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, 2000
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Commission File Number 1-1657
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CRANE CO.
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(Exact name of registrant as specified in its charter)
Delaware 13-1952290
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 First Stamford Place, Stamford, CT. 06902
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(Address of principal executive office) (Zip Code)
(203) 363-7300
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(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
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The number of shares outstanding of the issuer's classes of common stock, as of
July 31, 2000:
Common stock, $1.00 Par Value - 60,757,181 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>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $387,853 $405,268 $771,660 $805,314
Operating Costs and Expenses:
Cost of sales 251,363 265,336 504,140 526,592
Selling, general and
administrative 68,174 66,005 137,881 137,307
Depreciation and amortization 13,459 16,386 26,738 31,020
------- ------- ------- -------
332,996 347,727 668,759 694,919
Operating Profit 54,857 57,541 102,901 110,395
Other Income (Expense):
Interest income 121 2,744 499 6,011
Interest expense (5,616) (7,384) (11,641) (15,272)
Miscellaneous - net 24,221 2,902 24,375 4,836
------ ------ ------ -------
18,726 (1,738) 13,233 (4,425)
Income Before Taxes 73,583 55,803 116,134 105,970
Provision for Income Taxes 25,758 19,705 40,647 37,437
------ ------ ------ ------
Income from Continuing Operations 47,825 36,098 75,487 68,533
Income from Discontinued Operations - 3,213 - 4,444
-------- -------- -------- ------
Net Income $ 47,825 $ 39,311 $ 75,487 $ 72,977
======== ======== ======== ========
Basic Net Income Per Share:
Income from Continuing Operations $.79 $.53 $1.23 $1.01
Income from Discontinued Operations - .05 - .06
------ ------ ------ ------
Net Income $.79 $.58 $1.23 $1.07
====== ====== ====== ======
Average Basic Shares Outstanding 60,703 67,890 61,262 68,090
Diluted Net Income Per Share:
Income from Continuing Operations $.78 $.53 $1.22 $1.00
Income from Discontinued Operations - .04 - . 06
------ ------ ------- ------
Net Income $.78 $.57 $1.22 $1.06
====== ====== ======= ======
Average Diluted Shares Outstanding 61,341 68,511 61,733 68,702
Dividends Per Share $.10 $.10 $.10 $.10
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
<TABLE>
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
<CAPTION>
June 30, December 31,
2000 1999 1999
---- ---- ----
Assets
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 2,627 $ 7,329 $ 3,245
Accounts receivable 228,178 243,186 206,468
Inventories:
Finished goods 96,820 113,221 107,006
Finished parts and subassemblies 54,789 58,377 57,667
Work in process 26,808 31,265 23,471
Raw materials 67,328 71,239 71,330
------- ------- -------
245,745 274,102 259,474
Net Assets of Discontinued Operations - 141,301 -
Other Current Assets 39,678 40,811 35,973
------- ------- -------
Total Current Assets 516,228 706,729 505,160
Property, Plant and Equipment:
Cost 580,935 572,649 579,263
Less accumulated depreciation 333,546 312,426 322,614
------- ------- -------
247,389 260,223 256,649
Other Assets 35,182 35,243 45,771
Intangibles 41,390 45,643 43,796
Cost in excess of net assets acquired 328,383 313,261 329,321
---------- ---------- ----------
$1,168,572 $1,361,099 $1,180,697
========== ========== ==========
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
<TABLE>
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
<CAPTION>
June 30, December 31,
2000 1999 1999
---- ---- ----
Liabilities and Shareholders Equity
<S> <C> <C> <C>
Current Liabilities
Current maturities of long-term debt $ 322 $ 472 $ 385
Loans payable 10,303 39,385 13,271
Accounts payable 93,416 93,976 87,611
Accrued liabilities 109,840 115,974 116,098
U.S. and foreign taxes on income 35,469 19,777 16,150
------- ------- -------
Total Current Liabilities 249,350 269,584 233,515
Long-Term Debt 249,963 317,533 286,772
Deferred Income Taxes 26,449 28,085 25,866
Other Liabilities 25,575 20,426 25,927
Accrued Postretirement Benefits 30,851 32,161 31,709
Accrued Pension Liability 8,390 8,605 8,798
Preferred Shares, par value $.01 - - -
5,000,000 shares authorized
Common Shareholders Equity:
Common stock, par value $1.00 72,426 72,426 72,426
200,000,000 shares authorized,
72,426,139 shares issued
Capital surplus 98,289 96,262 98,289
Retained earnings 683,969 634,816 623,421
Accumulated other comprehensive loss (28,545) (22,237) (22,481)
Common stock held in treasury (248,145) (96,562) (203,545)
-------- ------- --------
Total Common Shareholder's Equity 577,994 684,705 568,110
---------- ---------- ----------
$1,168,572 $1,361,099 $1,180,697
========== ========== ==========
Common Stock Issued 72,426 72,426 72,426
Less Common Stock held in Treasury (11,669) (4,513) (9,624)
------- ------ ------
Common Stock Outstanding 60,757 67,913 62,802
======= ======= ======
See Notes to Consolidated Financial Statements
</TABLE>
-4-
<PAGE>
<TABLE>
Part I - Financial Information (Cont'd.)
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
2000 1999
---- ----
<S> <C> <C>
Operating activities:
Income from Continuing Operations $75,487 $68,533
Gain on sale of investments (28,418) (2,583)
Depreciation 18,740 18,588
Amortization 7,998 12,432
Deferred income taxes 418 2,856
Cash provided by (used for) operating working capital (1,344) (2,896)
Other (900) (6,133)
------ ------
Total provided by Operating activities 71,981 90,797
Investing activities:
Capital expenditures (12,785) (13,558)
Purchase of equity investment - (2,029)
Sale of equity investment 45,556 5,361
Payments for acquisitions (8,500) -
Proceeds from divestitures - 447
Proceeds from disposition of capital assets 389 6,137
------ ------
Total provided by (used for) Investing activities 24,660 (3,642)
Financing activities:
Equity:
Dividends paid (12,201) (13,595)
Reacquisition of shares-open market (49,384) (20,433)
Reacquisition of shares-stock incentive programs (3,710) (745)
Stock options exercised 8,105 5,418
------- -------
Net equity (57,190) (29,355)
Debt
Proceeds from issuance of long-term debt 48,500 115,000
Repayments of long-term debt (81,077) (150,609)
Net decrease in short-term debt (7,243) (14,411)
-------- --------
Net debt (39,820) (50,020)
-------- --------
Total used for Financing activities (97,010) (79,375)
Cash Used in Discontinued Operations - (16,198)
Effect of exchange rate on cash and cash equivalents (249) (448)
----- ------
Decrease in cash and cash equivalents (618) (8,866)
Cash and cash equivalents at beginning of period 3,245 16,195
------ ------
Cash and cash equivalents at end of period $2,627 $7,329
====== ======
Detail of Cash Provided by (Used for) Operating Activities
Working capital:
Accounts receivable $(25,085) $(9,391)
Inventories 9,929 12,036
Other current assets (2,039) 3,518
Accounts payable 7,518 7,332
Accrued liabilities (9,185) (19,377)
U.S. and foreign taxes on income 17,518 2,986
--------- -------
Total $ (1,344) $(2,896)
========= ========
Supplemental disclosure of cash flow information:
Interest paid $11,800 $16,238
Income taxes paid 25,764 32,652
</TABLE>
See Notes to Consolidated Financial Statements
-5-
<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements (Unaudited)
<TABLE>
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and 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. Certain prior period amounts have been reclassified to conform
to the 2000 presentation.
The Company began reporting its former Huttig Building Products subsidiary,
which was spun-off in December of 1999, as a discontinued operation in the
third quarter of 1999. In this accounting treatment, the total net assets
of Huttig are shown on the balance sheet as "Net Assets of Discontinued
Operations", and on the statement of operations only the net income of
Huttig is shown, as "Income from Discontinued Operations". Prior period
amounts have been reclassified to conform to this treatment.
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, 1999.
2. Net Sales, gross profit and operating profit by segment are as follows:
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(In Thousands)
Net Sales:
Engineered Materials $ 92,422 $ 94,383 $189,640 $185,444
Merchandising 57,026 50,662 113,403 100,947
Aerospace 89,652 95,795 171,552 192,875
Fluid Handling 116,960 131,632 234,518 260,949
Crane Controls 32,600 30,986 64,223 61,146
Other - 3,125 - 6,520
Intersegment Elimination (807) (1,315) (1,676) (2,567)
-------- -------- -------- --------
Total $387,853 $405,268 $771,660 $805,314
======== ======== ======== ========
Gross Profit:
Engineered Materials $ 22,876 $ 24,783 $ 48,889 $ 48,010
Merchandising 19,818 20,533 39,772 39,271
Aerospace 42,785 44,257 75,704 90,017
Fluid Handling 28,990 26,567 58,180 54,556
Crane Controls 9,174 10,725 19,082 20,725
Other - 673 - 1,137
Corporate 29 (273) (7) (263)
-------- -------- -------- --------
Total $123,672 $127,265 $241,620 $253,453
======== ======== ======== ========
</TABLE>
-6-
<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(In Thousands)
Operating Profit (Loss):
Engineered Materials $14,505 $16,633 $ 31,482 $ 31,291
Merchandising 8,914 11,274 18,566 20,780
Aerospace 25,503 27,677 42,223 54,920
Fluid Handling 9,476 4,482 17,498 10,050
Crane Controls (471) 1,227 (296) 1,811
Other - (134) - (279)
Corporate (3,081) (3,524) (6,527) (8,077)
Intersegment Elimination 11 (94) (45) (101)
------- ------- -------- --------
Total $54,857 $57,541 $102,901 $110,395
======= ======= ======== ========
</TABLE>
3. 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 $22.3 million at June 30, 2000, $27.1 million at June
30, 1999, and $23.1 million at December 31, 1999.
4. Intangibles
Intangible assets are amortized on a straight-line basis over their
estimated useful lives, which range from five to twenty years. Accumulated
amortization was $23.9 million at June 30, 2000, $20.4 million at June 30,
1999 and $22.0 million at December 31, 1999
5. Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is amortized on a straight-line basis
principally over 15 to 40 years. Accumulated amortization was $68.4
million at June 30, 2000, $52.5 million at June 30, 1999 and $60.1 million
at December 31, 1999. In March of 2000, Streamware Corporation was
acquired. The cost in excess of net assets resulting from this acquisition
will be amortized over 15 years using the straight-line method.
6. Miscellaneous Net
Included in this caption is a pre-tax gain from the sale of investments of
$28.4 million.
7. Total comprehensive income for the three and six-month periods ended June
30, 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
(In thousands) Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $47,825 $39,311 $75,487 $72,977
Foreign currency translation adjustments (3,359) (1,064) (6,064) (4,201)
------- ------- ------- -------
Comprehensive Income $44,466 $38,247 $69,423 $68,776
======= ======= ======= =======
</TABLE>
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<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements (Unaudited)
8. Special Charges
The pre-tax special charges of $35.0 million taken in 1999 were
principally for a series of actions to reduce the fixed cost base in
Engineered Materials, Aerospace, Fluid Handling and Controls by closing or
consolidating facilities, reducing staff, rationalizing product lines and
for other unusual items. In total, five manufacturing facilities have been
closed or ceased production. A summary of the liability balance included
in accrued liabilities relating to severance and facility closure costs at
June 30, 2000 is as follows:
<TABLE>
<CAPTION>
Liability Liability
Balance at Balance at
December 31, June 30,
(In thousands) 1999 Deductions 2000
---- ----
<S> <C> <C> <C>
Severance costs $1,327 $1,093 $234
Facility closure costs 1,695 1,460 235
------ ------ ----
Total $3,022 $2,553 $469
====== ====== ====
</TABLE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended June 30, 2000
This 10Q may contain forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. These statements present management's
expectations, beliefs, plans and objectives regarding future financial
performance, and assumptions or judgments concerning such performance. Any
discussions contained in this 10-Q, except to the extent that they contain
historical facts, are forward-looking and accordingly involve estimates,
assumptions, judgments and uncertainties. There are a number of factors that
could cause actual results or outcomes to differ materially from those addressed
in the forward-looking statements. Such factors are detailed in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 filed
with the Securities and Exchange Commission
Results from Operations
Second Quarter of 2000 Compared to Second Quarter of 1999
Income from continuing operations for the quarter was $47.8 million, or $.78 per
diluted share outstanding, compared with $36.1 million, or $.53 per diluted
share outstanding, for the second quarter of 1999. During the second quarters of
2000 and 1999, non-operating gains from the sale of investments and
non-operating expenses accounted for $.26 per diluted share and $.03 per diluted
share, respectively. Excluding these non-operating items, earnings per diluted
share increased to $.52 in the second quarter of 2000 compared with $.50 for the
second quarter of 1999. Operating profit for the second quarter was $54.9
million on sales of $387.9 million compared with $57.5 million on sales of
$405.3 million in 1999. Operating profit margins were 14.1% for the quarter
compared with 14.2% in the second quarter 1999.
-8-
<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended June 30, 2000
Engineered Materials sales decreased by $2.0 million, or 2%, to $92.4 million
for the second quarter of 2000 compared with the second quarter of 1999. Gross
profit decreased 8% to $22.9 million versus the quarter in 1999. Operating
profit decreased $2.1 million, or 13%, to $14.5 million. Operating profit
margins for the segment declined to 15.7% compared with 17.6% in 1999. The
decrease in this segment's results was primarily driven by Kemlite, which
experienced a sales decline of $ 2.2 million, or 4%, to $59.3 million and an
operating profit decline of $2.0 million, or 15%, to $11.5 million for the
quarter compared with the second quarter of 1999. Kemlite was adversely affected
by the decline in the transportation market, increased raw material costs and
certain operating inefficiencies.
Merchandising Systems sales increased by $6.4 million, or 13%, to $57.0 million
for the second quarter of 2000 compared with the second quarter of 1999. Gross
profit for the quarter decreased 3% to $19.8 million compared to 1999. Operating
profit decreased $2.4 million, or 21%, to $8.9 million. Operating profit margins
for the segment were 15.6% in 2000 compared with 22.3% in 1999. National
Vendors' sales increased $8.3 million, or 22%, to $47.1 million, with the 1999
Stentorfield acquisition contributing $7.0 million and the 2000 Streamware
acquisition contributing $.5 million of this increase. National Vendors'
operating profit decreased $2.0 million, or 23%, to $6.7 million. This negative
comparison of operating profit was primarily due to a $1.3 million favorable
court decision in the U.K. last year and our investment in Streamware, which
incurred an operating loss of $.6 million during the second quarter of 2000.
NRI's sales decreased by $2.0 million, or 16%, to $9.9 million and operating
profit decreased $.3 million, or 13%, to $2.3 million due to unfavorable U.S.
dollar-to-Euro exchange rates, which more than offset continued shipments of
higher-margin changer units and material cost-saving initiatives.
Aerospace sales decreased by $6.1 million, or 6%, to $89.7 million for the
second quarter of 2000 versus the second quarter of 1999. Gross profit decreased
3% to $42.8 million during the second quarter of 2000 compared with 1999.
Operating profit decreased $2.2 million, or 8%, to $25.5 million. Operating
profit margins for the segment were 28.4% compared with 28.9% in 1999. Results
were affected by lower sales volume in the commercial aerospace market and
Interpoint's standard power and custom markets. This segment recorded a $49.2
million increase in order backlog from December 31, 1999, to $281.8 million,
suggesting some stabilization of the aerospace markets served. Interpoint
contributed $16.5 million of the increase, having been selected during June to
provide power converters for a leading fiber optics Company. ELDEC contributed
$28.5 million of the increase.
Fluid Handling sales declined $14.7 million, or 11%, to $117.0 million for the
second quarter of 2000 compared with the second quarter of 1999. Gross profit
increased 9% to $29.0 million during the quarter versus 1999. Operating profit
increased $5.0 million, or 111%, to $9.5 million in 2000. Operating profit
margins for the segment improved to 8.1% compared with 3.4% in 1999. Four of the
five businesses reported higher profits and all five reported improved operating
margins. Commercial Valves' operating profit improved by $3.9 million to $1.5
million on a $5.7 million, or a 19%, sales reduction to $24.7 million.
Engineered Valves' operating profit increased $1.0 million to $1.9 million on a
$2.0 million decrease in sales to $25.0 million as the result of increased
shipments of high-margin pressure-seal valves to the power generation market and
from the closure of a steel valve facility in the U.K.
-9-
<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended June 30, 2000
Controls sales increased $1.6 million, or 5%, to $32.6 million for the second
quarter of 2000 compared with the second quarter of 1999. Gross profit decreased
14% to $9.2 million compared with 1999. Operating profit decreased $1.7 million
to a $.5 million loss. Operating profit (loss) margins were (1.4%) versus 4.0%
in 1999. Production problems caused by the integration of Ferguson's Greenwood,
Mississippi production into its St. Louis, Missouri facility resulted in
Ferguson's operating profit decreasing $1.4 million on a $.7 million increase in
sales. Results were mixed in the other businesses in this segment, resulting in
a $.9 million increase in sales and a $.3 million decrease in operating profit.
Sale of Investments
In May 2000, Crane Co. sold its interest in Powec AS, a Norwegian manufacturer
of power supplies for the telecommunications industry, as well as its related
United States telecommunications power supply product line, for $45.6 million.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Six Months Ended June 30, 2000
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30,1999
For the six months ended June 30, 2000, income from continuing operations was
$75.5 million, or $1.22 per diluted share outstanding, compared with $68.5
million, or $1.00 per diluted share outstanding, for the first half of 1999.
During the six month periods ended June 30, 2000 and June 30, 1999,
non-operating gains from the sale of investments and non-operating expenses
accounted for $.26 per diluted share and $.03 per diluted share, respectively.
Excluding these non-operating items, earnings per diluted share were $.96
compared with $.97 for the six months ended June 30, 1999. Operating profit for
the six months ended June 30, 2000 was $102.9 million on sales of $771.7 million
compared with $110.4 million on sales of $805.3 million in 1999. Operating
profit margins for the six months ended June 30, 2000 were 13.3% compared with
13.7% for the six months ended June 30, 1999.
Order backlog at June 30, 2000 was $431.2 million, an increase of 12.8% from
year-end December 31, 1999. Orders continued to increase, improving by $30.9
million, or 8%, to $408.7 million during the quarter over the same three-month
period a year ago.
Net sales from domestic businesses were 75% of total net sales in 2000 compared
with 74% in the same six-month period of 1999. Operating profit from domestic
businesses was 89% and 91% of total operating profit for 2000 and 1999,
respectively. Operating margins for domestic businesses were 15.9% in 2000
compared with 16.8% in 1999. Operating margins for non-US businesses were 6.0%
in 2000 versus 4.6% in 1999.
-10-
<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Six Months Ended June 30, 2000
Engineered Materials sales increased by 2%, or $4.2 million to $189.6 million
versus the same six-month period in 1999. Gross profit increased 2% to $48.9
million for the six-month period compared with 1999. Operating profit increased
1%, or $.2 million, to $31.5 million. Operating margins for the segment
decreased to 16.6% of sales compared to 16.9% in 1999 as higher material costs
at Plumbing and Kemlite partially offset improvement in operating margins at
Cortec and Resistoflex. Order backlog decreased 26% to $18.4 million from
December 31, 1999.
Merchandising Systems sales increased 12%, or $12.5 million, to $113.4 million
for the six-month period compared with the same period in 1999. Gross profit
increased 1% to $39.8 million versus 1999. Operating profit decreased 11%, or
$2.2 million, to $18.6 million. Operating profit margins were 16.4% in 2000
compared with 20.6% in 1999, primarily due to a brief strike during the first
quarter at National Vendors' St. Louis facility, lower results in England and a
favorable legal settlement of $1.3 million in 1999. In addition, results in the
first half of 2000 include costs related to National Vendors' acquisition of
Streamware Corporation in late March. National Vendors sales increased $15.8
million, with the 1999 Stentorfield acquisition contributing $12.9 million of
the sales increase. NRI sales decreased 14%, or $3.3 million, due to an
unfavorable U.S. dollar to Euro exchange rate, but operating profit increased
1%, or $.1 million, due to continued shipments of higher-margin changer units
and material cost-saving initiatives. Order backlog increased $1.5 million to
$19.8 million from December 31,1999.
Aerospace sales decreased by 11%, or $21.3 million to $171.6 million compared
with 1999. Gross profit decreased 16% to $75.7 million versus the same six-month
period of 1999. Operating profit decreased 23%, or $12.7 million, to $42.2
million. Operating profit margins were 24.6% compared to 28.5% in 1999. Sales
were lower due to a slowdown in the commercial transport aerospace market that
began in the second half of 1999 and lower shipments of standard power and
custom products at Interpoint. Operating profit at ELDEC and Hydro-Aire was
negatively impacted by lower commercial OEM and aftermarket spares revenues
while Interpoint's operating profit declined compared with 1999 due to lower
revenues. Order backlog increased $49.2 million to $281.8 million from December
31,1999.
Fluid Handling sales declined 10%, or $26.4 million, to $234.5 million for the
six month period compared with the same period in 1999. Gross profit increased
7% to $58.2 million versus 1999. Operating profit increased 74%, or $7.4
million, to $17.5 million in 2000. Operating margins for the segment improved to
7.5% of sales compared to 3.9% in 1999. Commercial Valves operating profit
improved by $6.8 million on a 13%, or $7.8 million, sales reduction as this
business returned to profitability and operating margins improved to 5.1%. The
sales decline resulted principally from increased discipline in pricing and
order acceptance. Pumps sales increased by $2.1 million, resulting in increased
operating profit of $.9 million, while Crane Supply's operating profit increased
by 22%, or $.8 million, on a 3% decrease in sales, due to improved shipping
margins. Valve Services shipments decreased by $8.9 million and operating profit
decreased by $.1 million. Engineered Valves operating profit decreased $.8
million on a $9.9 million decrease in sales as the result of lower valve
shipments to the marine and oil and gas markets. This was partially offset by
higher shipments of Pressure Seal valves to the power generation market and the
closure of the Triangle Steel facility in the U.K. Overall Fluid Handling order
backlog increased by $5.0
-11-
<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Six Months Ended June 30, 2000
million to $83.3 million from December 31,1999, led by continued strong demand
from the power generation industry and the improving marine market.
Controls sales increased 5%, or $3.1 million, to $64.2 million for the six
months ended June 30, 2000 versus the same period in 1999. Gross profit
decreased 8% to $19.1 million in 2000 compared with 1999. Operating profit
decreased $2.1 million, or 116%, to a loss of $.3 million. Dynalco and Azonix
achieved higher operating profit, which was more than offset by declines at
Ferguson resulting from production problems caused by the integration of its
Greenwood, Mississippi production into its St. Louis facility, and at Barksdale
and Powers Process. Operating profit (loss) margins declined to (.5%) versus
3.0% in 1999. Order backlog decreased by $.4 million to $27.9 million from
December 31,1999.
Liquidity and Capital Resources
For the six-month period ended June 30, 2000, the Company generated $72.0
million of cash from operating activities, compared with $90.8 million in 1999.
Net debt totaled 30.9% of capital at June 30, 2000 compared to 33.8% in 1999.
The current ratio was 2.1 with working capital totaling $266.9 million compared
to 2.6 and $437.1 million at June 30, 1999. The Company had unused credit lines
of $454.3 million at June 30, 2000.
The Company's cash flows and earnings are subject to fluctuations from changes
in interest rates and foreign currency exchange rates. The Company manages its
exposures to these market risks through internally established policies and
procedures and, when deemed appropriate, through the use of interest rate swap
agreements and forward exchange contracts. Of the $250 million in long-term debt
outstanding at June 30, 2000, 79.4% was at fixed rates of interest ranging from
6.75% to 8.50%. At June 30, 2000, no interest rate swap agreements were
outstanding and the amounts outstanding for forward exchange contracts were not
material. The Company does not enter into derivatives or other financial
instruments for trading or speculative purposes.
New Accounting Pronouncements
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
On June 26, 2000, the SEC issued SAB 101B to defer the effective date of
implementation of SAB 101 until no later than the fourth fiscal quarter of
fiscal years beginning after December 31, 1999. The Company is required to adopt
SAB 101 by December 31, 2000. The Company does not expect the adoption of SAB
101 to have a material impact on the consolidated financial statements.
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<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
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, 1999.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit 27. Article 5 of Regulation S-X Financial Data Schedule for the first
quarter.
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<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 14, 2000 By /s/ M. L. Raithel
-----------------
M. L. Raithel
Vice President and Chief
Financial Officer
Date August 14, 2000 By /s/ T. M. Noonan
----------------
T. M. Noonan
Vice President, Controller
and Chief Tax Officer
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