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 March 31, 1995
Commission File Number 1-1657
CRANE CO.
(Exact name of registrant as specified in its charter)
Delaware 13-1952290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 First Stamford Place, Stamford, Ct. 06902
(Address of principal executive office) (Zip Code)
(203) 363-7300
(Registrant's telephone number, including area code)
(Not Applicable)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's classes of common stock, as of
April 30, 1995:
Common stock, $1.00 Par Value - 30,166,447 shares
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
Periods Ended March 31,
Three Months
1995 1994
Net Sales $432,578 $331,705
Operating Costs and Expenses:
Cost of sales 323,458 259,754
Selling, general and administrative 68,597 48,816
Depreciation and amortization 11,904 8,308
403,959 316,878
Operating Profit 28,619 14,827
Other Income (Deductions):
Interest income 368 711
Interest expense (6,993) (3,326)
Miscellaneous - net (97) 241
(6,722) (2,374)
Income Before Taxes 21,897 12,453
Provision for Income Taxes 8,622 5,044
Net Income $ 13,275 $ 7,409
Net Income Per Share $.44 $.25
Average Shares Outstanding 30,273 30,051
Dividends Per Share $ .1875 $ .1875
<FN>
See Notes to Consolidated Financial Statements
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Part I - Financial Information
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
(Unaudited)
March 31, December 31,
1995 1994 1994
Assets
Current Assets:
Cash and cash equivalents $ 1,693 $ - $ 2,072
Accounts receivable, less allowance
of $3,717,($3,034 at March 31, 1994
and $3,693 at December 31, 1994) 247,819 207,575 234,695
Inventories at lower of cost, principally
LIFO, or market; replacement cost would
be higher by approximately $53,612
($54,763 at March 31, 1994 and $52,739 at
December 31, 1994)
Finished goods 121,596 128,955 116,625
Finished parts and subassemblies 31,699 24,166 30,556
Work in process 40,862 33,749 39,286
Raw materials 53,493 35,432 50,598
247,650 222,302 237,065
Other current assets 6,722 8,191 6,407
Total Current Assets 503,884 438,068 480,239
Property, Plant and Equipment:
Cost 516,209 480,594 513,348
Less accumulated depreciation 257,117 227,415 250,350
259,092 253,179 262,998
Other Assets 30,670 32,973 30,173
Intangibles, less accumulated amortization
of $7,760 ($5,127 at March 31, 1994 and
$7,716 at December 31, 1994.) 62,366 27,185 63,434
Cost in excess of net assets acquired
less accumulated amortization of
$18,205 ($12,657 at March 31, 1994
and $16,730 at December 31, 1994) 173,521 120,772 171,201
$1,029,533 $872,177 $1,008,045
<FN>
See Notes to Consolidated Financial Statements
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/TABLE
Part I - Financial Information
March 31, December 31,
1995 1994 1994
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 1,223 $ 2,424 $ 1,272
Loans payable 18,423 49,085 20,986
Accounts payable 103,896 91,565 95,211
Accrued liabilities 116,995 99,684 119,382
U.S and foreign taxes on income 11,965 10,601 7,444
Total Current Liabilities 252,502 253,359 244,295
Long-Term Debt 333,576 244,764 331,289
Deferred Income Taxes 33,180 12,293 32,440
Other Liabilities 17,391 19,393 20,159
Accrued Postretirement Benefits 43,075 43,068 43,066
Accrued Pension Liability 8,709 6,761 8,804
Preferred Shares, Par Value $.01
Authorized - 5,000 Shares - - -
Common Shareholders' Equity:
Common shares 30,142 29,911 30,047
Capital surplus 14,678 10,871 12,766
Retained earnings 304,139 265,704 296,268
Currency translation adjustment (7,859) (13,947) (11,089)
Total Common Shareholders' Equity 341,100 292,539 327,992
$1,029,533 $872,177 $1,008,045
<FN>
See Notes to Consolidated Financial Statements
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/TABLE
Part I - Financial Information (Cont'd.)
Crane Co. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net income $ 13,275 $ 7,409
Depreciation 9,057 6,978
Amortization 2,847 1,330
Deferred taxes 549 153
Cash used for operating
working capital (12,120) (3,650)
Other (1,854) (172)
Total from operating activities 11,754 12,048
Cash flows from investing activities:
Capital expenditures (6,967) (5,769)
Payments for acquisitions (1,879) (68,734)
Proceeds from divestitures - -
Proceeds from disposition of capital assets 1,778 280
Proceeds from the sale of equity investments - -
Total used for investing activities (7,068) (74,223)
Cash flows from financing activities:
Equity:
Dividends paid (5,655) (5,608)
Reacquisition of shares (2,367) (42)
Stock options exercised 4,373 785
Net Equity (3,649) (4,865)
Debt:
Proceeds from issuance of long-term debt - 14,460
Repayments of long-term debt (3,578) (1,053)
Net increase in short-term debt 2,065 41,024
Net Debt (1,513) 54,431
Total(used for)provided from financing activities (5,162) 49,566
Effect of exchange rate on cash and cash equivalents 97 17
Decrease in cash and cash equivalents (379) (12,592)
Cash and cash equivalents at beginning of period 2,072 12,592
Cash and cash equivalents at end of period $ 1,693 $ -
Detail of Cash (Used for) Provided From Operating
Working Capital:
Accounts receivable $(11,939) $ (7,693)
Inventories (9,524) (8,152)
Other current assets (277) 452
Accounts payable 2,686 9,232
Accrued liabilities 2,553 (538)
U.S. and foreign taxes on income 4,381 3,049
Total $(12,120) $ (3,650)
Supplemental disclosure of cash flow information:
Interest paid $ 6,251 $ 5,831
Income taxes paid 3,418 1,952
See Notes to Consolidated Financial Statements
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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.
2. Sales and operating profit by segment are as follows:
Three Months Ended March 31,
1995 1994
(In thousands)
Net Sales:
Fluid Handling $ 78,860 $ 65,471
Aerospace 51,049 18,738
Engineered Materials 53,938 48,700
Crane Controls 33,072 8,380
Merchandising Systems 47,623 36,738
Wholesale Distribution 169,106 154,803
Other 3,128 3,758
Intersegment Elimination (4,198) (4,883)
Total $432,578 $331,705
Operating Profit (Loss):
Fluid Handling $ 2,243 $ 3,273
Aerospace 11,908 3,543
Engineered Materials 6,675 5,514
Crane Controls 2,888 101
Merchandising Systems 6,616 4,536
Wholesale Distribution 1,828 1,406
Other 221 (354)
Corporate (3,700) (3,109)
Intersegment Elimination (60) (83)
Total $ 28,619 $ 14,827
3.Supplemental schedule on non-cash financing activities:
Crane Co. purchased all of the capital stock of ELDEC
Corporation in March 1994 for $77,300 and Mark Controls
Corporation in April 1994 for $96,900. The fair value of
assets and liabilities at the date of acquisition are
presented as follows:
Mark
ELDEC Controls
(in thousands)
Fair value of assets acquired $138,951 $170,288
Cash paid for capital stock (77,300) (96,900)
Assumption of liabilities $ 61,651 $ 73,388
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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 March 31, 1995 and 1994
Results From Operations:
Net income for the quarter ended March 31, 1995 was a record $13.3 million or
$.44 per share, up 80% from the $7.4 million and $.25 per share reported in
the same period last year. Sales in the quarter were $432.6 million, up 30%
from $331.7 million last year, and operating profit increased 93% to $28.6
million.
Fluid Handling sales were up 20% but operating profit was down 31% compared to
the first quarter last year. Sales were up largely due to the inclusion of the
Mark Controls valve businesses acquired in April 1994, and also due to strong
demand in Crane Ltd. (U.K.) markets. Segment sales and operating profit
comparisons were adversely impacted primarily by Cochrane due to losses on a
foreign contract, decisions by a new management team to incur certain
restructuring costs, and a lawsuit settlement. Crane Pumps and Systems sales
were down slightly but operating profit and margins were up due to the effects
of the Burks/Deming post-acquisition consolidation cost savings.
Aerospace sales and operating profit were up significantly due largely to the
inclusion of ELDEC which was acquired in late March 1994, and improved operating
results at both Hydro-Aire and Lear Romec. ELDEC had its highest quarterly
profit since the acquisition and its strong performance is expected to continue.
The improvements at Hydro-Aire and Lear Romec resulted from market penetration
and productivity increases. Hydro-Aire also had higher aftermarket sales in the
quarter.
Engineered Materials sales were up 11% due to strong end markets for the
products of Kemlite, Cor Tec, and Resistoflex. Resistoflex also benefited from
new product introductions. The segment's 21% operating profit increase from
last year was largely due to Cor Tec and Resistoflex. Kemlite, Cor Tec and
Resistoflex are each leaders in their served markets and enjoy high
profitability due to a competitive cost advantage. Crane Plumbing sales
declined 17% due to the weak Canadian housing market but operating profit was
slightly improved.
Crane Controls sales and operating profit were up dramatically in the quarterly
comparisons primarily due to the inclusion this year of the businesses acquired
as part of Mark Controls in April 1994. All businesses in this segment (Azonix,
Barksdale, Dynalco, Powers Process Controls, and Ferguson) had better results
than last year. Reported results of this segment are somewhat distorted by
non-cash goodwill charges of $3 million per year which reduce reported earnings
but have no effect on cash flow returns.
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Merchandising Systems sales were up 30%, largely due to National Vendors'
continued success with new product introductions, notably Cafe System "7",
higher sales of its broad line of snack, drink and food machines, and the
commencement of another contract for the Post Office in March 1995. National
Vendors' profits and margins were higher due to the higher sales. National
Vendors' results continued to improve despite disruptions caused by
construction connected with the last stages of the $25 million plant
expansion and cost reduction project. Sales at NRI were up significantly in the
quarter but the unit operated at a small loss due entirely to an $.8 million bad
debt loss resulting from a customer bankruptcy.
Wholesale Distribution sales were up 9% due to Huttig's acquisition of a
specialty millwork facility in June 1994, and operating profit was up 30% due
to strong results at Crane Supply and improvement at Valve Systems, partly
offset by lower margins at Huttig.
Net interest expense in the quarter increased $4 million compared to the prior
year due to debt financed acquisitions. Net debt was $351.5 million at the end
of the quarter, and the net debt to capital ratio was 51% .
The effective tax rate decreased to 39.4% in the first quarter of 1995 compared
to 40.5% in 1994 due primarily to operating losses in Germany with no tax
benefit in 1994.
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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 March 31, 1995 and 1994
[CAPTION]
Liquidity and Capital Resources:
During the first three months of 1995 the company generated $11.8 million
of cash from operating activities, compared to $12.0 million in 1994. Net
debt totaled 51 percent of capital at March 31, 1995. The current ratio
increased to 2.0 with working capital totaling $251.4 million and $184.7
million in 1995 and 1994, respectively. Interest coverage as a result of
the Mark Controls acquisition in April 1994 was 4.1, compared to 4.7 at
March 31, 1994. The company had unused credit lines of $408 million at
March 31, 1995.
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Part II - Other Information
Item 4. Submission of Matters to a vote of Security Holders
A) The Annual Meeting of shareholders was held on May 8, 1995.
B) The following three Directors were reelected to serve for three years
until the Annual Meeting of 1998.
Mr. Mone Anathan,III
Vote for - 27,397,368
Vote withheld - 133,278
Mr.Richard S.Forte`
Vote for - 27,397,254
Vote withheld - 133,392
The following Director was elected to serve for three years until the
Annual Meeting of 1998.
Mr.Jean Gaulin
Vote for - 27,387,338
Vote withheld - 143,308
C) The shareholders approved the selection of Deloitte & Touche LLP.as
independent auditors for the company for 1995.
Vote for - 27,414,369
Vote against - 47,903
Abstained - 68,374
D) Approval of the Company's Stock Option Plan as amended to make an
additional 1,000,000 shares of Common Stock available for grant
Vote for - 26,383,556
Vote against - 874,736
Abstained - 272,354
Item 6. Exhibits and Reports on Form 8-K
11. Computation of earnings per share for the quarters March 31,
1995 and 1994.
27. Article 5 of Regulation S-X Financial Data Schedule
for the first quarter.
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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 May 11, 1995 By
D.S. SMITH
Vice President-Finance
and Chief Financial Officer
Date May 11, 1995 By
M.L. RAITHEL
Controller
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Crane Co. and Subsidiaries
Exhibit A to Form 10-Q
Computation of Net Income per Common Share
Three Months March 31, 1995 and 1994
(In Thousands, Except Per Share Amounts)
Period Ended March 31,
Three Months
1995 1994
Primary Net Income Per Share:
Net income available
to shareholders $13,275 $ 7,409
Average primary shares outstanding 30,273 30,051
Net income $.44 $.25
Fully Diluted - Income Per Share:
Net income $13,275 $ 7,409
Add back interest, net of tax,
assuming the conversion of
debentures - 6
Net income available to
shareholders, assuming the
conversion of debentures $13,275 $ 7,415
Average primary shares outstanding 30,273 30,051
Add:
Adjustment for further dilutive
effect of stock options (ending
market price higher than average
market price used in primary
shares calculation) 23 -
Shares reserved for conversion
of debentures - 171
Average fully diluted shares
outstanding 30,296 30,222
Net income $.44 $.25
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