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, 1997
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, 1997:
Common stock, $1.00 Par Value - 45,904,700 shares
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
Crane Co.
Consolidated Statements of Income
(in thousands except per share amounts)
(unaudited)
<CAPTION>
Periods Ended June 30,
Three Months Six Months
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $ 518,763 $ 466,231 $ 986,096 $902,694
Operating Costs and Expenses:
Cost of sales 375,794 339,605 713,954 659,587
Selling, general and
administrative 77,902 70,999 152,716 141,485
Depreciation & amortization 13,815 12,050 27,179 24,072
467,511 422,654 893,849 825,144
Operating Profit 51,252 43,577 92,247 77,550
Other Income (Deductions):
Interest income 388 647 1,080 1,180
Interest expense (5,986) (5,768) (11,943) (11,630)
Miscellaneous - net 216 (3,437) 232 (2,601)
(5,382) (8,558) (10,631) (13,051)
Income Before Taxes 45,870 35,019 81,616 64,499
Provision for Income Taxes 16,648 12,915 29,749 24,187
Net Income $ 29,222 $ 22,104 $ 51,867 $ 40,312
Net Income Per Share $ .63 $ .48 $ 1.12 $ .88
Average Shares Outstanding 46,632 45,968 46,502 45,878
Dividends Per Share $ .125 $ .125 $ .25 $ .25
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
-2-
<PAGE>
<TABLE>
Part I - Financial Information
Item 1. Financial Statements (Cont'd)
Crane Co.
Consolidated Balance Sheets
(in thousands)
<CAPTION>
June 30, December 31,
1997 1996 1996
(unaudited)
Assets
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,254 $ 22,494 $ 11,579
Accounts receivable 291,924 255,184 253,729
Inventories:
Finished goods 119,491 121,805 124,490
Finished parts and
subassemblies 36,910 35,199 35,507
Work in process 48,606 33,791 43,894
Raw materials 68,147 55,435 63,383
273,154 246,230 267,274
Other current assets 7,619 7,091 7,432
Total Current Assets 580,951 530,999 540,014
Property, Plant and Equipment:
Cost 572,075 521,344 547,566
Less accumulated depreciation 306,798 280,478 289,219
265,277 240,866 258,347
Other Assets 29,549 27,080 29,879
Intangibles 53,312 57,359 55,862
Cost in excess of net assets
acquired 214,748 167,601 204,753
$ 1,143,837 $ 1,023,905 $ 1,088,855
<FN>
See Notes to Consolidated Financial Statements
-3-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information
Item 1. Financial Statements (Cont'd)
Crane Co.
Consolidated Balance Sheets (Cont'd)
(in thousands)
<CAPTION>
June 30, December 31,
1997 1996 1996
(unaudited)
Liabilities and Shareholders' Equity
<S> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 1,106 $ 760 $ 1,251
Loans payable 28,964 18,115 23,937
Accounts payable 124,222 101,040 105,082
Accrued liabilities 111,575 116,559 116,488
U.S. and foreign taxes on income 10,160 14,143 7,095
Total Current Liabilities 276,027 250,617 253,853
Long-Term Debt 267,363 265,180 267,795
Deferred Income Taxes 30,301 27,609 29,774
Other Liabilities 25,365 21,876 25,126
Accrued Postretirement Benefits 42,908 43,153 43,155
Accrued Pension Liability 6,205 8,382 6,483
Preferred Shares, Par Value $.01
Authorized - 5,000 Shares - - -
Common Shareholders' Equity:
Common shares 45,832 45,547 45,660
Capital surplus 31,368 20,199 29,756
Retained earnings 431,080 352,384 394,621
Currency translation adjustment (12,612) (11,042) (7,368)
Total Common Shareholders' Equity 495,668 407,088 462,669
$ 1,143,837 $ 1,023,905 $ 1,088,855
<FN>
See Notes to Consolidated Financial Statements
-4-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information
Item 1. Financial Statements (Cont'd)
Crane Co.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 51,867 $ 40,312
Depreciation 18,415 17,279
Amortization 8,764 7,050
Deferred taxes (478) (833)
Cash used for operating working capital (19,047) (10,227)
Other (713) (917)
Total from operating activities 58,808 52,664
Cash flows from investing activities:
Capital expenditures (21,703) (16,710)
Payments for acquisitions (24,057) -
Proceeds from divestitures - 1,554
Proceeds from disposition of capital assets 857 1,391
Purchase of equity investment - -
Total used for investing activities (44,903) (13,765)
Cash flows from financing activities:
Equity:
Dividends paid (11,428) (11,356)
Reacquisition of shares (8,056) (1,522)
Stock options exercised 4,049 4,160
Net Equity (15,435) (8,718)
Debt:
Proceeds from issuance of long-term debt - -
Repayments of long-term debt (3,102) (11,905)
Net increase (decrease) in short-term debt 2,070 (1,237)
Net Debt (1,032) (13,142)
Total used for financing activities (16,467) (21,860)
Effect of exchange rate on cash and cash equivalents (763) (21)
Increase (decrease) in cash and cash equivalents (3,325) 17,018
Cash and cash equivalents at beginning of period 11,579 5,476
Cash and cash equivalents at end of period $ 8,254 $ 22,494
Detail of Cash (Used for) Provided From
Operating Working Capital:
Accounts receivable $ (31,435) $ (15,569)
Inventories (5,119) (1,877)
Other current assets 763 (353)
Accounts payable 19,108 4,830
Accrued liabilities (5,627) 1,343
U.S. and foreign taxes on income 3,263 1,399
Total $ (19,047) $ (10,227)
Supplemental disclosure of cash flow information:
Interest paid $ 11,227 $ 11,418
Income taxes paid $ 24,460 $ 22,530
See Notes to Consolidated Financial Statements
-5-
</TABLE>
<PAGE>
Part I - Financial Information
Item 1. Financial Statements (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.
These interim consolidated financial statements should be
read in conjunction with the Consolidated Financial
Statements and Notes to Consolidated Financial Statements in
the company's Annual Report on Form 10-K for the year ended
December 31, 1996.
<TABLE>
2. Sales and operating profit by segment are as follows:
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
(in thousands)
Net Sales:
Fluid Handling $ 102,158 $ 91,974 $ 190,273 $ 184,204
Aerospace 85,118 57,168 167,012 115,489
Engineered Materials 58,604 53,166 114,976 103,904
Crane Controls 33,576 32,457 65,329 66,240
Merchandising Systems 50,358 47,410 92,824 91,482
Wholesale Distribution 188,241 186,528 355,142 345,948
Other 3,442 1,892 6,396 4,472
Intersegment Elimination (2,734) (4,364) (5,856) (9,045)
Total $ 518,763 $ 466,231 $ 986,096 $ 902,694
Operating Profit (Loss):
Fluid Handling $ 7,438 $ 5,726 $ 13,527 $ 10,764
Aerospace 21,895 16,426 41,693 31,709
Engineered Materials 7,582 7,671 14,696 12,911
Crane Controls 3,278 2,619 5,207 6,096
Merchandising Systems 10,127 7,251 17,868 13,117
Wholesale Distribution 6,470 8,297 9,853 11,857
Other 207 (38) 523 13
Corporate (5,890) (4,475) (11,273) (9,047)
Intersegment Elimination 145 100 153 130
Total $ 51,252 $ 43,577 $ 92,247 $ 77,550
-6-
</TABLE>
<PAGE>
Part I - Financial Information
Item 1. Financial Statements (Cont'd)
Notes to Consolidated Financial Statements (Cont'd)
3. Restatements
Share and per share data for the three and six months ending
June 30, 1996 has been restated to reflect the three-for-two
stock split effected on December 12, 1996.
4. Inventories
Inventories are stated at the lower of cost or market,
principally on the last-in, first-out (LIFO) method of inventory
valuation. Replacement cost would be higher by $51,757,000 at
June 30, 1997, $52,377,000 at June 30, 1996, and $49,260,000 at
December 31, 1996.
5. Earning Per Share
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share,
(SFAS128). The company plans to adopt SFAS128 for both interim
and annual periods after December 15, 1997, as required by the
statement. Pro forma amounts as if the statement had been
adopted for the second quarter of 1997 are as follows:
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Basic Earnings Per Share $ .64 $ .49 $1.14 $ .89
Fully Diluted Earnings Per
Share $ .63 $ .48 $1.12 $ .88
</TABLE>
-7-
<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, 1997 and 1996
[CAPTION]
Results From Operations:
Second Quarter of 1997 Compared to Second Quarter of 1996:
Net income for the quarter ended June 30, 1997 set a second quarter
record, rising 32 percent to $29.2 million, or $.63 per share from
the $22.1 million, or $.48 per share, reported for the 1996 second
quarter. Operating profit for the second quarter increased 18
percent to $51.3 million on a sales gain of 11 percent to $518.8
million.
Fluid Handling sales rose 11 percent and operating profit increased
30 percent in the quarter compared with the prior year. The MOVATS
valve diagnostic and service business, acquired in April,
contributed $8 million in sales in the quarter. Sales were also
higher in the specialty marine Norwegian steel valve and Australian
steel valve operations. Pump product line sales were adversely
affected by delays in project orders. Fluid Handling operating
profits in the quarter increased from the prior year due to the
MOVATS acquisition and improved operational performance in North
American operations. Profitability was negatively impacted by
production problems in Norway and adverse product mix and lower
demand in the U.K. valve operation. The company expects MOVATS to
have less of an impact on sales and profitability for the remainder
of the year due to seasonality.
Aerospace sales increased 49 percent in the quarter with Interpoint,
the high density power converter business acquired in October of
1996, contributing more than half the increase. Excluding the
acquisition, sales rose 23 percent because of continued high
aircraft production levels and airline utilization rates. Operating
profit in the second quarter improved 33 percent due to the higher
sales volume and, excluding Interpoint, margins improved even though
product development costs were $2.2 million higher in the 1997
second quarter compared with the 1996 second quarter. Order
backlog, exclusive of Interpoint, was more than 11 percent higher
than the prior year backlog.
Engineered Materials sales increased 10 percent but operating profit
declined one percent, compared with the 1996 second quarter. While
all businesses contributed to the sales growth, Kemlite was the main
contributor as its fiberglass reinforced plastic panel products
continued to displace aluminum in the recreational vehicle and truck
trailer market. Overall margins declined to 12.9 percent of sales
from 14.4 percent in 1996 as Kemlite was impacted by the costs of
integrating the Sequentia transportation product line, acquired in
March, into its Joliet production facility. In addition, Resistoflex
profits were lower than the extremely strong results in 1996 due
-8-
<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, 1997 and 1996
primarily to lower large project related business. For the group as
a whole, order backlog was down 9 percent from the prior year level
reflecting the low project orders at Resistoflex partially offset by
a stronger transportation market at Kemlite.
Crane Controls sales increased 3 percent on strong shipments of air
suspension valves at Barksdale. Operating profit improved 25
percent primarily due to successful cost reduction efforts at
Ferguson. Controls order backlog stood 11 percent higher at the
close of the 1997 second quarter compared with the 1996 second
quarter.
Merchandising Systems sales were up 6 percent in the quarter
compared with last year because of the mid March 1997 Polyvend
vending machine acquisition, which contributed nearly $5 million in
sales. Operating profit increased 40 percent and profit margins
improved to 20.1 percent from 15.3 percent in the same period last
year due to productivity gains and sales of higher margin products
at both National Vendors and NRI, GmbH. The company expects further
cost reductions in the coming months as the integration of the
Polyvend manufacturing operation into National Vendor's St. Louis
facility is completed. Order backlog was in line with the prior
year.
Wholesale Distribution sales increased one percent as sales gains at
Huttig and Valve Systems and Controls were partially offset by sales
declines at Crane Supply due to lower levels of commercial and
industrial building in Canada. Operating profit fell 22 percent
because of higher material costs at Huttig's wood molding
manufacturing business and the impact of lower sales at Crane Supply
on profits and margins. Operating results at Huttig's distribution
business were essentially equal to the 1996 level. Order backlog at
June 30, 1997 was 6 percent below the prior year level.
In the second quarter of 1996, the company incurred miscellaneous
expense of $3.4 million due principally to litigation costs in
connection with the successful defense of a False Claims Act related
to the CF&I Steel Corporation which was spun off in 1985. This
compared to miscellaneous income of $216,000 in the 1997 second
quarter.
On July 1, 1997 the company announced the acquisition of MALLCO
Lumber & Building Materials Inc. MALLCO is a leading wholesale
distributor of lumber, doors and engineered wood products in
Phoenix, and throughout the state of Arizona. MALLCO, whose sales
in 1996 were approximately $70 million, will be integrated with
Huttig's existing millwork and lumber distribution businesses
serving the same geographic markets.
-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, 1997 and 1996
[CAPTION]
Results From Operations:
Six Months Ended June 30, 1997 Compared to Six Months Ended
June 30 , 1996:
Net income for the first six months increased 29 percent to $51.9
million, or $1.12 per share, compared to $40.3 million, or $.88 per
share, last year. Operating income for the first six months rose 19
percent to $92.2 million on a sales increase of 9 percent to $986.1
million.
Fluid Handling sales improved 3 percent and operating profit rose
26 percent compared to 1996. Sales increased due to the MOVATS
acquisition and strong shipments at the company's Australian valves
operation. These gains were partially offset by lower shipments of
cast steel valves. Operating profit improved as North American
valves operations benefited from the MOVATS acquisition and
productivity gains in the manufacture of bronze and quarter turn
valves.
Aerospace sales increased 45 percent for the first six months with
Interpoint and Grenson, acquired in the fourth quarter of 1996,
contributing nearly two-thirds of the increase. Excluding the
acquisitions, sales rose 17 percent on the continued strength of
aircraft production and utilization levels. Operating profit
increased 31 percent as a result of the higher sales and
acquisitions. Profit margins declined to 25 percent of sales
compared to 27.5 percent last year due to the inclusion of
Interpoint. Profit margins would have been slightly higher without
Interpoint even though product development costs were $4.4 million
higher than the prior year.
Engineered Materials sales rose 11 percent and operating profit rose
14 percent compared with the 1996 first half. All operations
experienced higher shipments with significant contributions from
Kemlite and Resistoflex. Kemlite sales improved 14 percent on
strong demand in the recreational vehicle market and the Sequentia
acquisition. Resistoflex sales gained 9 percent because of
significant project wins in the early part of the year. For the
group as a whole, profit margins improved slightly to 12.8 percent
of sales compared to 12.4 percent.
-10-
<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, 1997 and 1996
[CAPTION]
Results From Operations:
Six Months Ended June 30, 1997 Compared to Six Months Ended
June 30 , 1996:
Crane Controls operating profit decreased 15 percent on a one
percent sales decline. All operations reported lower sales except
for Barksdale which benefited from strong air suspension valve
shipments. Profit margins for the group were 8 percent of sales,
down from 9.2 percent last year.
Merchandising Systems sales increased 1.5 percent because of the
Polyvend acquisition which contributed $5.1 million in sales. This
was partially offset by lower domestic shipments to national
accounts and independent operators at National Vendors. Operating
profit improved 36 percent compared with the first half of 1996.
Profit margins for the group improved nearly five percentage points
to 19.2 percent of sales as a result of operating efficiencies and
sales of higher margin products.
Wholesale Distribution sales improved 2.7 percent but operating
profit declined 17 percent. Huttig's distribution business was the
major contributor to the sales gain, benefiting from strong housing
activity in New England, California and Florida. This was partially
offset by a decline in sales at Crane Supply due to a weak
industrial market in Ontario. The weak sales at Crane Supply
coupled with higher raw material costs at Huttig's manufacturing
business led to the decline in operating profit.
[CAPTION]
Liquidity and Capital Resources:
During the first half of 1997 the company generated $58.8 million of
cash from operating activities compared to $52.7 million in 1996.
In addition, the company paid $24.1 million in cash for the
Polyvend, Sequentia and MOVATS acquisitions, and repurchased 168,500
shares of Crane Co. stock in the open market at a cost of $4.9
million.
Net debt increased to $289.2 million at June 30, 1997, a $7.8
million increase from the start of the year due to the acquisitions.
Net debt to capital was 36.8 percent at June 30, 1997. The current
ratio was 2.1 with working capital totaling $304.9 million at June
30, 1997 compared to $280.4 million at June 30, 1996. Due to
seasonality, the company's working capital requirements peak at
midyear.
-11-
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
During the period covered by this report, there have been no
material developments in any of the legal proceedings described in
the company's Annual Report on Form 10-K for the year ended December
31, 1996.
Item 6. Exhibits and Reports on Form 8-K
11.Computation of earnings per share for the
quarters and six months ended June 30, 1997 and
1996.
27.Article 5 of Regulation S-X Financial Data Schedule
for the second quarter.
-12-
<PAGE>
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 8, 1997 By /s/ D.S. Smith
D.S. SMITH
Vice President-Finance
and Chief Financial Officer
Date August 8, 1997 By /s/ M.L. Raithel
M.L. RAITHEL
Controller
-13-
<PAGE>
<TABLE>
EXHIBIT 11
Crane Co.
Computation of Net Income per Common Share
(in thousands except per share amounts)
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Primary Net Income Per Share:
Net income available
to shareholders $29,222 $ 22,104 $51,867 $40,312
Average primary shares outstanding 46,632 45,968 46,502 45,878
Net Income $ .63 $ .48 $ 1.12 $ .88
Fully Diluted - Income Per Share:
Net income $29,222 $ 22,104 $51,867 $40,312
Average primary shares outstanding 46,632 45,968 46,502 45,878
Add
Adjustment for further dilutive
effect of stock options (ending
market price higher than average
market price used in primary
shares calculation) 128 - 222 2
Average fully diluted shares
outstanding 46,760 45,968 46,724 45,880
Net income $ .62 $ .48 $ 1.10 $ .88
</TABLE>
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 8,254
<SECURITIES> 0
<RECEIVABLES> 291,924
<ALLOWANCES> 0
<INVENTORY> 273,154
<CURRENT-ASSETS> 580,951
<PP&E> 572,075
<DEPRECIATION> 306,798
<TOTAL-ASSETS> 1,143,837
<CURRENT-LIABILITIES> 276,027
<BONDS> 267,363
<COMMON> 45,832
0
0
<OTHER-SE> 449,836
<TOTAL-LIABILITY-AND-EQUITY> 1,143,837
<SALES> 986,096
<TOTAL-REVENUES> 986,096
<CGS> 735,540
<TOTAL-COSTS> 893,849
<OTHER-EXPENSES> 232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,863
<INCOME-PRETAX> 81,616
<INCOME-TAX> 29,749
<INCOME-CONTINUING> 51,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,867
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.10
</TABLE>
