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 September 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 October 31, 1995:
Common stock, $1.00 Par Value - 30,162,789 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 September 30,
Three Months Nine Months
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $ 453,344 $ 451,108 $ 1,337,401 $ 1,211,542
Operating Costs and Expenses:
Cost of sales 336,860 339,806 993,081 924,329
Selling, general and
administrative 65,944 65,509 202,416 177,219
Depreciation & amortization 12,406 13,312 36,252 33,762
415,210 418,627 1,231,749 1,135,310
Operating Profit 38,134 32,481 105,652 76,232
Other Income (Deductions):
Interest income 979 467 1,602 2,918
Interest expense (6,699) (7,623) (20,729) (16,972)
Miscellaneous - net 2,701 626 3,067 1,355
(3,019) (6,530) (16,060) (12,699)
Income Before Taxes 35,115 25,951 89,592 63,533
Provision for Income Taxes 13,086 9,949 34,171 24,456
Net Income $ 22,029 $ 16,002 $ 55,421 $ 39,077
Net Income Per Share $.71 $.53 $1.81 $1.30
Average Shares Outstanding 30,830 30,219 30,567 30,129
Dividends Per Share $.1875 $.1875 $.5625 $.5625
<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>
September 30, December 31,
1995 1994 1994
(Unaudited)
Assets
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 423 $ 2,470 $ 2,072
Accounts receivable, net of
allowance 284,966 245,778 234,695
Inventories at lower of cost,
principally LIFO, or market;
replacement cost would be
higher by approximately
$52,021, ($56,250 at
September 30, 1994 and $52,739
at December 31, 1994)
Finished goods 113,439 123,367 116,625
Finished parts and
subassemblies 33,710 27,308 30,556
Work in process 37,358 41,588 39,286
Raw materials 54,558 52,051 50,598
239,065 244,314 237,065
Other current assets 6,682 13,648 6,407
Total Current Assets 531,136 506,210 480,239
Property, Plant and Equipment:
Cost 507,259 524,297 513,348
Less accumulated depreciation 263,540 246,166 250,350
243,719 278,131 262,998
Other Assets 27,410 24,962 30,173
Intangibles, less accumulated
amortization of $9,924
($6,833 at September 30, 1994
and $7,716 at December 31, 1994) 60,142 66,179 63,434
Cost in excess of net assets
acquired less accumulated
amortization of $21,051
($15,621 at September 30, 1994
and $16,730 at
December 31, 1994) 169,297 171,818 171,201
$ 1,031,704 $ 1,047,300 $ 1,008,045
<FN>
See Notes to Consolidated Financial Statements
-3-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information
<CAPTION>
September 30, December 31,
1995 1994 1994
(Unaudited)
Liabilities and Shareholders' Equity
<S> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 767 $ 1,453 $ 1,272
Loans payable 14,819 28,816 20,986
Accounts payable 109,612 100,231 95,211
Accrued liabilities 120,341 110,109 119,382
U.S. and foreign taxes on income 9,872 5,402 7,444
Total Current Liabilities 255,411 246,011 244,295
Long-Term Debt 305,756 386,302 331,289
Deferred Income Taxes 32,315 22,929 32,440
Other Liabilities 17,274 23,217 20,159
Accrued Postretirement Benefits 43,138 43,162 43,066
Accrued Pension Liability 8,730 6,991 8,804
Preferred Shares, Par Value $.01
Authorized - 5,000 Shares - - -
Common Shareholders' Equity:
Common shares 30,363 30,102 30,047
Capital surplus 20,037 14,081 12,766
Retained earnings 326,766 284,478 296,268
Currency translation adjustment (8,086) (9,973) (11,089)
Total Common Shareholders' Equity 369,080 318,688 327,992
$ 1,031,704 $ 1,047,300 $ 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>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 55,421 $ 39,077
Depreciation 26,848 26,075
Amortization 9,404 7,687
Deferred taxes (1,385) 204
Cash used for operating working capital (27,800) (12,845)
Other 872 (4,185)
Total from operating activities 63,360 56,013
Cash flows from investing activities:
Capital expenditures (20,239) (21,915)
Payments for acquisitions (1,879) (161,424)
Proceeds from divestitures - 2,580
Proceeds from disposition of capital assets 8,100 3,540
Purchase of equity investment (5,501) -
Total used for investing activities (19,519) (177,219)
Cash flows from financing activities:
Equity:
Dividends paid (17,096) (16,884)
Reacquisition of shares (3,129) (42)
Stock options exercised 8,762 1,041
Net Equity (11,463) (15,885)
Debt:
Proceeds from issuance of long-term debt - 230,105
Repayments of long-term debt (13,051) (75,164)
Net decrease in short-term debt (21,052) (28,059)
Net Debt (34,103) 126,882
Total(used for)provided from financing activities (45,566) 110,997
Effect of exchange rate on cash and cash equivalents 76 87
Decrease in cash and cash equivalents (1,649) (10,122)
Cash and cash equivalents at beginning of period 2,072 12,592
Cash and cash equivalents at end of period $ 423 $ 2,470
Detail of Cash (Used for) Provided From
Operating Working Capital:
Accounts receivable $ (37,497) $ (21,075)
Inventories 1,232 8,777
Other current assets (209) (4,607)
Accounts payable 6,164 9,815
Accrued liabilities 110 (2,528)
U.S. and foreign taxes on income 2,400 (3,227)
Total $ (27,800) $ (12,845)
Supplemental disclosure of cash flow information:
Interest paid $ 19,681 $ 17,039
Income taxes paid 30,526 24,269
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 Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
(In thousands)
Net Sales:
Fluid Handling $ 88,438 $ 81,921 $ 250,695 $ 226,698
Aerospace 55,902 46,413 160,391 113,936
Engineered Materials 47,842 50,975 151,806 153,543
Crane Controls 31,739 27,642 99,006 59,039
Merchandising Systems 42,480 42,883 142,087 119,482
Wholesale Distribution 187,765 203,193 536,451 543,937
Other 2,903 2,478 9,221 9,763
Intersegment Elimination (3,725) (4,397) (12,256) (14,856)
Total $ 453,344 $ 451,108 $ 1,337,401 $ 1,211,542
Operating Profit (Loss):
Fluid Handling $ 6,560 $ 5,866 $ 13,793 $ 13,750
Aerospace 14,329 9,522 40,581 20,500
Engineered Materials 4,699 6,111 16,719 18,534
Crane Controls 2,417 1,697 8,475 3,759
Merchandising Systems 4,587 5,275 19,983 16,274
Wholesale Distribution 8,793 6,835 16,542 12,686
Other 280 (427) 322 (528)
Corporate (3,507) (2,517) (10,817) (8,759)
Intersegment Elimination (24) 119 54 16
Total $ 38,134 $ 32,481 $ 105,652 $ 76,232
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 Nine Months Ended September 30, 1995 and 1994
[CAPTION]
Results From Operations:
Third Quarter of 1995 Compared to Third Quarter of 1994:
Net income for the quarter ended September 30, 1995 of $22 million
or $.71 per share was the second consecutive record quarter, a 38%
increase from the $16 million or $.53 per share reported for the
same period last year. Sales in the quarter were $453.3 million,
up 1% from last year, and operating profit increased 17% to $38.1
million.
Fluid Handling sales and operating profit were up 8% and 12% in
the quarter compared to the prior year due to increased demand for
the pressure seal valve line of the Pacific Valve business and for
valve products in the United Kingdom, where the third quarter
domestic demand was exceptionally strong. The backlog in the
worldwide valve business is 66% higher than last year. In the
third quarter the Hebei Ningjin Valve Plant in China, the
Company's first manufacturing joint venture in the Far East,
started manufacturing quarter turn industrial iron valves for sale
through Crane Co.'s global distribution network. Pumps business
units sales were approximately the same as last year.
Aerospace sales and operating profit were up substantially with
improvement at all three of the segment's business units. ELDEC
continued strong with quarterly profit 37% over last year on a 24%
increase in shipments. Hydro-Aire and Lear Romec earnings were up
due to somewhat higher OEM and aftermarket sales. Program wins and
market strength in the business and commuter jet market is of
increasing importance to segment results. Aerospace backlog is 16%
higher than last year.
Engineered Materials sales and operating profit were down 6% and
23% compared to the third quarter last year. The operating profit
decrease was partially due to the impact of higher raw material
costs at Kemlite and the inability to pass on these costs in the
market. The weak Canadian housing market, with housing starts 34%
below the same period last year, continued to adversely impact
Crane Plumbing sales and operating profit. Cor-Tec's shipments
continued strong and were significantly ahead of last year while
profit doubled from 1994. Resistoflex's operating profit increased
compared to last year due to improved manufacturing efficiency and
continued strong demand for lined pipe and fittings.
-7-
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three and Nine Months Ended September 30, 1995 and 1994
[CAPTION]
Results From Operations:
Third Quarter of 1995 Compared to Third Quarter of 1994:
Crane Controls sales and operating profit were up 15% and 42%
compared to the third quarter 1994. Barksdale had record shipments
for the quarter due to the Unimess acquisition and additional
distribution channels. Ferguson operating profit increased
primarily due to higher shipments and margins on the Index and
Cams product line.
Merchandising Systems sales and operating profit were down due to
the leveling off of the automated merchandising market and
increased promotional activities to entice new equipment
purchases. The Cafe System "7" product continues to gain
acceptance. NRI operated at a profit for the second consecutive
quarter due to higher production and sales levels and the benefits
of the cost reduction program previously instituted.
Wholesale Distribution sales were down due to lower shipments at
Huttig, which reflected a slow down in single family construction
across the United States. Despite lower sales, Huttig's operating
profit increased as a result of management's continued focus on
operating cost and inventory management which resulted in LIFO
income of $1.5 million in the quarter. In addition, strong results
at Crane Supply and continued improvement at Valve Systems
resulted in a 29% operating profit increase in the segment over
the third quarter 1994.
Net interest expense in the quarter decreased $1.4 million
compared to the prior year due to decreased debt. Net debt was
$320.9 million at the end of the quarter.
Miscellaneous income increased $2.1 million in the third quarter.
The third quarter results included a gain of $9.4 million on the
sale of Mid-Ocean Reinsurance investment in September partially
offset by legal costs for a previously discontinued operation of
$3.4 million and net losses recognized on excess real estate of
$3.5 million.
The effective tax rate decreased to 37.3% in the third quarter of
1995 compared to 38.3% in 1994 due principally to lower taxes
related to non U.S. operating units.
-8-
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three and Nine Months Ended September 30, 1995 and 1994
[CAPTION]
Results From Operations:
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30 , 1994:
Net income for the first nine months was up 42% to $55.4 million
or $1.81 per share compared to $39.1 million or $1.30 per share
last year. Operating income for the first nine months was up 39%
to $105.7 million on a sales increase of 10% to $1.3 billion.
Fluid Handling sales were up 11% compared to 1994 due to increased
demand for valve products in the United Kingdom as well as the
inclusion of Mark Controls Corporation acquired in April 1994.
Operating profit remained level with 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 nine 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 down slightly compared to
September 1994, as strong sales at Cortec and Resistoflex were
offset by lower sales at Crane Plumbing. Operating profit
decreased 10% 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 increased 68% compared to last year while
operating profit more than doubled due mainly to the Mark Controls
Corporation acquisition in April 1994. 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 19% from last year to $142.1
million. This increase was due to the continued strong acceptance
of National Vendors' new product introductions and expanded
distribution channels. National Vendors' profits were up 10% due
to higher sales and production volume. NRI sales were up 27% from
last year and the unit was profitable compared to a loss last
year.
Wholesale Distribution sales were down 1% due to Huttig's
distribution business and reflects the slowdown in single family
housing construction across the United States which offset the
higher sales at Valve Systems and Crane Supply. Operating profit
was up 30% due to strong results at Crane Supply and improved
results at Valve Systems which more than offset lower Huttig
earnings.
-9-
<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three and Nine Months Ended September 30, 1995 and 1994
[CAPTION]
Results From Operations:
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994:
Net interest expense increased $5.1 million compared to the prior
year due to debt financed acquisitions in 1994.
Miscellaneous income increased $1.7 million compared to the prior
year. Results for the year included a $9.4 million gain on the sale
of Mid-Ocean Reinsurance investment in September partially offset by
legal costs for a previously discontinued operation of $3.4 million
and net losses recognized on excess real estate of $3.4 million.
The effective tax rate decreased to 38.1% from 38.5% in 1994.
[CAPTION]
Liquidity and Capital Resources:
During the first nine months of 1995 the company generated
$63.4 million of cash from operating activities, compared to
$56 million in 1994. Net debt totaled 47 percent of capital
at September 30, 1995 compared to 57 percent last year. The
current ratio of 2.1 remained the same as 1994 with working
capital totaling $275.7 million in 1995 compared to $260.2
million in 1994. The company had unused credit lines of $401
million at September 30, 1995.
On October 30, 1995 the company acquired certain assets and
assumed certain liabilities of Process Systems, Inc. based
in Warren, Michigan for a net purchase price of $7 million.
Process Systems is a manufacturer of vertical turbine pumps
and accessories for industrial applications. Process Systems
will operate as a subsidiary of Crane Pumps and Systems,
based in Piqua, Ohio and Crane's existing vertical turbine
pump product lines will be integrated with Process Systems.
-10-
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings:
Item 5. Other:
In October 1995, the Company announced that L. Hill Clark
was elected President and Chief Operating Officer of the
company. Mr. Clark joined Crane Co. in 1990 as President
of Lear Romec. His background in manufacturing and
engineering will be of great assistance in Crane's
continued efforts to reduce costs and increase efficiency
and quality.
-11-
Item 6. Exhibits and Reports on Form 8-K
10. Material Contracts
11.Computation of earnings per share for the
quarters and nine months ended September 30, 1995
and 1994.
27.Article 5 of Regulation S-X Financial Data Schedule
for the third 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 November 13, 1995 By D.S. SMITH
D.S. SMITH
Vice President-Finance
and Chief Financial Officer
Date November 13, 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 Nine Months Ended September 30, 1995 and 1994
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary Net Income Per Share:
Net income available
to shareholders $ 22,029 $ 16,002 $ 55,421 $ 39,077
Average primary shares 30,830 30,219 30,567 30,129
outstanding
Net Income $ .71 $ .53 $ 1.81 $ 1.30
Fully Diluted - Income Per
Share:
Net income $ 22,029 $ 16,002 $ 55,421 $ 39,077
Add back interest, net of
tax, assuming the conversion
of debentures - - - 12
Net income available to
shareholders, assuming the
conversion of debentures $ 22,029 $ 16,002 $ 55,421 $ 39,089
Average primary shares 30,830 30,219 30,567 30,129
outstanding
Add
Adjustment for further
dilutive effect of stock
options (ending market
price higher than average
market price used in
primary shares calculation) (4) - 11 -
Shares reserved for
conversion of debentures - - - 117
Average fully diluted shares
outstanding 30,826 30,219 30,578 30,246
Net income $ .71 $ .53 $ 1.81 $ 1.29
</TABLE>
-14-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> Sept-30-1995
<CASH> 423
<SECURITIES> 0
<RECEIVABLES> 284,966
<ALLOWANCES> 0
<INVENTORY> 239,065
<CURRENT-ASSETS> 531,136
<PP&E> 507,259
<DEPRECIATION> 263,540
<TOTAL-ASSETS> 1,031,704
<CURRENT-LIABILITIES> 255,411
<BONDS> 0
<COMMON> 30,363
0
0
<OTHER-SE> 338,717
<TOTAL-LIABILITY-AND-EQUITY> 1,031,704
<SALES> 1,337,401
<TOTAL-REVENUES> 1,337,401
<CGS> 1,022,962
<TOTAL-COSTS> 1,231,749
<OTHER-EXPENSES> (3,067)
<LOSS-PROVISION> 1,007
<INTEREST-EXPENSE> 19,127
<INCOME-PRETAX> 89,592
<INCOME-TAX> 34,171
<INCOME-CONTINUING> 55,421
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,421
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
</TABLE>
