,035,873
<SALES> 884,057
<TOTAL-REVENUES> 884,057
<CGS> 676,200
<TOTAL-COSTS> 816,539
<OTHER-EXPENSES> 366
<LOSS-PROVISION> 893
<INTEREST-EXPENSE> 13,407
<INCOME-PRETAX> 54,477
<INCOME-TAX> 21,085
<INCOME-CONTINUING> 33,392
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,392
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
