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, 2001
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, 2001: Common stock, $1.00 Par Value 59,672,364 shares
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
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Net Sales $409,034 $387,962 $788,317 $771,757
Operating Costs and Expenses:
Cost of sales 267,441 251,478 516,395 504,249
Selling, general and
administrative 72,220 68,174 143,722 137,881
Depreciation and amortization 14,186 13,459 35,678 26,738
353,847 333,111 695,795 668,868
Operating Profit 55,187 54,851 92,522 102,889
Other Income (Expense):
Interest income 118 259 473 776
Interest expense (5,151) (5,763) (9,930) (11,913)
Miscellaneous - net (211) 24,235 (1,924) 24,381
(5,244) 18,731 (11,381) 13,244
Income Before Taxes 49,943 73,582 81,141 116,133
Provision for Income Taxes 17,480 25,758 28,399 40,648
Net Income $32,463 $47,824 $52,742 $75,485
Basic Net Income Per Share:
Net Income $.54 $.79 $.88 $1.23
Average Basic Shares Outstanding 59,611 60,703 59,949 61,262
Diluted Net Income Per Share:
Net Income $.54 $.78 $.87 $1.22
Average Diluted Shares Outstanding 60,240 61,341 60,553 61,733
Dividends Per Share $.10 $.10 $.20 $.20
See Notes to Consolidated Financial Statements
-2-
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
June 30, December 31,
2001 2000 2000
Assets
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Current Assets
Cash and cash equivalents $ 13,151 $ 2,627 $ 10,926
Accounts receivable 277,703 228,030 209,817
Inventories:
Finished goods 90,718 96,893 87,118
Finished parts and subassemblies 58,956 54,789 53,361
Work in process 36,961 26,808 24,749
Raw materials 95,578 67,328 71,101
282,213 245,818 236,329
Other Current Assets 42,226 39,758 43,080
Total Current Assets 615,293 516,233 500,152
Property, Plant and Equipment:
Cost 675,675 588,030 589,433
Less accumulated depreciation 408,450 340,118 343,322
267,225 247,912 246,111
Other Assets 45,959 35,042 39,116
Intangibles 40,217 41,417 39,599
Cost in excess of net assets acquired 400,157 327,875 318,873
$1,368,851 $1,168,479 $1,143,851
See Notes to Consolidated Financial Statements
-3-
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
June 30, December 31,
2001 2000 2000
Liabilities and Shareholders Equity
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Current Liabilities
Current maturities of long-term debt $ 325 $ 322 $ 326
Loans payable 8,238 10,329 14,532
Accounts payable 104,328 93,011 92,249
Accrued liabilities 134,762 109,848 104,361
U.S. and foreign taxes on income 29,853 35,517 20,509
Total Current Liabilities 277,506 249,027 231,977
Long-Term Debt 377,065 249,963 213,790
Deferred Income Taxes 28,629 26,450 28,386
Other Liabilities 22,983 25,574 22,746
Accrued Postretirement Benefits 28,854 30,851 29,653
Accrued Pension Liability 17,825 8,390 10,536
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 101,144 98,289 101,144
Retained earnings 763,493 683,969 720,864
Accumulated other comprehensive loss (39,653) (28,315) (31,096)
Common stock held in treasury (281,421) (248,145) (256,575)
Total Common Shareholders Equity 615,989 578,224 606,763
$1,368,851 $1,168,479 $1,143,851
Common Stock Issued 72,426 72,426 72,426
Less Common Stock held in Treasury (12,843) (11,669) (12,000)
Common Stock Outstanding 59,583 60,757 60,426
See Notes to Consolidated Financial Statements
-4-
Part I - Financial Information (Cont'd.)
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended
June 30,
2001 2000
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Operating activities:
Net income $52,742 $75,485
Gain on sale of investments - (26,646)
Depreciation and amortization 29,546 26,738
Non-cash special charges stock based retirement costs 6,132 -
Deferred income taxes 451 418
Cash used for operating working capital (1,374) (1,344)
Other (6,076) (2,670)
Total provided from Operating activities 81,421 71,981
Investing activities:
Capital expenditures (16,968) (12,785)
Payments for acquisitions (173,888) (8,500)
Proceeds from sale of investments - 45,556
Proceeds from disposition of capital assets 5,212 389
Total provided from (used for)Investing activities (185,644) 24,660
Financing activities:
Equity:
Dividends paid (11,980) (12,201)
Reacquisition of shares-open market (27,821) (49,384)
Reacquisition of shares-stock incentive programs (2,164) (3,710)
Stock options exercised 6,266 8,105
Net equity (35,699) (57,190)
Debt
Proceeds from issuance of long-term debt 167,040 48,500
Repayments of long-term debt (11,401) (81,077)
Net decrease in short-term debt (14,135) (7,243)
Net debt 141,504 (39,820)
Total provided from (used for) Financing activities 105,805 (97,010)
Effect of exchange rate on cash and cash equivalents 643 (249)
Increase (decrease) in cash and cash equivalents 2,225 (618)
Cash and cash equivalents at beginning of period 10,926 3,245
Cash and cash equivalents at end of period $ 13,151 $2,627
Detail of Cash Provided by (Used for) Operating Activities
Working capital:
Accounts receivable $(18,816) $(25,085)
Inventories 4,561 9,929
Other current assets (924) (2,038)
Accounts payable 3,440 7,518
Accrued liabilities 511 (9,185)
U.S. and foreign taxes on income 9,854 17,517
Total $(1,374) $(1,344)
Supplemental disclosure of cash flow information:
Interest paid $9,931 $11,800
Income taxes paid 18,467 25,764
See Notes to Consolidated Financial Statements
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Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements (Unaudited)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted
in the United States of America 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 2001
presentation.
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, 2000.
2. Net Sales, gross profit and operating profit by segment are as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
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(In Thousands)
Net Sales:
Engineered Materials $ 80,864 $ 92,402 $157,585 $189,620
Merchandising 54,121 57,148 111,824 113,509
Aerospace 104,734 89,652 204,109 171,552
Fluid Handling 140,738 116,990 257,124 234,553
Crane Controls 29,340 32,638 59,114 64,224
Other - - - -
Intersegment Elimination (763) (868) (1,439) (1,701)
Total $409,034 $387,962 $788,317 $771,757
Gross Profit:
Engineered Materials $ 19,632 $ 22,862 $ 36,530 $ 48,890
Merchandising 16,851 19,819 36,550 39,775
Aerospace 46,702 42,772 91,096 75,676
Fluid Handling 37,501 28,831 65,667 57,842
Crane Controls 9,503 9,178 18,860 19,074
Other - - - -
Corporate (974) 60 (929) 57
Total $129,215 $123,522 $247,774 $241,314
Operating Profit (Loss):
Engineered Materials $11,812 $14,505 $ 20,244 $ 31,482
Merchandising 6,362 8,915 15,163 18,567
Aerospace 26,881 25,498 51,361 42,214
Fluid Handling 12,658 9,446 19,705 17,432
Crane Controls 1,092 (474) 1,052 (299)
Other - - - -
Corporate (3,618) (3,039) (15,003) (6,507)
Total $55,187 $54,851 $92,522 $102,889
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Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements (Unaudited)
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 $21.8 million at June 30, 2001, $22.3
million at June 30, 2000, and $21.4 million at December 31, 2000.
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 $27.0 million at June 30, 2001, $23.6 million
at June 30, 2000 and $25.4 million at December 31, 2000.
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 $77.8 million at June 30, 2001, $61.2 million
at June 30, 2000 and $69.5 million at December 31, 2000. In February of
2001, Ventech Controls, Inc and Laminated Profiles Ltd. were acquired. In
April and June 2001, the Industrial Flow Group of Alfa Laval AB and Xomox
valve business, respectively, were acquired.
6. Total comprehensive income for the three-month and six-month period ended
June 30, 2001 and 2000 was as follows:
(In thousands) Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
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Net Income $32,463 $47,824 $52,742 $75,485
Foreign currency translation adjustments (1,072) (4,107) (8,557) (5,834)
Comprehensive Income $31,391 $43,717 $44,185 $69,651
-7-
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, 2001
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, 2000 filed
with the Securities and Exchange Commission.
Results from Operations
Second Quarter of 2001 Compared to Second Quarter of 2000
Net income for the second quarter of 2001 was $32.5 million or $.54 per
diluted share, compared with $31.6 million or $.52 per diluted share for the
second quarter of 2000 ($47.8 million or $.78 per diluted share including
non-operating gains). During the second quarter of 2000, non-operating gains of
$16.2 million or $.26 per diluted share resulted from the sale of investments.
Operating profit for the second quarter of 2001 was $55.2 million on sales
of $409.0 million compared with $54.9 million on sales of $388.0 million for the
second quarter of 2000. Operating profit margins were 13.5% for the second
quarter of 2001 compared with 14.1% for the second quarter of 2000.
Net sales from domestic businesses were 73% of the quarter(s) total net
sales in 2001 compared with 79% in the same three-month period of 2000.
Operating profit from domestic businesses was 76% and 89% of total operating
profit for 2001 and 2000, respectively. Operating profit margins for domestic
businesses were 14.0% in 2001 compared with 15.9% in 2000. Operating profit
margins for non-US businesses were 12.2% in 2001 versus 7.6% in 2000.
Acquisitions
On April 1, 2001, the Company acquired for approximately $37 million plus
working capital, the Industrial Flow Group of Alfa Laval Holding AB (renamed
Crane Process Flow Technologies) which had annual sales of $77 million in 2000
and which has been immediately accretive to Crane(s) earnings.
On June 29, 2001, the Company completed the acquisition of the Xomox valve
business from Emerson Electric, for a purchase price of $145 million. Xomox,
with annual sales of approximately $150 million, is a leading global supplier of
sleeved plug valves, quarter-turn valves and actuators under the Tufline and
Matryx brand names. Diluted earnings per share relating to the Xomox acquisition
are expected to be slightly positive in 2001 and $0.10 per share in 2002.
Aerospace sales increased $15.1 million or 17% to $104.7 million for the
second quarter of 2001 compared with the second quarter of 2000. Operating
profit increased $1.4 million or 5% to $26.9 million in the second quarter of
2001 versus $25.5 million in the second quarter of 2000. Operating profit
margins were 25.7% in the second quarter of 2001 compared with 28.4% in the
second quarter of 2000 as spending increased for research and development on new
programs in 2001 at Hydro-Aire and ELDEC. Interpoint was again profitable in the
quarter.
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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, 2001
Engineered Materials sales decreased $11.5 million or 12% to $80.9 million
for the second quarter of 2001 compared with the second quarter of 2000
primarily due to weak transportation and recreational vehicle markets for
Kemlite. Segment operating profit decreased $2.7 million, or 19% to $11.8
million in the second quarter of 2001 versus $14.5 million in the second quarter
of 2000. Operating profit margins were 14.6% compared with 15.7% in the second
quarter of 2000. Kemlite experienced a sales decline of $6.7 million or 11% to
$52.4 million and an operating profit decline of $1.6 million or 15% for the
second quarter of 2001 compared with the second quarter of 2000 as truck trailer
and recreational vehicle production decreased 53% and 17% respectively, from the
second quarter of 2000. Results at Resistoflex were moderately lower than the
same prior year quarter due to continued lower shipments to the chemical process
industry.
Merchandising Systems sales decreased $3.0 million or 5% to $54.1 million
for the second quarter of 2001 compared with the second quarter of 2000. Segment
operating profit decreased $2.5 million or 29% to $6.4 million in the second
quarter of 2001 versus $8.9 million in the second quarter of 2000 as strong
results at NRI were more than offset by lower results at Crane Merchandising
Systems. Operating profit margins were 11.8% in the second quarter of 2001
compared with 15.6% in the second quarter of 2000. Crane Merchandising Systems
sales, which declined 13% in the first quarter, were off 23% in the second
quarter compared to the prior year and resulted in substantially lower operating
profits. NRI(s) sales increased $8.1 million, or 81%, to $18.2 million and
operating profit more than doubled due to very strong demand in anticipation of
the conversion to the euro in January 2002.
Fluid Handling sales increased $23.7 million or 20% to $140.7 million for
the second quarter of 2001 compared with the second quarter of 2000. Operating
profit increased $3.2 million to $12.7 million in the second quarter of 2001
versus $9.5 million in the second quarter of 2000. Operating profit margins were
9.0% in the second quarter of 2001 compared with 8.1% in the second quarter of
2000. Crane(s) valve businesses increased sales by $29.2 million and operating
profit by $4.1 million reflecting positive comparisons in Valve Services, the
Marine markets and the April 1, 2001 acquisition of Crane Process Flow
Technologies. The Valve & Pump short-cycle businesses that are sensitive to the
economy had 10-15% declines in sales and reduced operating profits.
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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, 2001
Controls sales decreased $3.3 million or 10% to $29.3 million for the
second quarter of 2001 compared with the second quarter of 2000. Operating
profit increased $1.6 million to $1.1 million in the second quarter of 2001
versus a loss of $.5 million in the second quarter of 2000 principally as a
reflection of a sharp reduction in Ferguson(s) operating loss.
Results from Operations
Six Months Ended June 30,2001 Compared to Six Months Ended June 30,2000
For the six months ended June 30, 2001, net income (excluding a special
charge of $4.0 million or $.07 per diluted share) was $56.7 million or $.94 per
diluted share, compared with $59.3 million or $.96 per diluted share for the six
months ended June 30, 2000 ($75.5 million or $1.22 per diluted share including
non-operating gains). The special charge relates to the retirement of R. S.
Evans as the Company(s) Chief Executive Officer and represents stock-based
retirement costs that previously were being amortized to an anticipated
retirement at age 65.
During the six months ended June 30, 2000, a minority investment in a
telecommunications power supply venture was sold, generating a non-operating
gain of $16.2 million or $.26 per diluted share. Operating profit for the six
months ended June 30, 2001 was $98.7 million (excluding the special charge) on
sales of $788.3 million compared with $102.9 million on sales of $771.8 million
in 2000. Operating profit margins for the six months ended June 30, 2001 were
12.5% (excluding the special charge) compared with 13.3% for the six months
ended June 30, 2000. Order backlog at June 30, 2001 totaled $525.3 million, an
increase of $93.1 million, or 22%, from June 30, 2000 and a $7.9 million
decrease from March 31, 2001.
During the six months ended June 30,2001, the Company recognized a $1.2
million pre-tax loss in miscellaneous income on a euro currency option entered
into in connection with the recently completed acquisition of the Industrial
Flow Group of Alfa Laval Holding AB. Overall, the Company recognized a $1.4
million pre-tax gain on this option, of which $2.6 million was recognized in the
fourth quarter of 2000.
Net sales from domestic businesses were 75% of the six months total net
sales in 2001 compared with 78% in the same six-month period of 2000. Operating
profit from domestic businesses was 74% and 88% of total operating profit for
2001 and 2000, respectively. Operating profit margins for domestic businesses
were 12.5% in 2001 compared with 16.0% in 2000. Operating profit margins for
non-US businesses were 12.7% in 2001 versus 7.3% in 2000.
-10-
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, 2001
Aerospace sales increased $32.6 million or 19% to $204.1 million for the
six months of 2001 compared with the same period of 2000. Operating profit
increased $9.1 million or 22% to $51.4 million in the six months of 2001.
Operating profit margins were 25.2% for the six months ended June 30, 2001
compared with 24.6% for the six months ended June 30, 2000. All business units
improved lead by Hydro-Aire and ELDEC. Order backlog for the segment was $314.8
million at June 30, 2001, an increase of $33.0 million or 12% from June 30, 2000
and $6.0 million from March 31, 2001. Results in the Aerospace segment should
remain strong in the second half of the year.
Engineered Materials sales decreased $32.0 million or 17% to $157.6 million
for the six months of 2001 compared with the six months of 2000 primarily due to
weak transportation, recreational vehicle and chemical processing markets.
Segment operating profit decreased $11.2 million, or 36% to $20.2 million for
the six months ended June 30, 2001. Operating profit margins were 12.8% in 2001
compared with 16.6% in 2000 for the six-month period. Kemlite sales declined
$19.8 million to $102.5 million and operating profit declined $7.6 million for
the six months of 2001 compared with the six months of 2000 as truck trailer and
recreational vehicle production continued to decrease compared with the six
months ended June 30, 2000. Results at Resistoflex were affected by lower
shipments to the chemical process industry of $3.4 million, lowering operating
profit by $1.6 million compared to the same six-month period in 2000. Order
backlog at June 30, 2001 was $15.5 million, a decrease of $2.9 million or 16%
from June 30, 2000, and a $3.1 million decrease from March 31, 2001. Reduced
backlog and continued weak transportation and petro-chemical markets are likely
to result in second half 2001 operating profits which approximate the
lower-than-historical prior year levels.
Merchandising Systems sales decreased $1.7 million or 1% to $111.8 million
for the six months of 2001 compared with the six months of 2000. Segment
operating profit decreased $3.4 million or 18% to $15.2 million for the six
months ended June 30, 2001 as continued strong results at NRI were more than
offset by lower results at Crane Merchandising Systems. Operating profit margins
were 13.6% for the six months ended June 30, 2001 compared with 16.4% for the
six months ended June 30, 2000. Crane Merchandising Systems sales declined 18%
for the six months of 2001 compared with the same prior year period which
resulted in an operating profit decline of $10.4 million. NRI(s)sales increased
$15.5 million, to $36.3 million and operating profit increased $7.0 million due
to the strong demand in anticipation of the conversion to the euro in January
2002. Order backlog at June 30, 2001 was $64.6 million, an increase of $44.4
million from June 30, 2000, and a decrease of $13.2 million from March 31, 2001.
The backlog will continue to decrease each quarter as the advanced orders placed
at NRI in anticipation of the introduction of the euro in January 2002 are
shipped. Operating profit is anticipated to remain at these levels over the
second half of the year as continued difficult operating conditions at Crane
Merchandising Systems will offset a strong performance at NRI.
Fluid Handling sales increased $22.6 million or 10% to $257.1 million for
the six months of 2001 compared with the six months of 2000. Operating profit
increased $2.3 million to $19.7 million for the six months ended June 30, 2001.
Operating profit margins were 7.7% for the six months ended June 30, 2001
compared with 7.4% for the six months ended June 30, 2000. Crane(s) valve
businesses increased sales by $31.5 million and operating profit by $4.7 million
as a result of improved Valve Services market, the Marine markets and the April
1, 2001 acquisition of Crane Process Flow Technologies. Crane Pumps operating
profit decreased $1.5 million due to a $5.1 million decrease in sales and
increased severance costs for the six months ended June 30, 2001 compared with
the same prior year period. Order backlog at June 30, 2001 was $106.8 million,
an increase of $22.8 million or 27% from June 30, 2000, and an increase of $5.0
million from March 31, 2001, due to the addition of Crane Process Flow
Technologies backlog of $9.7 million. Fluid Handling(s) results should show
improvement each quarter over the prior year reflecting strong backlog for
projects in the marine, power and oil and gas markets, strict cost disciplines
in valves and pumps sold through distribution in the U.S., higher volumes in
nuclear valve services and the addition of Crane Process Flow Technologies and
Xomox.
-11-
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, 2001
Controls sales decreased $5.1 million or 8% to $59.1 million for the six
months of 2001 compared with the six months of 2000. Operating profit increased
$1.4 million to $1.1 million for the six months ended June 30, 2001 primarily
from the sharp reduction in Ferguson(s)operating loss. Order backlog at June 30,
2001 was $23.6 million; a decrease of $4.1 million or 15% from June 30, 2001 and
$2.7 million decrease from the March 31, 2001. Controls operating results are
expected to remain profitable for the remainder of the year driven by improved
performance at Ferguson and Azonix.
Liquidity and Capital Resources
For the six months ended June 30, 2001, the Company generated $81.4 million of
cash from operating activities, versus $72.0 million in 2000. Net debt totaled
37.7% of capital at June 30, 2001 compared with 30.8% at June 30, 2000. The
current ratio at June 30, 2001 was 2.2 with working capital totaling $337.8
million compared with 2.1 and $267.2 million at June 30, 2000. The Company had
unused credit lines of $327.4 million available at June 30, 2001. During the
first six months of 2001, the Company paid $27.8 million for the repurchase of
1.05 million shares of Crane common stock at an average price of $26.53 per
share and $12.0 million for the payment of dividends. Debt increased by $141.5
million due to the four 2001 acquisitions mentioned below. Average diluted
shares outstanding decreased by 1.2 million from the second quarter of 2000 due
to the Company(s) share repurchases.
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 $377.1 million in long-term
debt outstanding at June 30 2001, $200 million was at fixed rates of interest
ranging from 6.75% to 8.50% while $153 million was at a weighted average rate of
3.84% from the revolving credit agreement. At June 30, 2001, 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.
Acquisitions
In the first six months of 2001, the Company acquired Ventech Controls, Inc.,
Laminated Profiles, Ltd., the Industrial Flow Group of Alfa Laval AB and the
Xomox valve business of Emerson Electric. Total consideration paid in connection
with these acquisitions was $190 million. All of the acquisitions were accounted
for under the purchase method of accounting. Final allocation of the purchase
price to the assets acquired and liabilities assumed has not been completed for
these acquisitions. Final determination of the fair values to be assigned may
result in adjustments to the preliminary values assigned at the dates of
acquisition. Preliminary estimates of goodwill recorded for these acquisitions
aggregated approximately $90 million.
On April 1, 2001, the Company acquired for approximately $37 million plus
working capital, the Industrial Flow Group of Alfa Laval Holding AB (renamed
Crane Process Flow Technologies) which had annual sales of $77 million in 2000
and which has been immediately accretive to Crane(s) earnings.
On June 29, 2001, the Company completed the acquisition of the Xomox valve
business from Emerson Electric, for a purchase price of $145 million. Xomox,
with annual sales of approximately $150 million, is a leading global supplier of
sleeved plug valves, quarter-turn valves and actuators under the Tufline and
Matryx brand names. Diluted earnings per share relating to the Xomox acquisition
are expected to be slightly positive in 2001 and $0.10 per share in 2002.
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Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Six Ended June 30, 2001
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase method of accounting for business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method.
The adoption of SFAS 141 will not have a significant impact on the Company
financial statements.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective
January 1, 2002. SFAS 142 requires the discontinuance of goodwill amortization.
In addition, the SFAS 142 includes provisions for the reclassification of
certain existing recognized intangibles as goodwill, reassessment of the useful
lives of existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill and the identification of
reporting units for purposes of assessing potential future impairments of
goodwill. SFAS 142 also requires the Company to complete a transitional goodwill
impairment test six months from the date of adoption. The Company is currently
assessing but has not yet determined the impact of SFAS 142 on its financial
position and results of operations.
Part II - Other Information
Item 1. Legal Proceedings
Therehave 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, 2000.
Item 6. Exhibits and Reports on Form 8-K
1.) 8-K filed July 12, 2001 regarding acquisition of the Xomox valve
business from Emerson Electric Co.
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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 10,2001 By /s/ M. L. Raithel
M. L. Raithel
Vice President and Chief
Financial Officer
Date August 10,2001 By /s/ T. M. Noonan
T. M. Noonan
Vice President, Controller
and Chief Tax Officer
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