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, 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 October 31, 1997:
Common stock, $1.00 Par Value - 43,633,863 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
1997
1996
1997
1996
<S>
<C>
<C>
Net Sales
$534,818
$481,116
$1,520,915
$1,383,810
Operating Costs and Expenses:
Cost of sales
391,023
352,632
1,104,977
1,012,219
Selling, general and
administrative
75,351
71,246
228,072
212,731
Depreciation and
amortization
14,175
12,226
41,351
36,298
480,549
436,104
1,374,400
1,261,248
Operating Profit
54,269
45,012
146,515
122,562
Other Income (Deductions):
Interest income
729
639
1,809
1,819
Interest expense
(6,046)
(5,911)
(17,989)
(17,541)
Miscellaneous - net
(56)
2,394
177
(207)
(5,373)
(2,878)
(16,003)
(15,929)
Income Before Taxes
48,896
42,134
130,512
106,633
Provision for Income Taxes
17,496
15,245
47,244
39,432
Net Income
$ 31,400
$ 26,889
$ 83,268
$ 67,201
Net Income Per Share
$ .67
$ .59
$ 1.79
$ 1.47
Average Shares Outstanding
46,878
45,597
46,623
45,746
Dividends Per Share
$ .125
$ .125
$ .375
$ .375
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
- - - 2 -
<PAGE>
<TABLE>
Part I - Financial Information
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<CAPTION>
September 30,
December 31,
1997
1996
1996
(Unaudited)
Assets
<S>
<C>
<C>
<C>
Current Assets:
Cash and cash equivalents
$
21,863
$
28,241
$
11,579
Accounts receivable, net of
allowance
298,415
268,938
253,729
Inventories:
Finished goods
110,069
119,638
124,490
Finished parts and
subassemblies
45,940
34,618
35,507
Work in process
45,003
31,287
43,894
Raw materials
71,243
56,146
63,383
272,255
241,689
267,274
Other current assets
6,911
7,232
7,432
Total Current Assets
599,444
546,100
540,014
Property, Plant and Equipment:
Cost
574,943
530,701
547,566
Less accumulated depreciation
309,813
281,402
289,219
265,130
249,299
258,347
Other Assets
29,669
27,381
29,879
Intangibles
52,961
56,649
55,862
Cost in excess of net assets
acquired
216,497
165,995
204,753
$
1,163,701
$
1,045,424
$
1,088,855
<FN>
See Notes to Consolidated Financial Statements
- 3 -
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information
<CAPTION>
September 30,
December 31,
1997
1996
1996
(Unaudited)
Liabilities and Shareholders' Equity
<S>
<C>
<C>
<C>
Current Liabilities:
Current maturities of long-term debt
$
1,063
$
736
$
1,251
Loans payable
16,296
22,743
23,937
Accounts payable
125,232
112,330
105,082
Accrued liabilities
117,502
115,827
116,488
U.S. and foreign taxes on income
8,986
17,003
7,095
Total Current Liabilities
269,079
268,639
253,853
Long-Term Debt
266,916
265,179
267,795
Deferred Income Taxes
30,990
27,346
29,774
Other Liabilities
26,551
21,714
25,126
Accrued Postretirement Benefits
42,106
43,204
43,155
Accrued Pension Liability
6,202
8,397
6,483
Preferred Shares, Par Value $.01
Authorized - 5,000 Shares
-
-
-
Common Shareholders' Equity:
Common shares
45,879
44,840
45,660
Capital surplus
31,396
2,636
29,756
Retained earnings
458,963
374,349
394,621
Currency translation adjustment
(14,381)
(10,880)
(7,368)
Total Common Shareholders' Equity
521,857
410,945
462,669
$
1,163,701
$
1,045,424
$
1,088,855
<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,
1997
1996
<S>
<C>
<C>
Cash flows from operating activities:
Net income
$
83,268
$
67,201
Depreciation
27,622
25,973
Amortization
13,729
10,711
Deferred taxes
(220)
(1,159)
Cash used for operating working capital
(12,250)
(5,719)
Other
(4,310)
(4,647)
Total from operating activities
107,839
92,360
Cash flows from investing activities:
Capital expenditures
(31,049)
(40,595)
Payments for acquisitions
(36,107)
-
Proceeds from divestitures
-
1,554
Proceeds from disposition of capital assets
4,457
11,030
Purchase of equity investment
-
-
Total used for investing activities
(62,699)
(28,011)
Cash flows from financing activities:
Equity:
Dividends paid
(17,170)
(16,966)
Reacquisition of shares
(9,240)
(20,311)
Stock options exercised
6,390
4,492
Net Equity
(20,020)
(32,785)
Debt:
Repayments of long-term debt
(3,461)
(12,013)
Net (decrease) increase in short-term debt
(10,710)
3,321
Net Debt
(14,171)
(8,692)
Total(used for)provided from financing activities
(34,191)
(41,477)
Effect of exchange rate on cash and cash equivalents
(665)
(107)
Decrease in cash and cash equivalents
10,284
22,765
Cash and cash equivalents at beginning of period
11,579
5,476
Cash and cash equivalents at end of period
$
21,863
$
28,241
Detail of Cash (Used for) Provided From
Operating Working Capital:
Accounts receivable
$
(34,055)
$
(28,947)
Inventories
(1,650)
2,852
Other current assets
1,488
(483)
Accounts payable
19,747
10,450
Accrued liabilities
105
6,179
U.S. and foreign taxes on income
2,115
4,230
Total
$
(12,250)
$
(5,719)
Supplemental disclosure of cash flow information:
Interest paid
$
16,963
$
16,550
Income taxes paid
39,876
34,882
See Notes to Consolidated Financial Statements
- - - 5 -
</TABLE>
<PAGE>
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.
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.
2. Sales and operating profit by segment are as follows:
<TABLE>
<CAPTION>
Three Months Ended
Nine Months Ended
September 30,
September 30,
1997
1996
1997
1996
<S>
<C>
<C>
<C>
<C>
(in thousands)
Net Sales:
Fluid Handling
$
100,460
$
91,606
$
290,734
$
275,810
Aerospace
85,866
61,267
252,878
176,756
Engineered Materials
56,841
54,358
171,817
158,262
Crane Controls
32,821
31,933
98,149
98,173
Merchandising Systems
44,271
40,931
137,095
132,413
Wholesale Distribution
213,743
202,280
568,885
548,228
Other
3,675
2,756
10,071
7,228
Intersegment Elimination
(2,859)
(4,015)
(8,714)
(13,060)
Total
$
534,818
$
481,116
$
1,520,915
$
1,383,810
Operating Profit (Loss):
Fluid Handling
$
8,927
$
6,685
$
22,454
$
17,449
Aerospace
22,903
16,979
64,596
48,688
Engineered Materials
7,993
7,355
22,689
20,266
Crane Controls
3,353
2,501
8,560
8,597
Merchandising Systems
6,577
5,292
24,445
18,409
Wholesale Distribution
9,015
10,456
18,868
22,313
Other
230
70
753
83
Corporate
(4,724)
(4,346)
(15,998)
(13,393)
Intersegment Elimination
(5)
20
148
150
Total
$
54,269
$
45,012
$
146,515
$
122,562
</TABLE>
- - - 6 -
<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements
3. Restatements
Share and per share data for the three and nine months ending
September 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 $52,095,000 at
September 30, 1997, $51,706,000 at September 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 third quarter of 1997 are as follows:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
<S> <C> <C> <C> <C>
1997
1996
1997
1996
Basic Earnings Per Share
$ .68
$ .60
$1.82
$1.49
Fully Diluted Earnings
Per Share
$ .67
$ .59
$1.79
$1.47
</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 Nine Months Ended September 30, 1997 and 1996
[CAPTION]
Results From Operations:
Third Quarter of 1997 Compared to Third Quarter of 1996:
Net income for the quarter ended September 30, 1997 set a quarterly
record of $31.4 million, or $.67 per share. This represents a 17
percent increase from the $26.9 million, or $.59 per share, reported
for the 1996 third quarter. Operating profit for the third quarter
increased from $45 million to $54.3 million, a 21 percent increase.
Sales increased from $481.1 million to $534.8 million, an 11 percent
increase.
Fluid Handling sales rose 10 percent and operating profit increased
34 percent in the quarter compared with the prior year. North
American valve operations made significant contributions to both the
sales and earnings growth. MOVATS, which was acquired in April,
contributed $7.6 million in sales in the quarter. Additionally,
shipments of cast steel and quarter turn valves were higher. The
increased sales volume coupled with manufacturing efficiencies and
reduced selling expenses led to the improved results. This
improvement was tempered, however, by adverse product mix in the
U.K. valve operation. Profit margins improved to 8.9 percent of
sales from 7.3 percent.
Aerospace sales increased 40 percent, or $25 million, in the quarter
with Interpoint, the high density power converter business acquired
in October of 1996, contributing $16 million of the increase.
Excluding the acquisition, sales rose 15 percent because of
continued high aircraft production levels and airline utilization
rates. Operating profit improved 35 percent because of the higher
sales volume, and excluding Interpoint, margins improved even though
product development costs were $1.8 million higher in the 1997 third
quarter compared with the 1996 third quarter. Interpoint's margins
are historically lower than the other aerospace businesses.
Engineered Materials sales and operating profit increased 5 percent
and 9 percent, respectively, compared with the 1996 third quarter.
Kemlite improved sales due to higher demand in the truck trailer
market and an increased market share. Its translucent fiberglass
reinforced plastic roof panels continued to displace aluminum on dry
freight vans. Sales and operating profit declined at Resistoflex
compared with an exceptionally strong 1996 due to lower large
project business, particularly in Southeast Asia. Crane Plumbing was
profitable in the third quarter compared to a loss in 1996 because
of higher shipments and successful cost reduction initiatives.
- - - 8 -
<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, 1997 and 1996
Crane Controls operating profit was up 34 percent on a sales
increase of 3 percent compared with the third quarter 1996. This
reflects the strong performance by Azonix, which gained market share
in the oil and gas exploration industry with its man machine
interface (MMI) products. Cost controls allowed Ferguson and
Ferguson Europe to improve results from the prior year.
Merchandising Systems sales were up 8 percent in the quarter
compared with last year. The 1997 Polyvend acquisition contributed
$3.7 million in sales. While National Vendors increased its sales
in the U.S., exclusive of Polyvend, its European sales comparisons
were adversely affected by lower demand and unfavorable currency
translations. Operating profit for the group increased 24 percent as
a result of productivity gains and cost reductions.
Wholesale Distribution sales increased 6 percent as a result of the
MALLCO Lumber & Building Materials Inc. acquisition on July 1, 1997.
Without the acquisition, sales would have decreased 2 percent due to
lower housing starts in the key regions served by Huttig along with
lower demand for its value added wood moulding products. Operating
profits declined 14 percent because of higher raw material costs at
Huttig's manufacturing business.
The third quarter 1996 results included $2.4 million from gain on
sale of capital assets.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996:
For the nine months ended September 30, 1997, net income increased
24 percent to $83.3 million, or $1.79 per share, from the $67.2
million, or $1.47 per share, in the comparable 1996 period.
Operating profit for the nine months increased from $122.6 million
to $146.5 million, a 20 percent increase. Sales increased from $1.39
billion to $1.52 billion, an increase of 10 percent.
Fluid Handling sales were up 5 percent and operating profit was up
29 percent. The sales increase was attributable to the MOVATS
acquisition and strong shipments, in the first half of the year, at
the company's Australian valves operation. These gains were
partially offset by lower shipments in the cast steel valve line in
the earlier part of the year. Operating profit improved as the
North American valves operation benefited from the MOVATS
acquisition and productivity gains in the manufacture of bronze and
quarter turn valves.
- - - 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, 1997 and 1996
Aerospace sales were up 43 percent in the first nine months with
Interpoint and Grenson, acquired in the fourth quarter of 1996,
contributing more than 60 percent of the increase. Excluding the
acquisitions, sales increased 16 percent on the continued strength
of aircraft production and utilization levels. Operating profit
increased 33 percent because of the higher sales. Profit margins,
however, declined to 25.5 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 $6.2 million higher than the prior year
level.
Engineered Materials sales and operating profit increased 9 percent
and 12 percent, respectively. Sales at Kemlite improved as its
fiberglass reinforced plastic panel products continued to displace
aluminum in the recreational vehicle and truck trailer market.
Additionally, Kemlite benefited from the acquisition of Sequentia
transportation product line. For the group as a whole, profit
margins improved to 13.2 percent from 12.8 percent with all
businesses showing improvement except Kemlite where margins were
down slightly due to higher mix of shipments in the transportation
market.
Crane Controls sales and operating profit were essentially unchanged
from the prior year. Sales at Azonix were higher by nearly 16
percent and profit margins were nearly double compared to 1996
because of the success of its man machine interface (MMI) products.
At Barksdale, sales and profit comparisons were adversely affected
by a weaker German mark.
Merchandising Systems operating profit was 33 percent higher on a 4
percent sales increase. The sales gain was the result of the
Polyvend acquisition. Excluding Polyvend, total sales were 3
percent lower. Despite this decline, both National Vendors and NRI
greatly improved profit margins by increasing operating efficiencies
and reducing costs.
Wholesale Distribution sales increased 4 percent but operating
profit declined 15 percent. Sales improved not only due to the July
acquisition of MALLCO but also due to strong housing starts in the
first half of 1997. Lower demand for value added wood moulding
products and high raw material costs significantly eroded profit
margins at Huttig's wood moulding facility.
- - - 10 -
<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, 1997 and 1996
[CAPTION]
Liquidity and Capital Resources:
For the first nine months of 1997, the company generated nearly $108
million in cash from operations allowing Crane to reduce net debt
$19 million from December 31, 1996 to $262 million at September 30,
1997. As a result, the net debt to capital ratio improved to 33.5
percent from 37.8 percent. Internally generated funds were also
used for acquisitions of $36 million (excludes debt assumed),
capital expenditures of $31 million and dividends of $17 million.
- - - 11 -
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings:
On August 12, 1997, the United States Court of Appeals for the Eighth
Circuit issued an opinion affirming the dismissal of a lawsuit filed
February 28, 1991 alleging the company violated the federal False
Claims Act in connection with the distribution of the company's
shares of CF&I Steel Corporation to the company's shareholders in
1985.
There have been no material developments in any other legal
proceeding described in the company's Annual Report on Form 10-K for
the year ended December 31, 1996.
Item 5. Other:
On October 2, 1997, the company sold its Valve Systems and Controls
division for $7.5 million in cash and $1.5 million in convertible
preferred stock. No material gain or loss on the sale was
recognized.
Item 6. Exhibits and Reports on Form 8-K
11. Computation of earnings per share for the quarters
and nine months ended September 30, 1997 and 1996.
27. Article 5 of Regulation S-X Financial Data Schedule
for the third 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 November 12, 1997 By /s/ D.S. Smith
D.S. SMITH
Vice President-Finance
and Chief Financial Officer
Date November 12, 1997 By /s/ M.L. Raithel
M.L. RAITHEL
Controller
- 13 -
<PAGE>
<TABLE>
Crane Co. and Subsidiaries
Exhibit 11 to Form 10-Q
Computation of Net Income per Common Share
Three and Nine Months Ended September 30, 1997 and 1996
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended
Nine Months Ended
September 30,
September 30,
1997
1996
1997
1996
<S>
<C>
<C>
<C>
<C>
Primary Net Income Per Share:
Net income available
to shareholders
$
31,400
$
26,889
$
83,268
$
67,201
Average primary shares outstanding
46,878
45,597
46,623
45,746
Net Income
$
.67
$
.59
$
1.79
$
1.47
Fully Diluted - Income Per Share:
Net income available to
shareholders
$
31,400
$
26,889
$
83,268
$
67,201
Average primary shares outstanding
46,878
45,597
46,623
45,746
Add
Adjustment for further dilutive
effect of stock options (ending
market price higher than average
market price used in primary
shares calculation)
106
120
91
103
Average fully diluted shares
outstanding
46,984
45,717
46,714
45,849
Net income
$
.67
$
.59
$
1.78
$
1.47
</TABLE>
- 14 -
<PAGE>
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-31-1997
<PERIOD-END>
Sept-30-1997
<CASH>
21,863
<SECURITIES>
0
<RECEIVABLES>
298,415
<ALLOWANCES>
0
<INVENTORY>
272,255
<CURRENT-ASSETS>
599,444
<PP&E>
574,943
<DEPRECIATION>
309,813
<TOTAL-ASSETS>
1,163,701
<CURRENT-LIABILITIES>
269,079
<BONDS>
266,916
<COMMON>
45,879
0
0
<OTHER-SE>
475,978
<TOTAL-LIABILITY-AND-EQUITY>
1,163,701
<SALES>
1,520,915
<TOTAL-REVENUES>
1,520,915
<CGS>
1,038,428
<TOTAL-COSTS>
1,374,400
<OTHER-EXPENSES>
(177)
<LOSS-PROVISION>
0
<INTEREST-EXPENSE>
16,180
<INCOME-PRETAX>
130,512
<INCOME-TAX>
47,244
<INCOME-CONTINUING>
83,268
<DISCONTINUED>
0
<EXTRAORDINARY>
0
<CHANGES>
0
<NET-INCOME>
83,268
<EPS-PRIMARY>
1.79
<EPS-DILUTED>
1.78
</TABLE>
