-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FAhqS1ALSGS8wxXoyGOOkt7TKeSC5to8nAG1Nb2L2ghu9ys0HrESNboEFyBkdLgv J6UgZInOSIP2tVcAacOzlw== 0000950130-00-001311.txt : 20000316 0000950130-00-001311.hdr.sgml : 20000316 ACCESSION NUMBER: 0000950130-00-001311 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRANE CO /DE/ CENTRAL INDEX KEY: 0000025445 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-LUMBER, PLYWOOD, MILLWORK & WOOD PANELS [5031] IRS NUMBER: 131952290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-01657 FILM NUMBER: 570144 BUSINESS ADDRESS: STREET 1: 100 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033637300 MAIL ADDRESS: STREET 1: 100 FURST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 10-K 1 FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 ----------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ 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 offices) (Zip Code) Registrant's telephone number, including area code (203) 363-7300 ------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ----------------------- ----------------------- Common Stock, par value $1.00 New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: 8 1/2% senior notes due March 2004 6 3/4% senior notes due October 2006 (Title of Class) 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 ----- ----- Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Based on the average stock price of $19.41 on January 31, 2000 the aggregate market value of the voting stock held by nonaffiliates of the registrant was $962,788,784. The number of shares outstanding of the registrant's common stock, $1.00 par value was 61,974,291 at January 31, 2000. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the annual report to shareholders for the year ended December 31, 1999 and portions of the proxy statement for the annual shareholders meeting to be held on April 10, 2000 are incorporated by reference into Parts I, II, III and IV of this Form10-K Annual Report. PART I Item 1. Business -------- Crane Co. ("Crane" or the "Company") is a diversified manufacturer of engineered industrial products. Founded in 1855, Crane employs over 9,000 people in North America, Europe, Asia and Australia. STRATEGY The company's strategy is to grow the earnings of niche businesses with high market share, build an aggressive and committed management team whose interests are directly aligned to those of the shareholders, and maintain a focused, efficient corporate structure. ACQUISITIONS In the past five years, the company has completed 14 acquisitions. In October 1999, the company acquired Stentorfield, Ltd., based in Chippenham, England, for $33 million. Stentorfield is a premier designer and manufacturer of hot and cold beverage vending machines, serving the U.K. and European market with a broad line of full size and tabletop products, for the hotel, restaurant, office coffee service and vending industries. Stentorfield is known in the industry to provide high quality, reliable and easily serviced products and excellent customer service. This business was integrated with Crane's National Vendors business, which is the leading North American designer and manufacturer of full line vending machines, for snack, food and beverage. The acquisition provides the means for National Vendors to satisfy the growing U.K. and European demand for a broader "one-stop" product offering, consisting of Stentorfield's drinks machines and National Vendors' snack and food machines. During 1998 the company completed four acquisitions at a total cost of $178 million. In May, the company acquired Environmental Products USA, Inc. This business manufactures membrane-based water treatment systems for industrial, commercial and institutional markets. In August, the company acquired Sequentia Holdings, Inc., a manufacturer of fiberglass-reinforced plastic panels for the construction and building products markets. Sequentia complements the company's Kemlite subsidiary, which provides fiberglass-reinforced plastic panels for the transportation and recreational vehicle markets. In September, the company acquired Liberty Technologies, Inc. which develops, manufactures, markets and sells valve, motor, engine and compressor condition monitoring products and related services to the nuclear power generation and industrial process markets worldwide. Liberty complements the company's nuclear valve business which provides valves, valve diagnostic equipment and related services to the nuclear power industry, and its Dynalco Controls business, which provides sensors, instrumentation, control products and automation systems for use in industrial engine applications. Also in September, the company acquired the Plastic-Lined Piping Products ("PLPP") division of The Dow Chemical Company. PLPP was integrated with the company's Resistoflex division, which supplies lined pipe and valves to the chemical process and industrial markets. During 1997, the company completed four acquisitions at a total cost of $70 million, including assumed debt. In March, the company acquired the transportation products business of Sequentia, Incorporated. This business, which produces fiberglass-reinforced plastic panels for the truck body, trailer and container market, has been integrated with the company's Kemlite subsidiary. Also in March, the company acquired Polyvend Inc., a manufacturer of snack and food vending machines. Polyvend was completely integrated into Crane's National Vendors division significantly expanding its sales distribution channels. In April, the company acquired the Nuclear Valve Business of ITI MOVATS from Westinghouse. MOVATS is a leading supplier of valve diagnostic equipment and valve services to the commercial nuclear power industry. In December the company acquired certain operations and product lines of Stockham Valves & Fittings, Inc. The acquired product lines and related manufacturing operations have been integrated into the company's engineered valve business and its commercial bronze and iron valve business. 2 PART I Item 1. Business (continued) -------- During 1996, the company acquired two companies. In mid-October, the company acquired Interpoint Corporation in a tax-free merger in which the company issued 1,094,312 shares of Crane common stock and assumed $26 million in debt. Interpoint is a leader in the design and manufacture of standard and custom miniature DC-to-DC power converters with applications in aerospace and medical technology industries. In late October the company acquired Grenson Electronics Ltd. of Daventry, England. Grenson Electronics produces low voltage power conversion electronics for aerospace, defense and industrial markets. During 1995, the company completed three acquisitions at a total cost of $9.4 million. In February the company, through its Barksdale Control Products GmbH subsidiary, acquired Unimess GmbH, a German-based manufacturer of solid state pressure switches and transducers, level switches and indicating systems, and flow measurement and control components for specialized instrumentation. In the fourth quarter, the company, through its Crane Pumps & Systems subsidiary, acquired Process Systems, Inc. based in Michigan. Process Systems is a manufacturer of vertical turbine pumps and accessories for industrial applications. In November 1995, the company acquired Kessel PTE Ltd., a fluoropolymer plastic lined pipe manufacturer with facilities in Singapore and Thailand. DIVESTITURES In the past five years, the company has divested six businesses. In April 1999, the company sold Southwest Foundry, acquired as part of the Stockham Valves and Fittings, Inc. transaction, for $.4 million. In December 1999, the company sold its Crane Defense Systems business for $6.4 million in cash and a $.8 million note. In 1998, the company sold two foundry operations acquired as part of the Stockham Valves and Fittings Inc. transaction. Accu-Cast, Inc. in Chattanooga, TN and the Aliceville Foundry in Aliceville, AL were sold for a total of $4.3 million. In 1997, the company sold its Valve Systems and Controls division for $7.5 million in cash and $1.5 million in preferred stock. In March of 1996, the company sold Empire Foundry. DISCONTINUED OPERATIONS On December 6, 1999, the company's Board of Directors approved the spin-off of its Huttig Building Products ("Huttig") subsidiary effective December 16, 1999, to shareholders of record as of December 8, 1999. Huttig common shares were distributed on a basis of one share of Huttig for every 4.5 shares of Crane Co. common stock. Prior to the spin-off, Huttig repaid an intercompany loan of $68 million to the company, which the company used to pay down debt. The Wholesale segment was discontinued when Huttig was spun off. LONG-TERM FINANCING In September 1998 the company sold $100,000,000 of 6 3/4% notes that will mature on October 1, 2006. During April 1992 the company sold $100,000,000 8 1/2% notes that will mature on March 15, 2004. BUSINESS SEGMENTS See pages 27 and 28 of the Annual Report to Shareholders for year ended December 31, 1999 for sales, operating profit and assets employed of each business segment. 3 PART I Item 1. Business (continued) -------- ENGINEERED MATERIALS The Engineered Materials segment consists of five businesses: Kemlite, CorTec, Resistoflex, Polyflon and Crane Plumbing. Kemlite manufactures fiberglass-reinforced plastic panels for use principally by the transportation industry in refrigeration and dry van truck trailers and recreational vehicles. Kemlite products are also sold to the commercial construction industry for food processing, fast food restaurant and supermarket applications, to institutions where fire rated materials with low smoke generation and minimum toxicity are required and to residential construction. Kemlite sells its products directly to the truck trailer and recreational vehicle manufacturers. Sequentia manufactures fiberglass-reinforced plastic panels for the construction and building products markets. Kemlite uses distributors to serve its commercial construction market and some segments of the recreational vehicle market. Sequentia's Grand Junction, Tennessee and Houston, Texas plants were added to Kemlite's plants in Joliet, Illinois and Jonesboro, Arkansas. CorTec manufactures fiberglass-reinforced laminated panels serving the truck and truck trailer segment of the transportation industry. CorTec markets its products directly to the truck and truck trailer manufacturers. Resistoflex is engaged in the design, manufacture and sale of corrosion- resistant, plastic-lined steel pipes, fittings, tanks, valves, expansion joints and hose used primarily by the pharmaceutical, chemical processing, pulp and paper, ultra pure water and waste management industries. It also manufactures high-performance, separable fittings for operating pressures to 8,000 PSI used primarily in the aerospace industry. Resistoflex sells its industrial products through distributors who provide stocking and fabrication services to industrial users in the United States. Its aerospace products are sold directly to the aerospace industry. Resistoflex also manufactures plastic-lined pipe products at its Singapore plant serving the Asian chemical processing and the Asian pharmaceutical industries. Polyflon manufactures microwave laminates, high voltage RF capacitors, radomes and circuit processing for the wireless communication, magnetic resonance imaging, microwave and radar system manufacturers. Crane Plumbing manufactures plumbing fixtures in Canada. Its products are sold through distributors in Canada and it has a large share of the Canadian plumbing fixtures market. This group had assets of $250.0 million at December 31, 1999 and employed 1,700 people. Order backlog at year-end 1999 was $24.7 million. 4 PART I (continued) Item 1. Business (continued) -------- MERCHANDISING SYSTEMS The Merchandising Systems segment has two operating units: National Vendors, the industry leader in the design and manufacture of a complete line of vending merchandisers for the food/service vending market; and NRI, which manufactures electronic coin validators in Buxtehude, Germany for the automated merchandising and gambling/amusement markets in Europe. National Vendors products include electronic vending merchandisers for refrigerated and frozen foods, hot and cold beverages, snack foods, single cup individually brewed hot drinks and combination vendors/merchandisers, designed to vend both snack foods and hot/cold drinks, or snacks and refrigerated/frozen foods in one machine. National Vendors manufactures its products in a 463,000 sq. ft. state of the art facility in Bridgeton, Missouri. National Vendors' products are marketed to customers in the United States and Europe by company sales and marketing personnel as well as distributors, and in other international markets through independent distributors. In October 1999, the company acquired Stentorfield, Ltd., based in Chippenham, England. Stentorfield is a premier designer and manufacturer of hot and cold beverage vending machines, serving the U.K. and European market with a broad line of full size and tabletop products, for the hotel, restaurant, office coffee service and vending industries. Stentorfield is known in the industry to provide high quality, reliable and easily serviced products and excellent customer service. This business was integrated with Crane's National Vendors business, which is the leading North American designer and manufacturer of full line vending machines, for snack, food and beverage. The acquisition provides the means for National Vendors to satisfy the growing U.K. and European demand for a broader "one-stop" product offering, consisting of Stentorfield's drinks machines and National Vendors' snack and food machines. Merchandising Systems employs 1,350 people and had assets of $150.2 million at year-end 1999. Order backlog totaled $18.3 million at December 31, 1999. AEROSPACE The Aerospace segment consists of ELDEC, Hydro-Aire, Lear Romec and Interpoint. ELDEC designs, manufactures and markets custom position indication and control systems, proximity sensors, pressure sensors, true mass fuel flowmeters and power conversion systems for the commercial, business and military aerospace industries, and military marine and telecommunications markets. These products are custom designed for specific aircraft to meet technically demanding requirements of the aerospace and telecommunication industry. ELDEC has two international facilities, one in England and one in France. ELDEC also has a 45% equity investment in Powec A/S, a Norwegian manufacturer of power conditioning products and systems for the commercial wireless telecommunications market, whose products are complementary to the products and complex power systems engineering capabilities at ELDEC. Hydro-Aire designs, manufactures and sells aircraft brake control and anti- skid systems, including electro-hydraulic servo valves and manifolds, embedded software and rugged electronic controls, hydraulic control valves, landing gear sensors and fuel pumps as original equipment for the commercial transport, business and commuter, military, government and general aviation aerospace markets. In addition, Hydro-Aire designs and manufactures systems similar to those above for the retrofit of aircraft with improved systems and manufactures replacement parts for systems installed as original equipment by the aircraft manufacturer. All of these products are largely proprietary to Hydro-Aire and, to some extent, are custom designed to the requirements and specifications of the aircraft manufacturer or program contractor. These systems and replacement parts are sold directly to aircraft manufacturers, airlines, governments, and aircraft maintenance and overhaul companies. 5 PART I (continued) Item 1. Business (continued) -------- Lear Romec designs, manufactures and sells lubrication and fuel pumps for aircraft, aircraft engines and radar cooling systems for the commercial and military aerospace industries. Lear Romec has a leading share of the non- captive market for turbine engine lube and scavenge oil pumps. Lear Romec also manufactures fuel boost and transfer pumps for commuter and business aircraft. Interpoint designs, manufactures and sells standard and custom miniature (hybrid) DC-to-DC power converters and custom miniature (hybrid) electronic circuits for applications in commercial, space and military aerospace industries and in the medical technology industry. Interpoint has one international facility in Taiwan. The group employs 2,100 people and had assets of $269.2 million at year- end. The order backlog totaled $232.6 million at December 31, 1999. FLUID HANDLING The Fluid Handling segment consists of Engineered Valves, Commercial Valves, Valve Services, Crane Supply and pump and water treatment businesses. The Crane Engineered and Commercial valve businesses, with four manufacturing facilities in North America, as well as operations in the United Kingdom, Australia, Norway, China and Indonesia, sell a wide variety of commodity and special purpose valves and fluid control products for the chemical and hydrocarbon processing, power generation, marine, general industrial and commercial construction industries. Products are sold under the Crane, Jenkins, Pacific, Westad, Flowseal, Center Line, Stockham, Triangle and Duo-Check brands. The company's Valve Service business, with two manufacturing facilities in North America, provides valves, valve diagnostic equipment and related services to the nuclear power, hydrocarbon, chemical processing and power generation industries. Crane Pumps has eight manufacturing facilities in the United States. Pumps are manufactured under the Deming, Weinman, Chempump, Burks, Chem/Meter, Barnes, Sellers and Process Systems brand names. Pumps are sold to a broad customer base, which includes chemical and hydrocarbon process industries, automotive, municipal, industrial and commercial wastewater, power generation, commercial heating, ventilation and air-conditioning industries and original equipment manufacturers. The water treatment business has manufacturing facilities in Pennsylvania and Florida and serves the water and wastewater treatment market. Its products are sold under the Cochrane and Environmental Products names. Crane Supply, a distributor of plumbing supplies, valves and piping in Canada, maintains thirty-five branches throughout Canada and distributes Crane manufactured products in that country. Crane Supply also distributes products that are both complementary to and competitive with Crane's own manufactured products. This group employs over 3,000 people and had assets of $330.5 million at December 31, 1999. Fluid Handling order backlog totaled $79.5 million. Products in this group are sold directly to end users through Crane's sales organization and through independent distributors and manufacturers representatives. 6 PART I (continued) Item 1. Business (continued) -------- CRANE CONTROLS This segment includes five businesses: Barksdale, Powers Process Controls, Dynalco Controls, Azonix, and Ferguson. The companies in this segment design, manufacture and market industrial and commercial products that control flows and processes in various industries including the petroleum, chemical, construction, food and beverage, power generation industries and transportation. Barksdale manufactures solid state and electromechanical pressure switches and transducers, level switches and continuous level indicators, temperature switches, and directional control valves that serve a broad range of commercial and industrial applications. It has manufacturing and marketing facilities in the United States and Germany. Powers Process Controls designs, manufactures and markets water mixing and thermal shock protection shower systems, commercial and residential plumbing brass, correctional water controllers, process controllers and instrumentation, process control valves and temperature regulators for industrial applications and the commercial and institutional construction industry. Dynalco Controls designs and manufactures rotational speed sensors, temperature and pressure instruments and monitors for rugged environments, microprocessor based engine and mechanism controls. Dynalco's products are used worldwide by industries in a variety of applications, including stationary natural gas engines, power generation, oil and gas production and transmissions, and agriculture equipment. Azonix manufactures operator interfaces and measurement and control systems for hazardous and harsh applications, intelligent data acquisition products, high-precision thermometers and calibrators for the oil and gas, petrochemical, chemical, pharmaceutical and metal processing industries. Ferguson designs and manufactures in the United States and through Ferguson Machine Co. S.A. in Europe, precision index and transfer systems for use on and with machines that perform automatic forming, assembly, metal cutting, testing and inspection operations. Products include mechanical and electronic index drives, pick-and-place robots, in line transfer machines, rotary tables, press feeds and custom cams. The products in this segment are sold directly to end users, and engineering contractors through the company's own sales forces and cooperatively with sales representatives, stocking specialists and industrial distributors. Crane Controls had assets of $129.2 million at December 31, 1999, and employs 900 people. On December 31, 1999, Crane Controls had a backlog of $28.3 million. 7 PART I (continued) Item 1. Business (continued) -------- COMPETITIVE CONDITIONS The company's lines of business are conducted under actively competitive conditions in each of the geographic and product areas they serve. Because of the diversity of the classes of products manufactured and sold, they do not compete with the same companies in all geographic or product areas. Accordingly, it is not possible to estimate the precise number of competitors or to identify the principal methods of competition. Although reliable statistics are not available, the company believes that it is an important supplier to a number of market niches and geographic areas. The company's products have primary application in the industrial, construction, aerospace, automated merchandising, transportation, and fluid handling industries. As such, they are dependent upon numerous unpredictable factors, including changes in market demand, general economic conditions, residential and commercial building starts, and capital spending. Because these products are also sold in a wide variety of markets and applications, the company does not believe it can reliably quantify or predict the possible effects upon its business resulting from such changes. Seasonality is a factor in the Canadian operations. Net sales in Canada and assets related to Canadian operations were 13.19% and 7.85% of the respective 1999 consolidated amounts. The company's engineering and product development activities are directed primarily toward improvement of existing products and adaptation of existing products to particular customer requirements. While the company owns numerous patents and licenses, none are of such importance that termination would materially affect its business. Product development and engineering costs totaled approximately $58.9 million in 1999, $70.9 million in 1998, and $56.3million in 1997. Included in these amounts were approximately $7.4 million, $15.8 million and $9.6 million received by the company in 1999, 1998 and 1997, respectively, for customer sponsored research and development. The company is not dependent on any single customer nor are there any issues at this time regarding available raw materials for inventory. Costs of compliance with federal, state and local laws and regulations involving the discharge of materials into the environment or otherwise relating to the protection of the environment are not expected to have a material effect upon the company's capital expenditures, earnings or competitive position. 8 PART I (continued) Item 1. Business (continued) -------- FORWARD LOOKING STATEMENTS -------------------------- Throughout the Annual Report to Shareholders, particularly in the Letter to Shareholders and Management's Discussion and Analysis of Operations, the company makes numerous statements about expectations of future performance and market trends, and statements about plans and objectives and other matters, which because they are not historical fact may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, the company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and in its reports to shareholders, which can be identified by the use of forward-looking terminology such as "believes", "contemplates", "expects", "may", "will", "could", "should", "would" or "anticipates" or the negative thereof or comparable terminology. All forward-looking statements speak only as of the date on which such statements are made and involve risk and uncertainties that exist in the company's operations and business environment and are not guarantees of future performance. The company assumes no obligation to update any of these forward- looking statements, whether as a result of new information or future events. As a responsibility to our investors, the company will make reasonable efforts at timely disclosure of future facts and circumstances which may affect such statements. Because the company wishes to take advantage of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995, readers are cautioned to consider the following important risk factors that could affect the company's businesses and cause actual results to differ materially from those projected. General A substantial portion of the sales of the company's business segments are concentrated in industries which are cyclical in nature. Because of the cyclical nature of these businesses, their results are subject to fluctuations in domestic and international economies, as well as to currency fluctuations and unforeseen inflationary pressures. Reductions in the business levels of these industries would impact negatively on the sales and profitability of the affected business segments. While the company is a principal competitor in most of its markets, all of its markets are highly competitive. The company's competitors in many of its business segments can be expected in the future to improve technologies, reduce costs and develop and introduce new products, and the ability of the company's business segments to achieve similar advances will be important to their competitive positions. Competitive pressures, including those discussed above, could cause one or more of the company's business segments to lose market share or could result in significant price erosion, either of which would have an adverse effect on the company's results of operations. The company's acquisition program entails the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities and potential profitability of acquisition candidates and in integrating the operations of acquired companies. There can be no assurance that suitable acquisition opportunities will be available in the future, that the company will continue to acquire businesses or that any business acquired will be integrated successfully or prove profitable. 9 PART I (continued) Item 1. Business (continued) -------- Forward Looking Statements (continued) - -------------------------- Net sales and assets related to operations outside the United States were 34.8% and 21.9% of the respective 1999 consolidated amount. Such operations and transactions entail the risks associated with conducting business internationally, including the risk of currency fluctuations, slower payment of invoices, adverse trade regulations and possible social and economic instability. While the full impact of this economic instability cannot be predicted, it could have a material adverse effect on the company's revenues and profitability. Certain of the company's business segments are dependent upon highly qualified personnel, and the company generally is dependent upon the continued efforts of key management employees. Particularly in light of the current tight labor market, the company's prospects would be adversely affected by an inability to retain its key personnel. New factors emerge from time to time, and it is not possible for management to predict all of such factors. Further, management cannot assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The "Year 2000" issue concerned the potential exposures related to the automated generation of business and financial misinformation resulting from the application of computer programs which have been written using two digits, rather than four, to define the applicable year of business transactions. Suppliers, customers and creditors of the company also faced Year 2000 issues. The discussion of the Impact of the Year 2000 contained on Page 34 of the company's 1999 Annual Report under Management's Discussion and Analysis of Operations is incorporated herein by reference. Engineered Materials In the Engineered Materials segment, sales and profits could fall if there were a decline in demand for truck trailers, recreational vehicles or building products, for which Crane companies produce fiberglass-reinforced panels. Profits could be squeezed as well by unanticipated increases in resin and fiberglass material costs, by unforeseen fluctuations in the Canadian dollar, and by any inability on the part of Crane's companies to maintain their position in product cost and functionality against competing materials. Merchandising Systems Results at Crane's U.S.-based vending machine business could be reduced by delays in launching or supplying new products or an inability to achieve new product sales objectives. Results at Crane's Germany-based coin validation machine business could be affected by changes in demand stemming from the advent of the Euro, the planned new European currency, as well as by unforeseen fluctuations in the value of the Deutschemark versus the U.S. dollar. 10 PART I (continued) Item 1. Business (continued) -------- Forward Looking Statements (continued) - -------------------------- Aerospace A significant fall-off in demand for air travel or a decline in airline profitability generally could result in reduced aircraft orders, and could also cause the airlines to scale back their purchases of repair parts from Crane companies. The companies could also be impacted if major aircraft manufacturers encountered production problems, or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices. Sales and profits could face erosion if pricing pressure from competitors increased, if planned new products were delayed, if finding new aerospace-qualified suppliers grew more difficult, or if required technical personnel became harder to hire and retain. Aerospace segment results could be below expectations if Asia's economic problems lead to a further decline in aircraft orders, particularly since the new, long-range Boeing aircraft favored for many Asian routes contain a higher value of Crane-supplied equipment than other aircraft from Boeing and other manufacturers. Fluid Handling Crane's companies could face increased price competition from larger competitors. Further economic turmoil in Asia could reduce sales and profits, particularly if projects for which Crane companies are suppliers or bidders are cancelled or delayed, or if the companies' ability to source product from international sources is impeded. At Crane's Canadian distribution operation, reported results in U.S. dollar terms could be eroded by an unanticipated weakening of Canada's currency. Controls A number of factors could affect the Controls segment's results. Lower sales and earnings could result if Crane's companies can not maintain their cost competitiveness, encounter delays in introducing new products, or fail to achieve their new product sales objectives. Results could decline because of an unanticipated decline in demand for Crane products from the industrial machinery, oil and gas, and heavy equipment industries, or from unforeseen product obsolescence. 11 PART I (continued) Item 2. Properties ---------- TOTAL MANUFACTURING FACILITIES NUMBER AREA ------------------------------ ------ ---- Fluid Handling United States 16 1,401,000 sq. ft. Canada 2 140,000 sq. ft. International 9 1,251,000 sq. ft. Aerospace United States 6 634,000 sq. ft. International 3 40,000 sq. ft. Engineered Materials United States 10 1,235,000 sq. ft. Canada 3 636,000 sq. ft. International 1 10,000 sq. ft. Crane Controls United States 6 407,000 sq. ft. International 2 63,000 sq. ft. Merchandising Systems United States 1 463,000 sq. ft. Other International 2 109,000 sq. ft. Leased Leases Manufacturing Expiring Facilities Through Number Area ---------- ---------- ------ ---- United States 2009 11 536,000 sq. ft. Canada 2000 1 13,000 sq. ft. Other International 2007 6 139,000 sq. ft. Other Facilities ---------------- Fluid Handling operates six valve service centers in the United States, of which three are owned, and three distribution centers in the United States. This segment operates internationally thirty-nine distribution and three service centers. Crane Controls operates one distribution center internationally. Merchandising Systems operates eight distribution centers in the United States and seven internationally. Engineered Materials operates eight distribution centers in the United States, of which one is owned, and two internationally. In the opinion of management, these properties have been well maintained, are in sound operating condition, and contain all necessary equipment and facilities for their intended purposes. 12 PART I (continued) Item 3. Legal Proceedings Neither the company, nor any subsidiary of the company has become a party to, nor has any of their property become the subject of, any material legal proceedings, other than ordinary routine litigation incidental to their businesses. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of 1999. 13 PART I (continued) EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the registrant are as follows:
Officer Name Position Business Experience Age Since - ------------------------ -------- ------------------- --- ------- Robert S. Evans Chairman and Chief Chairman and Chief 55 1974 Executive Officer Executive Officer of the company since 1984 and previously President of the company Eric C. Fast President and President and Chief Operating 50 1999 Chief Operating Officer, previously Co-head of Global Officer Investment Banking of Salomon Smith Barney and a Managing Director of that firm Augustus I. duPont Vice President, Vice President and General 48 1996 General Counsel Counsel and Secretary of and Secretary the company, previously Vice President, General Counsel and Secretary of Reeves Industries, Inc.,* a manufacturer of apparel textiles and industrial coated fabrics, from May 1994 to December 1995 Bradley L. Ellis Vice President- Vice President - Chief 31 1997 Chief Information Information Officer of the Officer company since July 1997, previously with the Business Systems consulting group of Arthur Andersen LLP, an international provider of auditing and business consulting services John R. Packard Vice President- Vice President- Human 45 1999 Human Resources Resources of the company since January 1999, previously Human Resources Director for Fortune Brands, Inc., a diversified consumer products company Anthony D. Pantaleoni Vice President- Vice President - Environment, 45 1989 Environment, Health & Safety of the company Health & Safety Michael L. Raithel (1) Vice President- Vice President - Finance 52 1985 Finance and Chief and Chief Financial Officer Financial Officer and Controller of the company, previously Vice President - Controller of the company (1) Effective February 18, 2000
14 PART I (continued) EXECUTIVE OFFICERS OF THE REGISTRANT(continued)
Officer Name Position Business Experience Age Since - ------------------------ -------- ------------------- --- ------- Thomas M. Noonan Vice President- Vice President - Taxes since 45 1999 Taxes September 1999, previously Director of Taxes of the company from March 1996 to September 1999, previously Director of Taxes and Tax Counsel, Loctite Corporation, a manufacturer of sealants, adhesives and coatings Gil A. Dickoff Treasurer Treasurer of the company, 38 1992 previously Assistant Treasurer of the company
Certain Proceedings - ------------------- * Reeves Industries, Inc., a corporation which Mr.duPont served as Vice President, General Counsel and Secretary from May 1994 to December 1995, filed a petition and Plan of Reorganization for a consensual debt restructuring under Chapter 11 of the United States Bankruptcy Code on November 21, 1997. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. The information required by Item 5 is hereby incorporated by reference to Pages 35 through 37 of the 1999 Annual Report to Shareholders. Item 6. Selected Financial Data. The information required by Item 6 is hereby incorporated by reference to Pages 35 of the 1999 Annual Report to Shareholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information required by Item 7 is hereby incorporated by reference to Pages 6 through 14 of the 1999 Annual Report to Shareholders. Item 7A. Quantitative and Qualitative Disclosures about Market Risks. The information required by Item 7A is hereby incorporated by reference to Page 34 of the 1999 Annual Report to Shareholders. Item 8. Financial Statements and Supplementary Data. The information required by Item 8 is hereby incorporated by reference to Pages 15 through 35 of the 1999 Annual Report to Shareholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant The information required by Item 10 is incorporated by reference to the definitive proxy statement dated February 28, 2000, which the company has filed with the Commission pursuant to Regulation l4A except that such information with respect to Executive Officers of the Registrant is included, pursuant to Instruction 3, paragraph (b) of Item 401 of Regulation S-K, under Part I. 15 PART III (continued) Item 11. Executive Compensation The information required by Item 11 is incorporated by reference to the definitive proxy statement dated February 28, 2000, which the company has filed with the Commission pursuant to Regulation l4A. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by Item 12 is incorporated by reference to the definitive proxy statement dated February 28, 2000, which the company has filed with the Commission pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions The information required by Item 13 is incorporated by reference to the definitive proxy statement dated February 28, 2000, which the company has filed with the Commission pursuant to Regulation 14A. PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (a)(1) The consolidated balance sheets of Crane Co. and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, changes in common shareholders' equity and cash flows for the years ended December 31, 1999, 1998 and 1997 and the report thereon of Deloitte & Touche LLP dated January 20, 2000 appearing on Pages 15 through 29 of Crane Co.'s 1999 Annual Report to Shareholders which will be furnished with the company's proxy statement as required by Regulation 14A, Rule 14a-3(c), are incorporated herein by reference (2) Financial statement schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission have been omitted because they are not required under related instructions or are inapplicable, or the information is shown in the financial statements and related notes. (3) Exhibits: Exhibit 3A Certificate of Incorporation, as amended on May 25, 1999. Exhibit 3B By-laws, as amended on January 24, 2000. Exhibit 11 Computation of net income per share. Exhibit 13 Annual Report to shareholders for the year ended December 31, 1999. Exhibit 21 Subsidiaries of the Registrant. Exhibit 23 Independent auditors' consent. (b) Reports on Form 8-K: Filed 10/21/1999 The Company filed a Current Report on Form 8-K, reporting on Item 5 thereof, the unaudited pro forma consolidated balance sheet of the Registrant as of June 30, 1999 and the unaudited pro forma consolidated statements of income for the six-month period ended June 30, 1999 and for the year ended December 31, 1998. These pro forma financial statements reflect the pro forma impact of the Huttig Building Products, Inc. spin-off. Filed 12/23/1999 The Company filed a Current Report on Form 8-K, reporting on Item 2 thereof, that on November 17, 1999, Crane received a tax ruling from the IRS that the spin-off of Huttig would be tax-free to Crane and its shareholders. On December 16, 1999, Crane distributed all of the outstanding common stock of Huttig to its shareholders of record as of the close of business on December 8, 1999. 16 PART IV (continued) Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) (c) Exhibits to Form 10-K: (3) (a) The company's Certificate of Incorporation, as amended on May 25, 1999 (filed herewith as Exhibit 3A). (b The company's By-Laws, as amended on January 24, 2000 (filed herewith as Exhibit 3B). (4) Instruments Defining the Rights of Security Holders, including Indentures: (a) There is incorporated by reference herein: (1) Preferred Share Purchase Rights Agreement contained in Exhibit 1 to the company's Report on Form 8-K filed with the Commission on July 6, 1998. (b) There is incorporated by reference herein: 1) Indenture dated as of April 1,1991 between the Registrant and the Bank of New York contained in Exhibit 4.1 to the company's report on Form 8-K filed with the Commission on September 16, 1998. (10)Material Contracts: (iii)Compensatory Plans There is incorporated by reference herein: (a) The forms of Employment/Severance Agreement between the company and certain executive officers (form I) and (form II) which provide for the continuation of certain employee benefits upon a change of control as contained in Exhibit C of the company's annual report on Form 10-K for the fiscal year ended December 31, 1994. (b) The E.V.A. incentive compensation plan contained in Exhibit B to the company's annual report on Form 10-K for the fiscal year December 31, 1994. (c) The indemnification agreements entered into with each director and executive officer of the company, the form of which is contained in Exhibit C to the company's definitive proxy statement filed with the Commission in connection with the company's April 27, 1987 Annual Meeting. (d) The Crane Co. Retirement Plan for Non-Employee Directors contained in Exhibit E to the company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. (e) The Crane Co. 1998 Stock Option Plan contained in Exhibit 4.1 to the company's Registration Statement No. 333-50489 on Form S-8 filed with the Commission on April 20, 1998. (f) The Crane Co. 1998 Restricted Stock Award Plan contained in Exhibit 4.1 to the company's Registration Statement No. 333- 50487 on Form S-8 filed with the Commission on April 20, 1998. (g) The Crane Co. 1998 Non-Employee Director Restricted Stock Award Plan contained in Exhibit 4.1 to the company's Registration Statement No. 333-50495 on Form S-8 filed with the Commission on April 20, 1998. All other exhibits are omitted because they are not applicable or the required information is shown elsewhere in this Annual Report on Form 10-K. 17 SIGNATURES Pursuant to the requirements of Section l3 or l5 (d) of the Securities Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CRANE CO. ------------------- (Registrant) By /s/ M. L. Raithel --------------------------- M. L. Raithel Vice President-Finance and Chief Financial Officer and Controller Date 2/28/00 ------- Pursuant to the requirements of the Securities Exchange Act of l934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. OFFICERS /s/ R. S. Evans ------------------------ R. S. Evans Chairman and Chief Executive Officer and a Director Date 2/28/00 ------- /s/ E. C. Fast /s/ M. L. Raithel ----------------------------- --------------------------- E. C. Fast M. L. Raithel President and Chief Vice President-Finance and Operating Officer and a Director Chief Financial Officer and Controller (Principal Financial Officer and Principal Accounting Officer) Date 2/28/00 Date 2/28/00 ------- ------- DIRECTORS /s/ E. T. Bigelow, Jr. /s/ R. S. Forte ----------------------- ---------------------- E. T. Bigelow, Jr. R. S. Forte Date 2/28/00 Date 2/28/00 ------- ------- /s/ D.R. Gardner /s/ J. J. Lee /s/ - ----------------------- ----------------------- ---------------------- D.R. Gardner J. J. Lee W. E. Lipner Date 2/28/00 Date 2/28/00 Date 2/28/00 ------- ------- ------- /s/ D. C. Minton /s/ C. J. Queenan, Jr. /s/ - ----------------------- ----------------------- ---------------------- D. C. Minton C. J. Queenan, Jr. J. L. L. Tullis Date 2/28/00 Date 2/28/00 Date 2/28/00 ------- ------- ------- 18 EX-3.(A) 2 CERTIFICATE OF INCORPORATION EXHIBIT 3A CERTIFICATE OF MERGER OF CRANE CO. INTO CRANE DELAWARE Pursuant to Section 252 of the Delaware General Corporation Law The undersigned corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the ----- constituent corporations of the merger is as follows: Name State of Incorporation ---- ---------------------- Crane Co. Illinois Crane Delaware Co. Delaware SECOND: That an Agreement and Plan of Merger, dated as of April 3, ------ 1985, by and between Crane Co. and Crane Delaware Co., providing for the merger (the "Merger") of Crane Co. with and into Crane Delaware Co. has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of subsection (c) of Section 252 of the General Corporation Law of the State of Delaware. THIRD: That the surviving corporation shall be Crane Delaware Co., ----- which shall change its name in the Merger to Crane Co. FOURTH: The Certificate of Incorporation of the surviving ------ corporation, with such amendments as are effected by the Merger, is attached to this Certificate of Merger as Exhibit A, and, as so amended, shall constitute the Certificate of Incorporation, as amended, of the surviving corporation. From and after the filing of this Certificate of Merger, and until further amended or provided by law, said Exhibit A may be certified as the Certificate of Incorporation of the surviving corporation, as amended, separate and apart from this Certificate of Merger. FIFTH: That the executed Agreement and Plan of Merger is on file at ----- the principal place of business of the surviving corporation. The address of the principal place of business of the surviving corporation is 300 Park Avenue, New York, N.Y. 10022. SIXTH: That a copy of the Agreement and Plan of Merger will be ----- furnished by the surviving corporation, on request and without cost, to any stockholder of either constituent corporation. SEVENTH: The authorized capital stock of Crane Co. consists of ------- 20,000,000 shares of common stock, $6.25 par value, and 600,000 shares of serial preferred stock, $5.00 par value. EIGHTH: This Certificate of Merger is not to become effective until ------ the issuance of a Certificate of Merger in respect of the Merger by the Secretary of State of the State of Illinois pursuant to the Business Corporation Act of the State of Illinois. CRANE DELAWARE CO. By: /s/ R. S. Evans ---------------- President ATTEST: -2- By: /s/ Paul R. Hundt ------------------ Secretary -3- EXHIBIT A CERTIFICATE OF INCORPORATION OF CRANE CO. ARTICLE I --------- The name of the corporation (hereinafter called the "Corporation") is Crane Co. ARTICLE II ---------- The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company. ARTICLE III ----------- The purpose or purposes for which the Corporation is organized are to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. ARTICLE IV ---------- The total number of shares of all classes of stock which the Corporation shall have authority to issue is 40,000,000 shares of common stock, par value $6.25 per share ("Common Stock"). The holders of Common Stock shall have the exclusive power to vote and shall have one vote in respect of each share of such stock held by them. ARTICLE V --------- Board of Directors ------------------ Section 1. Number. The business and affairs of the Corporation shall --------- ------ be managed under the direction of the Board of Directors which shall consist of not less than three nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. -4- Section 2. Election and Terms. The directors shall be divided into --------- ------------------ three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1986 Annual Meeting of Stockholders, the term of office of the second class to expire at the 1987 Annual Meeting of Stockholders and the term of office of the third class to expire at the 1988 Annual Meeting of Stockholders. At each Annual Meeting of Stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Stockholders after their election. Section 3. Newly Created Directorships and Vacancies. Newly created --------- ----------------------------------------- directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 4. Removal. Any director, or the entire Board of Directors, --------- ------- may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the shares then entitled to vote at an election of directors, voting together as a single class. Section 5. Amendment, Repeal, etc. Notwithstanding anything --------- ----------------------- contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article V. ARTICLE VI ---------- Stockholder Action ------------------ Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Special meetings of stockholders of the Corporation may be called only by the Chairman of the Board of Directors or by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article VI. -5- ARTICLE VII ----------- By-law Amendments ----------------- The Board of Directors shall have the power to make, alter, amend or repeal the By-laws of the Corporation by such vote as may be specified therein. The affirmative vote of the holders of two-thirds or more of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required for the stockholders to make, alter, amend or repeal the By-laws. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article VII. ARTICLE VIII ------------ The name and mailing address of the incorporator of the Corporation is John F. Johnston, 12th and Market Streets, Wilmington, Delaware 19801. IN WITNESS WHEREOF, I, John F. Johnston, the sole incorporator of CRANE CO., have executed this Certificate of Incorporation this 3rd day of April, 1985, and DO HEREBY CERTIFY under the penalties of perjury that the facts stated in this Certificate of Incorporation are true. /s/ John F. Johnston ---------------------------------- John F. Johnston, Incorporator -6- CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION Crane Co. (the "Company"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the Company held on February 23, 1987, resolutions were duly adopted setting forth proposed amendments of the Certificate of Incorporation of the Company, declaring said amendments to be advisable and calling a meeting of stockholders of the Company for consideration thereof. The resolutions setting forth the proposed amendments are as follows: RESOLVED, that the Certificate of Incorporation be amended by increasing the number of authorized shares of common stock from 40,000,000 to 80,000,000, decreasing the par value of the Company's Common Stock from $6.25 to $1.00 per share, splitting each issued common share, including shares held in treasury, into one and one-half Common Shares, par value $1.00 per share, for each share previously issued, thereby effecting a three-for-two Common Share stock split, and authorizing a new class of 5,000,000 shares of preferred stock, par value $.01; and FURTHER RESOLVED, that Article IV of the Certificate of Incorporation of the Company be amended in its entirety to read as follows: ARTICLE IV The total number of shares of all classes of stock which the Corporation shall have authority to issue is eighty million (80,000,000) shares of common stock, par value $1.00 per share ("Common Stock"), and five million (5,000,000) shares of preferred stock, par value $.01 per share ("Preferred Stock"). The following is a description of each of the classes of stock of the Corporation and a statement of the powers, preferences, and rights of such stock, and the qualifications and restrictions thereof. 1 (a) At all meetings of the shareholders of the Corporation the holders of the Common Stock shall be entitled to one vote for each share of Common Stock held by them respectively. (b) Shares of the Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors of the Corporation. Each series shall be distinctly designated. Except as otherwise provided in the resolution setting forth the designations and rights of the series of Preferred Stock, all shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends (if any) thereon shall be cumulative, if made cumulative. The relative preferences, participating, optional and other special rights of each such series, and limitations thereof, if any, may differ from those of any and all other series at any time outstanding. The Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of each particular series of the Preferred Stock, the designation, preferences, and relative, participating, optional or other rights, if any, or the qualifications, limitations or restrictions thereof, if any, of such series, including, but without limiting the generality of the foregoing, the following: (1) the distinctive designation of, and the number of shares of the Preferred Stock which shall constitute the series, which number may be increased (except as otherwise fixed by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (2) the rate and times at which, and the terms and conditions upon which, dividends, if any, on shares of the series may be paid, the extent of preferences or relation, if any, of such dividends to the dividends payable on any other class or classes of stock of the corporation, or on any series of the Preferred Stock or of any other class or class of stock of the Corporation, and whether such dividends shall be cumulative, partially cumulative or non-cumulative; (3) the right, if any, of the holders of shares of the series to convert the same into, or exchange the same for, shares of any other class or classes of stock of the Corporation, and the terms and conditions of such conversion or exchange; (4) whether shares of the series shall be subject to redemption and the redemption price or prices and the time or times at which, and the terms and conditions upon which, shares of the series may be redeemed; (5) the rights, if any, of the holders of shares of the series upon voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up of the Corporation; (6) the terms of the sinking fund or redemption or purchase account, if any, to be provided for shares of the series; and 2 (7) the voting powers, if any, of the holders of shares of the series which may, without limiting the generality of the foregoing, include the right, voting as a series by itself or together with other series of the Preferred Stock or all series of the Preferred Stock as a class, (1) to cast more or less than one vote per share on any or all matters voted upon by the shareholders, (2) to elect one or more directors of the Corporation in the event there shall have been a default in the payment of dividends on any one or more series of the Preferred Stock or under such other circumstances and upon such conditions as the Board of Directors may fix. (c) The relative preferences, rights and limitations of each series of Preferred Stock in relation to the preferences, rights and limitations of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in this Article IV, and the consent by class or series vote or otherwise, of the holders of the Preferred Stock of such of the series of the Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether the preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in such resolution or resolutions adopted with respect to any series of Preferred Stock that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. (d) Subject to the provisions of the preceding paragraph (c), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors shall determine and on such terms and for such consideration, not less than the par value thereof, as shall be fixed by the Board of Directors. Upon this amendment becoming effective, each of the issued Common Shares, par value $6.25 per share, of the Company, including the Common Shares held in the Company's Treasury (collectively the "Old Common Shares"), shall be reclassified without any action on the part of the holder thereof into one and one-half fully paid and non-assessable Common Shares, par value $1.00 per share, of the Company, authorized to be issued under the Certificate of Incorporation of the Company, as hereby amended (the "New Common Shares"), provided, however, that fractional shares shall not be issued and the Company shall appoint an agent to act on behalf of the shareholders to arrange for the consolidation of fractional interests by providing forms for shareholders to elect either to sell their fraction or to buy additional fractions sufficient to make up a whole share. Each certificate representing one or more Old Common Shares issued at the time this amendment becomes effective shall automatically without the necessity of presenting the same for exchange thereafter represent the same number of New Common Shares. As soon as practicable following the date upon which this amendment becomes effective, the Company shall deliver to the persons entitled thereto certificates representing the additional whole New Common Shares to which they shall have become 3 entitled by virtue hereof. The number of shares reserved for issuance under the Company 1984 Stock Option Plan, outstanding stock options, convertible debentures and the Company's Shareholders Common Share Purchase Rights Plan shall be appropriately adjusted in accordance with the terms of their governing instruments. RESOLVED, that the Certificate of Incorporation of the Company be amended by adding a new Article IX to such Certificate of Incorporation which shall read as follows: ARTICLE IX No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. This paragraph shall not eliminate or limit the liability of a director for any act or omission occurring prior to the effective date of its adoption. If the General Corporation Law of the State of Delaware is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors, then the liability of a director to the Corporation shall be limited or eliminated to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended from time to time. No repeal or modification of this Article IX, directly or by adoption of an inconsistent provision of this Certificate of Incorporation, by the stockholders of the Corporation shall be effective with respect to any cause of action, suit, claim or other matter, that, but for this Article IX, would accrue or arise prior to such repeal or modification. SECOND: That thereafter, at a meeting of the stockholders of the Company duly called and held, the necessary number of shares as required by statute were voted in favor of the foregoing amendments. THIRD: That the foregoing amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. 4 IN WITNESS WHEREOF, Crane Co. has caused this Certificate to be signed by Paul R. Hundt, its Vice President and attested by Frances E. Edwards, its Assistant Secretary, this 30th day of April, 1987. Crane Co. By: /s/ Paul R. Hundt ------------------ Vice President ATTEST: /s/ Frances E. Edwards ----------------------- Assistant Secretary 5 AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of CRANE CO. (Pursuant to Section 151 of the Delaware General Corporation Law) ----------------------------------- Crane Co., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), hereby certifies that: 1. The Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Corporation was filed on August 20, 1996. 2. There are no shares of Series A Junior Participating Preferred Stock of the Corporation issued and outstanding as of the date hereof. 3. The powers, designations, preferences and relative, participating, optional or other rights, if any, or the qualifications, limitations or restrictions thereof, if any, of the Series A Junior Participating Preferred Stock of the Corporation shall be amended and restated in their entirety as set forth below. 4. The following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on April 20, 1998: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Certificate of Incorporation of the Corporation, the Board of Directors hereby creates a series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows: Series A Junior Participating Preferred Stock: Section 1. Designation and Amount. The shares of this series shall ---------------------- be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be five hundred thousand (500,000). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of -------- shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. Section 2. Dividends and Distributions. --------------------------- (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any other stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of -2- $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares hall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A ------------- Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, in the Restated Certificate of Incorporation of the Corporation or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. -3- (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. -------------------- (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. -4- Section 5. Reacquired Shares. Any shares of Series A Preferred Stock ----------------- purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the restated Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any -------------------------------------- liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall --------------------------- enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the -5- number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Preferred Stock ------------- shall not be redeemable. Section 9. Rank. The Series A Preferred Stock shall rank, with ---- respect to the payment of dividends and the distribution of assets, junior to all series of any other class of Preferred Stock. Section 10. Amendment. The Certificate of Incorporation of the --------- Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, Crane Co. has caused this Certificate of Designations of Series A Junior Participating Preferred Stock to be duly executed by the undersigned this 2nd day of July, 1998. Crane Co. /s/ Augustus I. duPont ---------------------- Name: Augustus I. duPont Title:Vice President -6- CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CRANE CO. Crane Co. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the Corporation resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and directing that it be submitted to the stockholders of the Corporation for approval and adoption. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the first paragraph of Article IV of the Certificate of Incorporation be amended in its entirety to read as follows: "The total number of shares of all classes of stock which the Corporation shall have authority to issue is Two Hundred Million (200,000,000) shares of common stock, par value $1.00 per share ("Common Stock"), and Five Million (5,000,000) shares of preferred stock, par value $.01per share ("Preferred Stock")." SECOND: That a majority of the outstanding stock entitled to vote on the proposed amendment voted in favor of the amendment at the Annual Meeting of Shareholders of the Corporation held on April 5, 1999. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by David S. Smith, its duly authorized officer on this 24th day of May, 1999. CRANE CO. By: /s/ David S. Smith ----------------------------- David S. Smith Vice President-Finance and Chief Financial Officer EX-3.(B) 3 BY-LAWS, AS AMENDED ON JAN. 24, 2000 EXHIBIT 3B CRANE CO. BY-LAWS (as amended through January 24, 2000) ARTICLE I Definitions, Offices Section 1. Definitions. When used herein, "Board" shall mean the ----------- Board of Directors of the Corporation, "Chairman" shall mean the Chairman of the Board and "Corporation" shall mean this Corporation. Section 2. Principal Office. The principal office of the Corporation ---------------- shall be located in the City of Stamford, State of Connecticut. Section 3. Other Offices. The Corporation may have and maintain such ------------- other business office or offices, either within or without the State of Connecticut, as the Board of Directors may from time to time determine. Section 4. Registered Office. The registered office of the ----------------- corporation shall be at such address as from time to time the Board of Directors may determine. ARTICLE II Stockholders Section 1. Annual Meeting. The annual meeting of the stockholders of -------------- the corporation shall be held at the hour of ten o'clock a.m. on the second Monday of May in each year unless the Board shall fix a different date and time, for the election of Directors and for the transaction of such other business as may properly come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of Directors shall not be held on the day designated herein for the annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as such meeting can conveniently be convened and held. Section 2. Special Meetings. Special meetings of the stockholders for ---------------- any purpose may be called at any time only by a majority of the entire Board or by the Chairman of the Board. A call for a special meeting of stockholders shall be in writing, filed with the Secretary, and shall specify the time and place of holding such meeting and the purpose or purposes for which it is called. Section 3. Stockholder Action. Any action required or permitted to be ------------------ taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Section 4. Place of Meetings. The annual meeting of stockholders and ----------------- all special meetings of stockholders for the election of directors shall be held either at the principal office of the Corporation or at such other place suitable for the holding of a stockholders' meeting as shall be designated in the notice thereof. Special meetings of stockholders for a purpose or purposes other than the election of directors may be held at such place, either within or without the State of Connecticut, as shall be specified or fixed in the call for such meeting and the notice thereof as the place for the holding of a special meeting for any purpose or purposes. Section 5. Notice of Meetings. Except as otherwise provided by ------------------ statute, written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, stating the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Secretary, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope addressed to the stockholder at his last known post office address as it appears on the stock record books of the Corporation, with postage thereon prepaid. Attendance of a person at a meeting of stockholders, in person or by proxy, constitutes a waiver of notice of the meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. 2 Section 6. Record Dates. The Board may fix in advance a date, not ------------ more than 60 nor fewer than 10 days prior to the date of any meeting of stockholders, nor more than 60 days prior to the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case such stockholders and only such stockholders as shall the stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 7. Voting Lists. The officer or agent having charge of the ------------ transfer book for shares of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder present. The original share or stock ledger or transfer book or a duplicate thereof, shall be the only evidence as to who are the stockholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of stockholders. Section 8. Quorum. At any meeting of stockholders the holders of a ------ majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum of the stockholders for all purposes unless a greater or lesser quorum shall be provided by law or by the Certificate of 3 Incorporation and in such case the representation of the number so required shall constitute a quorum. The stockholders present in person or by proxy at a meeting at which a quorum is present may continue to do business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a quorum. Whether or not a quorum is present the meeting may be adjourned from time to time by a vote of the holders of a majority of the shares present. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting if held at the time specified in the notice thereof. Section 9. Voting and Proxies. Each holder of Common Stock shall be ------------------ entitled to one vote per share held of record upon each matter on which stockholders generally are entitled to vote. At all meetings of stockholders, a stockholder entitled to vote may vote in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless otherwise provided by law, all questions touching the validity or sufficiency of the proxies shall be decided by the Secretary. Directors shall be elected by a plurality of the votes cast at an election. All other action (unless a greater plurality is required by law or by the Certificate of Incorporation or by these By-laws) shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, present in person or represented by proxy, and where a separate vote by class is required, by a majority of the votes cast by stockholders of such class, present in person or represented by proxy. Section 10. Voting of Shares by Certain Holders. ----------------------------------- (a) Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the By-laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. 4 (b) Shares standing in the name of a deceased person may be voted by his administrator or his executor either in person or by proxy. (c) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name, if authority so to do be contained in an appropriate order of the court by which such receiver was appointed, and a certified copy of such order is filed with the Secretary of the Corporation before or at the time of the meeting. (d) A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. (e) Shares of the Corporation belonging to it shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time, but shares of the Corporation held by it in a fiduciary capacity may be voted and shall be counted in determining the number of outstanding shares at any given time. Section 11. Inspectors. At each meeting of stockholders, the chairman ---------- of the meeting may appoint one or more inspectors of voting whose duty it shall be to receive and count the ballots and make a written report showing the results of the balloting. Section 12. Nomination of Directors. Only persons who are nominated ----------------------- in accordance with the following procedures shall be eligible for election as directors; provided, however, that the following procedures shall not apply to the nomination of persons for election as directors by vote of any class or series of preferred stock of the Corporation. Nominations of persons for election to the Board of Directors of the Corporation at an annual meeting of stockholders may be made at such meeting by or at the direction of the Board of Directors, by any committee or persons appointed by the Board of Directors or by any common stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 12. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a 5 stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, in the case of an annual meeting of stockholders, not less than 90 nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the 15th day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to the Rules and Regulations of the Securities and Exchange Commission under Section 14 of the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and (ii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. Such notice shall be accompanied by the executed consent of each nominee to serve as a director if so elected. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation by the holders of Common Stock of the Corporation unless nominated in accordance with the procedures set forth in this Section 12. The officer of the Corporation presiding at an annual meeting of stockholders shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing proce- 6 dure, and if he should so determine, he shall so declare to the meeting, and the defective nomination shall be disregarded. Section 13. Advance Notification of Stockholder Proposed Business to -------------------------------------------------------- be Transacted at Annual Meetings. To be properly brought before an annual - -------------------------------- meeting of stockholders, business must be either (a) specified in the notice of meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made. Such stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. No business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 13, provided, however, that nothing in this Section 13 shall be deemed to preclude discussion by any stockholder of any business properly brought before the meeting. The officer of the Corporation presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 13, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. 7 The provisions of this Section 13 shall not apply to any stockholder proposal included in the Corporation's proxy statement pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended. 8 ARTICLE III Directors Section 1. Number. The business and affairs of the Corporation shall ------ be managed under the direction of the Board which shall consist of not less than three nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the board pursuant to a resolution adopted by a majority of the entire Board. Section 2. Election and Terms. The directors shall be divided into ------------------ three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1986 annual meeting of stockholders, the term of office of the second class to expire at the 1987 annual meeting of stockholders and the term of office of the third class to expire at the 1988 annual meeting of stockholders. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Section 3. Newly Created Directorships and Vacancies. Newly created ----------------------------------------- directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. Section 4. Removal. Any director, or the entire Board, may be removed ------- from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the shares of the Corporation then entitled to vote at an election of directors, voting together as a single class. Section 5. Regular Meetings. The regular annual meeting of the Board ---------------- shall be held at such time and place as the 9 Board may by resolution determine from time to time without other notice than as set forth in such resolution. The regular monthly meetings of the Board shall be held at such time and place as the Board may by resolution determine from time to time. The Board may by resolution change the times and places, either within or without the State of Connecticut, for the holding of such regular monthly meetings, and such times and places for the holding of other regular meetings without notice other than such resolution. Section 6. Special Meetings. Special meetings of the Board may be ---------------- held at any time on the call of the Chairman or at the request in writing of a majority of the directors. Special meetings of the Board may be held at such place, either within or without the State of Connecticut, as shall be specified or fixed in the call for such meeting or notice thereof. Section 7. Notice of Special Meetings. Notice of each special meeting -------------------------- shall be deposited in the United States mail by or at the direction of the Secretary to each director addressed to him at his residence or usual place of business at least seventy-two (72) hours before the day on which the meeting is to be held, or shall be sent to him by telegram, be delivered personally, or be given orally at least twenty-four (24) hours before the day on which the meeting is to be held. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope so addressed, with postage thereon prepaid. If notice be given by telegraph, such notice shall be deemed to be delivered when the same is delivered to the telegraph company. If the Secretary shall fail or refuse to give any such notice, then notice may be given by the officer or any one of the directors making the call. Notice may be waived in writing by any director, either before or after the meeting. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given if all directors shall be present thereat, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of 10 such meeting, and any and all business may be transacted thereat. 11 Section 8. Quorum. A majority of the members of the Board then in ------ office, or of a committee thereof, shall constitute a quorum for the transaction of business, except that the presence of the Chairman of the Board shall be necessary to constitute a quorum of the Executive Committee of the Board, and the vote of a majority of the members present at a meeting at which a quorum is present shall be the act of the Board or of the Committee thereof, except for the amendment of the By-laws which shall require the vote of not less than a majority of the members of the Board then in office. Section 9. Action without a Meeting. Action required or permitted to ------------------------ be taken pursuant to authorization voted at a meeting of the Board, or a committee thereof, may be taken without a meeting if, before or after the action, all members of the Board or of the Committee consent thereto in writing. The written consents shall be filed with the minutes of the proceedings of the Board or Committee. The consent shall have the same effect as a vote of the Board or Committee thereof for all purposes. Section 10. Organization. At all meetings of the Board the Chairman, ------------ the Vice Chairman of the Board, the President, an Executive Vice President or a Vice President, or in their absence a member of the Board to be selected by the members present, shall preside as Chairman of the meeting. The Secretary or an Assistant Secretary of the Corporation shall act as Secretary of all meetings of the Board, except that in their absence the Chairman of the meeting may designate any other person to act as secretary. At meetings of the Board business shall be transacted in such order as from time to time the Board may determine. Section 11. Compensation. In the discretion of the Board, directors ------------ may be paid a fixed fee for attendance at meetings and allowed reimbursement for expenses incurred in such attendance or otherwise in performance of duties as directors. In addition each director may be paid a fixed annual fee, in an amount to be determined by the Board, payable in convenient installments. Directors shall also be entitled to receive compensation for services rendered to the Corporation as officers, committee members, employees, or in any other capacity than as directors. 12 Section 12. Presence at Meeting. A member of the Board or of a ------------------- Committee designated by the Board may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in this manner constitutes presence in person at the meeting. Section 13. Executive Committee. The Board, by resolution adopted by ------------------- a majority of the entire board, may designate two or more directors to constitute an Executive Committee, which committee, to the extent Provided in such resolution or in these By-laws, shall have and exercise all of the authority of the Board in the management of the Corporation provided such Committee shall not have the authority of the Board in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation involving the corporation, recommending to the stockholders the sale, lease, or exchange of all or substantially all of the property and assets of the Corporation, recommending to the stockholders a dissolution of the Corporation or a revocation thereof, filling vacancies on the Board or on any committee of the Board (including the Executive Committee), amending, altering or repealing any By-laws of the Corporation, electing or removing officers of the Corporation, fixing the compensation of any member of the Executive Committee or amending, altering or repealing any resolution of the Board which by its terms provides that it shall not be amended, altered or repealed by the Executive Committee. Section 14. Committees of the Board. The Board may designate one or ----------------------- more other committees, each consisting of one or more directors of the Corporation as members and one or more directors as alternate members, with such power and authority as prescribed by the By-laws or as provided in a resolution adopted by a majority of the Board. Each Committee, and each member thereof, shall serve at the pleasure of the Board. 13 ARTICLE IV Officers Section 1. Officers' Number. The officers of the Corporation shall be ---------------- a Chairman of the Board, a President, a Vice Chairman, one or more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, a Secretary, a Treasurer, a Controller, and such other subordinate corporate or divisional officers as may be elected or appointed in accordance with the provisions of Section 3 of this Article IV. The Board may designate a variation in the title of any officer. Any two or more offices may be held by the same person except the offices of President and Secretary. Section 2. Election, Term of Office, and Qualifications. The officers -------------------------------------------- of the Corporation shall be elected annually by the Board at the first meeting of the Board held after the annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as the same can conveniently be held. Each officer, except such officers as may be elected or appointed in accordance with the provisions of Section 3 of this Article IV, shall hold his office until his successor shall have been duly elected and shall have qualified or until his death, resignation or removal. Section 3. Subordinate Officers. -------------------- (a) Subordinate Corporate Officers. The Board may annually appoint ------------------------------ one or more Assistant Controllers, Executive Assistants, Assistant Vice Presidents, a Secretary of the Board, one or more Assistant Secretaries, Assistant Treasurers, Auditors or Assistant Auditors, and such other subordinate corporate officers and agents as the Board may determine, to hold office as subordinate corporate officers for such period and with such authority and to perform such duties as may be prescribed by these By-laws or as the Board may from time to time determine. The Board may, by resolution, empower the Chairman of the Board to appoint any such subordinate corporate officers or agents to hold office for such period and to perform such duties as may be prescribed in said resolution. In its discretion the Board may leave unfilled, for any such period as it may fix by resolution, any corporate office, except those of President, Secretary and Treasurer. 14 (b) Divisional Officers. The Board, the Chairman of the Board or ------------------- the President may from time to time appoint employees of the Company divisional officers who shall have such operating and divisional responsibilities as may be designated by the President. Such divisional officers shall not be corporate officers and shall serve at the discretion of, under the direction of, and subject to removal by, the President. Section 4. Resignations. Any officer may resign at any time by giving ------------ written notice to the Board or to the Chairman of the Board or Secretary of the Corporation. Any such resignation shall take effect at the time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Removal. Any of the officers designated in Section 1 of ------- this Article IV may be removed by the Board, whenever in its judgment the best interests of the Corporation will be served thereby, by the vote of a majority of the total number of directors then in office. Any subordinate corporate officer appointed in accordance with Section 3 of this Article IV may be removed by the Board for like reason by a majority vote of the directors present at any meeting, a quorum being present, or by any superior officer upon whom such power of removal has been conferred by resolution of the Board. Any divisional officer appointed in accordance with Section 3 of this Article IV may be removed by the Chairman of the Board at any time and at his sole discretion or by any superior officer upon whom the power of removal has been conferred by the Chairman of the Board. The removal of any officer, subordinate officer or agent shall be without prejudice to the contract rights, if any, of the person so removed. Section 6. Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification or otherwise may be filled for the unexpired portion of the term in the same manner in which an officer to fill said office may be chosen pursuant to Section 2 or 3 of this Article IV, as the case may be. Section 7. Bonds. If the Board shall so require, any officer or agent ----- of the Corporation shall give bond to the Corporation in such amount and with such surety as the Board may deem sufficient, conditioned upon the faithful performance of their respective duties and offices. 15 Section 8. The Chairman of the Board. The Board shall elect a ------------------------- Chairman who shall be the Chief Executive Officer of the Corporation. He shall preside at all meetings of the stockholders and of the Board. He shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the Board to delegate any specific powers, except such as may be by law exclusively conferred upon the President, to any officer or officers of the Corporation. All papers, documents, deeds, and other instruments required to be executed by the Corporation shall be signed and executed for the Corporation by the Chairman or the President when directed by, and in the manner prescribed by, the Board. He shall have the general powers and duties of supervision and management which are usually vested in the Chief Executive Officer of a Corporation. Section 9. The President. The President shall have supervision over ------------- all such matters as may be delegated to him by the Board or the Chairman. In the absence of the Chairman or whenever the office of Chairman is vacant the President shall have the general powers of and shall perform the duties pertaining to the office of Chairman. Section 10. The Vice Chairman of the Board. The Board may elect a ------------------------------ Vice Chairman who shall have such duties as may be delegated to him by the Board or the Chairman. Section 11. Executive Vice Presidents; Senior Vice Presidents and Vice ---------------------------------------------------------- Presidents. - ---------- (a) Executive Vice Presidents and Senior Vice Presidents shall have supervision over all such matters, other officers of the Company, including Vice Presidents, and in the case of Executive Vice Presidents, Senior Vice Presidents, and other employees as may be designated or assigned to them by the President or Chairman of the Board, and shall perform such duties as the Board of Directors may designate or as may be assigned to them by the President or by the Chairman of the Board in the event of absence or disability of the President. Whenever the term "Vice President" is used in any other Article of these By-laws, it shall be deemed to include Executive Vice Presidents and Senior Vice Presidents. (b) The Vice Presidents shall perform such duties as the Board may designate or may be assigned to them by the 16 President, or the Chairman of the Board in the event of absence or disability of the President. Section 12. Treasurer. The Treasurer shall: --------- (a) Subject to the supervision and direction of the Vice President - - Finance, have the custody of all moneys, notes, bonds, securities and other evidences of indebtedness belonging to the Corporation, and shall keep full and accurate accounts of all moneys and securities received and of all moneys paid by him on account of the Corporation. He shall daily deposit all moneys, checks and drafts received to the credit and in the name of the Corporation, in such banks or other depositories as shall from time to time be authorized, approved or directed by the President, the Vice President - Finance, or the Board, and shall, on behalf of the corporation, endorse for deposit or collection, checks, notes, drafts and other obligations, provided, however, that checks of the United States Government or of any state or municipal government, which may be received by any branch house of the Corporation, may be endorsed for deposit by the local manager of the house receiving the check, and provided further, however, that checks, warrants, drafts, notes and other negotiable instruments, which may be received by any branch house of the Corporation, may be endorsed by the local manager in the name of the Corporation for collection or deposit by or in the local bank authorized to carry the local accounts. (b) Furnish to the Board, to the President and to such other officers as the Board may designate, at such times as may be required, an account of all his transactions as Treasurer. (c) Perform such other duties pertaining to the business of the Corporation as shall be directed or required by the President, the Vice President - Finance, or the Board and, subject to the control of the Vice President - Finance, the Board and these By-laws, perform all acts incident to the office of the Treasurer. d) Give such bond of the faithful discharge of his duties as the Board may require. The books and papers of the Treasurer shall at all times be open to the inspection of the President and each member of the Board. 17 Section 13. Secretary. The Secretary shall: --------- (a) Attend all meetings of the stockholders and also, in the event that no Secretary of the Board is elected or appointed, he shall attend meetings of the Board, and keep the minutes of such meetings in one or more books provided for that purpose. (b) See that all notices are duly given in accordance with the provisions of these By-laws, or as required by law. (c) Be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation or a facsimile thereof is affixed to or impressed on all certificates for shares prior to the issue thereof, and all documents, the execution of which on behalf of the Corporation under its seal, is duly authorized. (d) Sign with the President or a Vice President certificates for shares of the Corporation, the issue of which shall have been authorized by resolution of the Board. (e) See that the reports, statements, certificates and all other documents and records required by law are properly made, kept and filed. (f) In general, perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or the Board. 18 Section 14. Controller. The Controller shall: ---------- (a) Maintain adequate records of all assets, liabilities, and transactions of this Corporation; see that adequate audits thereof are currently and regularly made; and in conjunction with other officers and department heads initiate and enforce measures and procedures whereby the business of the Corporation shall be conducted with the maximum safety, efficiency, and economy. His duties and powers shall extend to all subsidiary corporations and to all affiliated corporations. (b) Prepare and furnish such reports and financial statements covering results of operations of the Corporation as shall be required of him by the President or the Board. Prepare and furnish such reports and statements showing the financial condition of the Corporation as shall be required of him by the President or the Board, and have the primary responsibility for the preparation of financial reports to the stockholders. (c) Perform such other duties pertaining to the business of the Corporation as shall be directed or required by the President or the Board and, subject to the control of the President, the Board and these By-laws, perform all acts incident to the office of the Controller. The books, records and papers of the Controller shall at all times be open to the inspection of the President and each member of the Board. Section 15. Assistant Treasurers. If one or more Assistant Treasurers -------------------- shall be elected or appointed pursuant to the provisions of Section 3 of this Article IV, then in the absence or disability of the Treasurer, the Assistant Treasurers shall perform all the duties of the Treasurer, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Treasurer, except that they shall have no power to sign in the name of the Corporation contracts as described in Section 1 of Article VII, unless specifically authorized by the Board. Any such Assistant Treasurer shall perform such other duties as from time to time may be assigned to him by the Board or any superior officer. Section 16. Assistant Secretaries. If one or more Assistant --------------------- Secretaries shall be elected or appointed pursuant to the provisions of Section 3 of this Article IV, then in the absence or disability of the Secretary, the Assistant Secretaries shall perform the duties of the Secretary, and when 19 so acting shall have all the powers of, and be subject to all the restrictions imposed upon, the Secretary. Any such Assistant Secretary shall perform such other duties as from time to time may be assigned to him by the Board or any superior officer. Section 17. Secretary of the Board. The Secretary of the Board shall ---------------------- record the minutes of meetings of the Board, deposit them with the Secretary of the Corporation, and perform such other duties as may be assigned to him by the Board. Section 18. Compensation. The compensation of the officers shall be ------------ fixed from time to time by the Board, provided that the Board may authorize any officer or Committee to fix the compensation of officers and employees. No officer shall be prevented from receiving such compensation by reason of the fact that he is also a director of the Corporation. ARTICLE V Capital Stock Section 1. Certificates of Stock. The certificates for shares of the --------------------- capital stock of the Corporation shall be in such form as shall be approved by the Board. The certificates shall be signed by the Chairman or the Vice Chairman of the Board, the President, an Executive Vice President, Senior Vice President or Vice President and also by the Treasurer or the Secretary, and may be sealed with the seal of the Corporation, or a facsimile thereof. The signatures of the aforesaid officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or its employee. The validity of any stock certificate of the Corporation signed and executed by or in the name of duly qualified officers of the Corporation shall not be affected by the subsequent death, resignation, or the ceasing for any other reason of any such officer to hold such office, whether before or after the date borne by or the actual delivery of such certificate. The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Corporation's capital stock records. 20 All certificates surrendered to the Corporation shall be cancelled, and no new certificates shall be issued until the former certificate for the same number of shares shall have been surrendered and cancelled except in case of a lost or destroyed certificate. The Corporation may treat the holder of record of any share or shares of stock as the holder in fact thereof, and shall not be bound to recognize any equitable or other claim to interest in any such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by law. Section 2. Lost, Stolen or Destroyed Certificates. The Corporation -------------------------------------- may issue a new certificate for shares in place of a certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board may require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in form satisfactory to the Corporation sufficient to indemnify the Corporation, its transfer agents and registrars against any claim that may be made against them on account of the alleged lost or destroyed certificate or the issuance of such a new certificate. Section 3. Transfer of Shares. Shares of the capital stock of the ------------------ Corporation shall be transferable by the owner thereof in person or by duly authorized attorney, upon surrender of the certificates therefor properly endorsed. The Board, at its option, may appoint a transfer agent and registrar, or one or more transfer agents and one or more registrars, or either, for the stock of the Corporation. Section 4. Regulations. The Board shall have power and authority to ----------- make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. 21 ARTICLE VI [Intentionally Omitted in 1985] ARTICLE VII Execution of Instruments on Behalf of the Corporation Section 1. Contracts. Except as herein provided, all contracts of the --------- Corporation shall be signed in the name of the Corporation by the Chairman, the President, a Vice President or the Treasurer, sealed with the Corporate Seal and attested by the Secretary or an Assistant Secretary. Bids and contracts for the purchase or sale of merchandise in the ordinary course of business of branch houses or divisions of the Corporation, together with bonds given to secure the performance thereof, shall be executed in the name of the Corporation or in an authorized divisional name by an officer authorized to sign contracts as above specified in this section, or, if relating to business of branch houses, by a District Manager, or by the Manager or Assistant Manager of the branch houses, respectively, and if relating to the business of a division, by an Officer, Manager or Assistant Manager of such division. Section 2. Bills of Exchange, Promissory Notes, Bonds or Other --------------------------------------------------- Evidence of Indebtedness of the Corporation, Bonds of Indemnity, and Securities - ------------------------------------------------------------------------------- Received. All bills of exchange, promissory notes, bonds, or other evidences of - -------- indebtedness of the Corporation shall be signed in the name of the Corporation by the Chairman, the President, or a Vice President, and shall be countersigned by the Treasurer or by an Assistant Treasurer. All forms of bonds of indemnity, the execution of which is required of the Corporation, shall be signed in the name of the Corporation by the Chairman, the President, a Vice President, the Treasurer or an Assistant Treasurer, and shall be countersigned by the Secretary or an Assistant Secretary. Any securities received by the Corporation in settlement or for security for the payment of any indebtedness due the Corporation may be sold, assigned, transferred and delivered by the Chairman, the President, a Vice President or the Treasurer, and all instruments of conveyance, assignment or transfer thereof shall be executed in the name of the 22 Corporation by such officers, attested by the Secretary or an Assistant Secretary, and the corporate seal attached. Section 3. Checks and Accounts. All checks shall be signed by either ------------------- the Chairman, the President, a Vice President, the Treasurer or an Assistant Treasurer, the Controller or Assistant Controller and also signed by either the Controller or an Assistant Controller, an Auditor or an Assistant Auditor, the Secretary or an Assistant Secretary of the Corporation, and no other person or persons shall be authorized to sign checks upon or against the funds of the Corporation except as hereinafter provided. The Chairman, the President, a Vice President, or the Treasurer is authorized to establish and maintain Managers' funds for branch house's or manufacturing division's general use including the meeting of payrolls, at the various locations of the branch houses, or manufacturing divisions of the Corporation, and special payroll funds at any location where the corporation carries on business. Such funds shall be subject to withdrawal on the signature or signatures of one or more persons, as determined and designated in writing by either the Chairman, the President, a Vice President, or the Treasurer. Checks drawn for the payment of dividends on shares of the Corporation's stock, and such other checks as may be designated in writing by the Chairman or the President, together with a Vice President or the Treasurer, may bear facsimile signatures, provided, however, that for the purpose of transfer ring funds between banks in which the Corporation has monies on deposit, the Treasurer or an Assistant Treasurer may direct or authorize the use of checks payable to a depository hank for credit of the Corporation, which checks shall have plainly printed upon their face "Depository Transfer Check" and shall require no signature other than the printed name of the Corporation. The respective Managers or Assistant Managers of the Corporation's branch houses, Managers, Credit Managers or Credit Supervisors of Regional Offices, and Officers, Managers or Assistant Managers of the Corporation's Divisions, are authorized to file claims for and to collect on behalf of the Corporation any amounts due for merchandise sold or invoiced from such branch houses, regional offices or divisions, and in the name of the corporation, or in an authorized divisional name, to give proper receipts, releases and waivers of mechanics' and materialmen's liens in connection therewith. 23 Section 4. Conveyances, Leases, Releases and Satisfaction of Judgment ---------------------------------------------------------- and Mortgages. All conveyances, leases and releases and satisfactions of - ------------- judgment and mortgages shall be signed in the name of the Corporation by the Chairman, the President, a Vice President or the Treasurer, sealed with the corporate seal and attested by the Secretary or an Assistant Secretary. Section 5. Other Instruments. All other instruments not hereinabove ----------------- specifically designated shall be signed in the name of the Corporation by the Chairman, the President, a Vice President, or Treasurer, sealed with the corporate seal and attested by the Secretary or an Assistant Secretary, provided, however, that notwithstanding the provisions contained in these By- laws, the Board may at any time direct the manner in which and the person by whom any particular instrument, contract or obligation, or any class of instruments, contracts or obligations of the Corporation may and shall be executed. Section 6. Miscellaneous. Whenever the Board directs the execution of -------------- an instrument, contract or obligation and does not specify the officer who shall execute the same, it shall be executed as hereinabove provided. ARTICLE VIII Corporate Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation and the words "Corporate Seal-1985-Delaware." Said seal may be used by causing it or a facsimile or equivalent thereof to be impressed or affixed or reproduced, and shall be in the custody of the Secretary. If an when so directed by the Board, a duplicate of the seal may be kept and used by the Treasurer, or by any Assistant Treasurer or Assistant Secretary. 24 ARTICLE IX Miscellaneous Provisions Section 1. Dividends. Dividends upon the outstanding shares of the ---------- Corporation may be paid from any source permitted by law. Dividends may be declared at any regular or special meeting of the Board and may be paid in cash or other property or in the form of a stock dividend. Section 2. Fiscal Year. The fiscal year of the Corporation shall end ------------ on the 31st day of December each year, unless otherwise provided by resolution of the Board. Section 3. Stock in other Corporations. Any shares of stock in any ---------------------------- other corporation which may from time to time be held by the Corporation may be represented and voted at any meeting of stockholders of such corporation by the Chairman or the President of the Corporation or by any other person or persons thereunto authorized by the Board, or by any proxy designated by written instrument of appointment executed in the name of the Corporation either by the Chairman, the President, or a Vice President, and attested by the Secretary or an Assistant Secretary. Shares of stock in any other corporation which shares are owned by the Corporation need not stand in its name, but may be held for its benefit in the individual name of the Chairman or of any other nominee designated for the purpose by the Board. Certificates for shares so held for the benefit of the Corporation shall be endorsed in blank, or have proper stock powers attached so that said certificates are at all time in due form for transfer, and shall be held for safekeeping in such manner as shall be determined from time to time by the Board. Section 4. Election of Auditors. The directors shall select --------------------- independent auditors to audit the books and records of the Corporation for the current fiscal year, subject to the approval of the stockholders at the annual meeting. Should the auditors so elect resign, be removed for good cause shown, or otherwise fail to serve during or with respect to said year, a majority of the directors shall select a substitute firm of auditors to serve with respect to said year. 25 ARTICLE X Indemnification Section 1. Actions, Suits or Proceedings other than by or in the Right ----------------------------------------------------------- of the Corporation. The Corporation shall indemnify any person who was or is a - ------------------- party or is threatened to be made a party to any threatened pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer or trustee of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding or any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Actions or Suits by or in the Right of the Corporation. ------------------------------------------------------ The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer or trustee of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such 26 action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Section 3. Indemnification for Costs, Charges and Expenses of -------------------------------------------------- Successful Party. Notwithstanding the other provisions of this Article, to the - ---------------- extent that a director or officer of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Section 4. Determination of Right to Indemnification. Any ----------------------------------------- indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be paid by the corporation unless a determination is made (1) by the Board of Directors by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the director or officer is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. Section 5. Advance of Costs, Charges and Expenses. Costs, charges and -------------------------------------- expenses (including attorneys' fees) incurred by a person referred to in Sections 1 and 2 of this Article in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director or officer in his 27 capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized in this Article. The Board of Directors may, in the manner set forth above, and upon approval of such director or officer of the Corporation, authorize the Corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 6. Procedure for Indemnification. Any indemnification under ----------------------------- Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within 60 days, upon the written request of the director or officer. The right to indemnification or advances as granted by this Article shall be enforceable by the director or officer in any court of competent jurisdiction, if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such persons' costs and expenses incurred in connection with successfully establishing right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of this Article, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 7. Other Rights; Continuation of Right to Indemnification. ------------------------------------------------------ The indemnification provided by this Article 28 shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, and shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director or officer or the obligations of the Corporation arising hereunder. Section 8. Insurance. The Corporation shall purchase and maintain --------- insurance on behalf of any person who is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article, provided that such insurance is available on acceptable terms, which - -------- determination shall be made by a vote of a majority of the entire Board of Directors. Section 9. Savings Clause. If this Article or any portion hereof -------------- shall be invalidated on any ground by any court of competent jurisdiction, any portion of this Article so invalidated shall be severable and such invalidity shall not by itself render any other portion of this Article invalid, and the Corporation shall nevertheless indemnify each director or officer of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. 29 ARTICLE XI Amendments Except as otherwise required by law or the Certificate of Incorporation, these By-laws may be amended or repealed, and new By-laws may be adopted, either by the affirmative vote of two-thirds of the shares of stock outstanding and entitled to vote thereon, voting together as a single class, or by the affirmative vote of a majority of the Board then in office. 30 EX-11 4 COMPUTATION OF NET INCOME PER SHARE CRANE CO. AND SUBSIDIARIES Exhibit 11 to FORM 10-K Annual Report for the Year Ended December 31, 1999 Computation of Net Income Per Share* (In Thousands Except Per Share Data)
Basic 1999 1998 1997 1996 1995 - ----- -------- -------- --------- -------- -------- Income from Continuing Operations $100,898 $124,842 $103,716 $79,822 $64,486 Income from Discontinued Operations 13,672 13,596 9,055 12,288 11,851 -------- -------- -------- ------- ------- Net Income $114,570 $138,438 $112,771 $92,110 $76,337 ======== ======== ======== ======= ======= Income from Continuing Operations $ 1.51 $ 1.82 $ 1.51 $ 1.17 $ .95 Income from Discontinued Operations .20 .20 .13 .18 .17 -------- -------- -------- ------- ------- Net income per share $ 1.71 $ 2.02 $ 1.64 $ 1.35 $ 1.12 ======== ======== ======== ======= ======= Weighted Average number of basic shares 66,981 68,555 68,565 68,034 68,096 Diluted ------- Income from Continuing Operations $100,898 $124,842 $103,716 $79,822 $64,486 Income from Discontinued Operations 13,672 13,596 9,055 12,288 11,851 -------- -------- -------- ------- ------- Net Income $114,570 $138,438 $112,771 $92,110 $76,337 ======== ======== ======== ======= ======= Income from Continuing Operations $ 1.50 $ 1.80 $ 1.50 $ 1.16 $ .94 Income from Discontinued Operations .20 .20 .13 .18 .17 -------- -------- -------- ------- ------- Net income per share $ 1.70 $ 2.00 $ 1.63 $ 1.34 $ 1.11 ======== ======== ======== ======= ======= Weighted average number of Basic shares 66,981 68,555 68,565 68,034 68,096 Add: Adjustment to basic shares for dilutive stock options 479 813 819 566 384 -------- -------- -------- ------- ------- Total weighted average number of shares 67,460 69,368 69,384 68,600 68,480 ======== ======== ======== ======= =======
*All share and per share data have been retroactively restated to reflect the three-for-two splits of common stock effected in the form of a 50% stock dividend in 1998 and 1996. EX-13 5 ANNUAL REPORT EXHIBIT 13 1999 Annual Report [LOGO OF CRANE CO.] Our Credo We strive for a dominant presence in niche markets. We generate solid rates of return on invested capital and high levels of cash flow. We use our cash effectively to grow and strengthen our existing businesses, and to acquire new businesses. We acquire businesses that fit with our existing businesses and strengthen our position in niche markets. We maintain an incentive compensation plan specifically designed to align the interests of management and shareholders. We do this with one goal in mind: To build shareholder value. Table of Contents Financial Highlights 1 Letter to Shareholders 2 Management's Discussion and Analysis of Operations 6 Consolidated Financial Statements 15 Notes to Consolidated Financial Statements 19 Management's Responsibility for Financial Reporting 29 Independent Auditors` Report 29 Directors and Officers 36 Shareholder Information 37 Financial Highlights
($ and shares in thousands except per share data) 1999 1998 % Change - -------------------------------------------------------------------------------------------------------------------------------- Summary of Operations Net Sales $1,553,657 $1,561,055 -- % EBITDA(b) 279,916 276,323 1.3% Operating Profit 204,541(a) 211,961 (3.5)% Income Before Taxes 190,782(a) 192,789 (1.0)% Income from Continuing Operations 123,465(a) 124,842 (1.1)% Cash Flow(c) 184,745 180,715 2.2% - -------------------------------------------------------------------------------------------------------------------------------- Diluted Share Data Income from Continuing Operations $ 1.83(a) $ 1.80 1.7% Cash Flow 2.74 2.61 5.0% Dividends .40 .37 8.1% Average Diluted Shares 67,460 69,368 - -------------------------------------------------------------------------------------------------------------------------------- Financial Position at Assets $1,175,447 $1,379,731 (14.8)% December 31, Net Debt 297,183 392,384 (24.3)% Shareholders' Equity 568,110 643,234 (11.7)% Market Value of Equity(d) 1,248,199 2,067,206 (39.6)% Market Capitalization(d) 1,545,382 2,459,590 (37.2)% - -------------------------------------------------------------------------------------------------------------------------------- Key Statistics Sales per Employee $ 161 $ 155 Operating Profit as a % of Sales 13.2%(a) 13.6% Income from Continuing Operations as a % of Sales 7.9%(a) 8.0% Return on Average Assets-Continuing Operations 10.1%(a) 10.7% Return on Average Shareholders' Equity 21.1%(a) 23.8% Net Debt to Capital 34.3% 37.9% - --------------------------------------------------------------------------------------------------------------------------------
(a) Before pre-tax special charges of $34,987 ($22,567 after tax or $.33 per diluted share.) (b) EBITDA is earnings before interest, taxes, depreciation and amortization and special charges. (c) Cash flow is income from continuing operations before special charges plus depreciation and amortization. (d) Market value of equity is number of shares of common stock outstanding times closing stock price. Market capitalization is market value of equity plus net debt. [GRAPH] Diluted EPS from Income from Continuing Operations EBITDA Continuing Operations (in dollars) (in millions) (in millions) 95 0.94 95 171 95 64 96 1.16 96 192 96 80 97 1.50 97 236 97 104 98 1.80 98 276 98 125 99 1.83 99 280 99 123 Crane Co 1999 Annual Report 1 Chairman's Letter to Shareholders - -------------------------------------------------------------------------------- Dear Shareholder: After a strong performance in 1998, Crane Co. overcame weakness in some markets and operating problems in several businesses in 1999 to achieve slightly higher per-share earnings and cash flow, before one-time charges, on essentially level sales. We took aggressive action to sharpen our corporate focus on manufacturing, strengthen margins, and position Crane to resume its strong earnings growth, which has averaged about 18% annually over the past five years. We spun off our distribution business, Huttig Building Products, our largest single unit, in mid-December, reinforcing Crane's position as a manufacturer of engineered industrial products. In order to deal with softness or declines in key markets and reduce our cost base in our Fluid Handling, Aerospace, and Controls segments, we consolidated facilities, reduced staff and rationalized product lines. In all, five manufacturing facilities and eight peripheral facilities have been or will be closed. These actions are expected to improve annual operating results by $26 million. 1999 Results Before special charges associated with our repositioning and cost-reduction programs, our net earnings from continuing operations for the year were $1.83 per diluted share, compared with $1.80 in 1998, on fewer shares outstanding. Earnings from discontinued operations -- Huttig -- contributed $.20 per diluted share, equal to Huttig's 1998 results, for a total of $2.03 per diluted share versus $2.00 in 1998. The special charges, $.33 per diluted share, lowered 1999 net earnings to $1.70 per diluted share. Income from continuing operations before special charges was $123.5 million in 1999, a dip of 1% from $124.8 million in 1998, on sales of $1.55 billion. Special charges, net of taxes, totaling $22.6 million, reduced income from continuing operations to $100.9 million. Cash flow from continuing operations increased from $2.61 per diluted share to $2.74 in 1999, before special charges. After special charges, cash flow was a strong $2.40 per diluted share, or $162.2 million -- equal to 10 cents per dollar of sales. Positive Achievements In spite of the difficult operating environment, we continued to make good progress in pursuing three key objectives: . Enhancing Crane's intellectual capital -- finding and nurturing the talented, dedicated people who will create the company's future. We installed new leadership at several businesses, hiring or promoting skilled executives to those positions. We brought aboard Eric C. Fast, former Co-Head of Global Investment Banking for Salomon Smith Barney, as Crane's President and Chief Operating Officer. He replaces L. Hill Clark, who retired but is continuing to help us in a manufacturing consulting role. . Focusing on the customer -- moving vigorously to determine our customers' needs and investing in innovative, cost-efficient ways to meet those needs, including new products and e-commerce solutions. . Achieving operational excellence -- aggressively deploying a range of techniques including Six Sigma, lean manufacturing and focused factories to shorten manufacturing cycle times, increase efficiency and reduce costs. We have invested $40 million over the past several years to assure that our businesses have state-of-the-art ERP systems. Eleven such business systems were implemented in 1999 alone, and they are already delivering on the promise of increased manufacturing and administrative efficiency and lower cost. These systems had the added benefit of making the businesses "Y2K"compliant. Our Operational Excellence program has continued to demonstrate its value. At all of our businesses, "black belts"trained in Six Sigma analytical techniques and lean manufacturing methods are streamlining our production and business processes, reducing waste, and improving our competitive 2 Crane Co 1999 Annual Report position and the bottom line. At one of those businesses, Lear Romec, the new president is herself a black belt. Cost savings from Six Sigma projects totaled approximately $18 million in 1999. Our EVA compensation system, which ties managers' rewards to actual economic value added, is also contributing to development of a highly beneficial, results-oriented culture throughout Crane. Segment Overview Two of our five business segments -- Engineered Materials and Merchandising Systems -- achieved higher sales and operating profits. The Fluid Handling segment, particularly our valve businesses, was hard hit by the global downturn in the oil and gas markets and had earnings of only $4 million after absorbing $18.9 million of special charges to close four manufacturing facilities and five peripheral facilities, and rationalize product lines. From the beginning of 1999, our companies in this segment reduced their employment by 18%, with an additional 3% reduction expected in the first quarter of 2000. Controls, facing soft energy markets, recorded a modest operating profit. In Aerospace, sales and profits fell more than anticipated, as Boeing sold fewer widebody airplanes and aftermarket demand for provisioning spares declined. Aerospace remained our most profitable segment, however, with 1999 operating profits surpassed only by the extraordinarily strong 1997 and 1998 results. Strong Gains in Engineered Materials Segment Engineered Materials turned in an excellent performance, fueled by strong sales and operating profit gains at Kemlite and Resistoflex. Kemlite's sales of fiberglass-reinforced plastic panels benefited from its strong positions in the transportation, recreational vehicle (RV) and building products markets and from a full year's results from its 1998 Sequentia acquisition. Resistoflex's plastic-lined pipe, hose and fittings business similarly benefited from synergies and full-year results from its 1998 acquisition of Plastic-Lined Piping Products. Acquisition Boosts Merchandising Systems Results National Vendors had its best sales year, maintaining its 1998 gains and getting a boost in the United Kingdom from the addition of Stentorfield in October 1999. Stentorfield's strength in the U.K. Office Coffee Service (OCS) market extends National Vendors' existing leadership in the snack and food vending machine market there, and gives the company a strong entry into the large European hot drink market. National Rejectors, based in Germany, also had increased sales and significantly higher operating profits, despite growing competition in the coin-validation industry and delayed approval of designs for euro-denominated coins. [GRAPH] Cash Flow (Income from continuing operations plus special charges, depreciation and amortization) (in millions) 95 108 96 124 97 155 98 181 99 185 Revamping of Valve Businesses We took far-reaching measures to rationalize our global valve businesses, which have been hurt by the oil and gas capital spending downturn, by Asia's economic ills, and by internal problems. We reduced our personnel by approximately 25% and closed or downsized a number of facilities in North America and Europe. As a result of these actions, and with stronger oil and gas markets likely, we look for a return to solid profitability in 2000. Huttig Spun Off to Shareholders Our businesses have generally been effective in establishing strong, defensible positions in niche markets, where we can earn good margins on the high-value- added, engineered products we manufacture. Huttig is in a different business that does not fit our strategy or earnings goals. As a building products distribution business, it has inherently lower operating margins, which have made the impressive margins in our manufacturing business harder to see in our consolidated results. The Huttig spin-off will significantly increase Crane's overall operating margin, and should result in a higher price/earnings ratio for our stock. That, in turn, will help with acquisitions, which are an important part of our growth strategy. As part of the Huttig spin-off, Crane received $68 million, which was used to pay down debt, strengthening our balance sheet. Crane shareholders received a tax-free dividend on December 16, 1999, of one share of Huttig common stock for each 4.5 shares of Crane stock held. Crane Co 1999 Annual Report 3 Also in December, we sold Crane Defense Systems, which builds large shipboard equipment for the Navy, for $7.2 million. Financial Strength and Shareholder Value An important goal at Crane has been to grow our cash flow, which increases our flexibility in building shareholder value. It is worth noting that our 1999 cash flow of $260 million, including the Huttig spin-off, roughly approximates our investment in Stentorfield ($33 million), the repurchase of 6.0 million shares of Crane stock ($124 million) and a significant reduction in our debt ($108 million). Although we prefer to invest in our existing businesses or make attractive acquisitions, we will continue to repurchase Crane stock when it is undervalued and when doing so represents the best way of enhancing shareholder value. New Directors Join Board Retirements led to the election of two new directors to Crane's Board. Boris Yavitz retired from the Board after 12 years of service and will be missed, as will his guidance and counsel on corporate policy and governance. He was replaced by John Lee, Chairman and Chief Executive Officer of Hexcel Corporation, who brings a depth of financial and operating experience and strong knowledge of the aerospace industry. Eric C. Fast, our new President and COO, was also elected to the board. New Century, Positive Outlook The first year of the new century should be a positive one for Crane, with good gains in sales and earnings, and stronger gains in earnings per share as a result of improved margins and continued deployment of our strong cash flow. The U.S. economy seems likely to remain strong and growing, with the Asian and European economies continuing their recovery. Oil and gas markets are expected to turn up before mid-year. Our 1999 cost-cutting actions and operating improvements will have a continuing positive effect in 2000, and we are well positioned to make acquisitions that meet our criteria, further enhancing growth. We look for flat sales but improved earnings in Fluid Handling, and much stronger sales and profits in the Controls segment. Aerospace sales and earnings are likely to stabilize at levels below 1999, with increased sales for regional and business jets partially offsetting lower Boeing business. We anticipate higher sales and earnings in the Engineered Materials segment, where both Kemlite and Resistoflex have extremely strong positions in their markets. We also have high expectations for Merchandising Systems, where both National Vendors and National Rejectors combine great strength in their home markets with high-potential new products and effective strategies for increased penetration in Europe. All told, 2000 looks at this writing like a good year, and prospects for subsequent years are considerably brighter. We want to thank our customers for their loyalty, our suppliers for their focus on quality and timeliness, and our employees for the dedication and skill they bring to work every day. We also wish to thank the members of our Board of Directors for the perceptive and valuable guidance they provide, and our shareholders for their continuing support. Sincerely, /s/ R. S. Evans /s/ Eric C. Fast R. S. Evans Eric C. Fast Chairman and Chief Executive Officer President and Chief Operating Officer February 15, 2000 4 Crane Co 1999 Annual Report 1999 Review Crane's businesses report their results in five segments: Engineered Materials Merchandising Systems Aerospace Fluid Handling Controls In the pages that follow, we discuss these results, along with the events, trends, market dynamics and management initiatives that influenced them. Crane Co 1999 Annual Report 5 Management's Discussion and Analysis of Operations Engineered Materials - -------------------------------------------------------------------------------- Strong Gains in Engineered Materials (dollars in millions) 1999 1998 - -------------------------------------------------------------------------------- Sales $357.1 $279.0 Operating Profit 59.9* 39.7 Operating Margins 16.8% 14.2% - -------------------------------------------------------------------------------- *Before special charges of $3.2 million. Sales, operating profit and operating margin increased to record levels in the Engineered Materials segment, fueled by internal growth and acquisition-related gains at Kemlite and Resistoflex. Operating profit increased by 51% before special charges of $3.2 million on a 28% sales gain, as two of the segment's five businesses improved their results. Operating profit after special charges was $56.7 million. Order backlog at year end totaled $25 million, up $1 million from the prior year. Special charges were principally for a product liability issue related to a Crane Plumbing facility closed in 1990. Kemlite Increases Sales, Operating Profit Kemlite, the largest business, had a record year, with sales and operating profit up 40% and 58%, respectively, largely because of full-year results from its Sequentia acquisition. Kemlite's core business -- fiberglass-reinforced- plastic (frp) liner panels and translucent roofs for trucks and trailers and side panels for recreational vehicles (RV) -- grew 15% overall. Kemlite's shipments to the truck and trailer markets, expected to decline in 1999, instead rose 8%, and shipments to the RV market increased 23% as RV unit volume exceeded 300,000 for the first time. Kemlite, the industry leader in both markets, also benefited as supplier to the faster-growing RV manufacturers. Sales of building products gained 11%. International sales jumped 23% on sales of $1.6 million for military shelters for British troops in Kosovo and strong fourth quarter sales in Canada and South Korea. The company also opened a sales office in Shanghai. Kemlite successfully introduced its new fiber-free, higher-gloss Medallion(R) panels to the RV market and improved manufacturing efficiency at all three plants through Six Sigma and other cost-reduction efforts. Difficult Year for CorTec CorTec, Crane's other manufacturer of fiberglass-reinforced materials, saw sales drop 25% from 1998 and reported a loss for the year, as several trailer fleets switched away from CorTec's fiberglass-reinforced plywood side panels to other materials. High mid-year plywood costs, lower volume and aggressive pricing to gain market share in truck body panels lowered operating profit and margin. CorTec incurred additional development expenses for its new Encor(R) product, in which a foam core replaces plywood, and is repositioning it as a premium material for refrigerated trailers and controlled temperature food service trucks. Encor(R), impervious to rot, is finding a niche in houseboats and in personal cargo, utility and specialty trailers. CorTec implemented a new, customer-focused enterprise resource planning system (ERP), and has reduced Encor(R) production costs through Six Sigma projects. Lower costs, improving pricing, and sales to Ryder for larger rental trucks should strengthen results in 2000. Record Results for Resistoflex Resistoflex enjoyed its best year, with sales and operating profit up sharply, principally as a result of its fourth quarter 1998 acquisition of Plastic-Lined Piping Products. Resistoflex achieved these results despite a cyclical downturn in the global chemical processing industry, a major user of its corrosion- resistant, Teflon-lined pipe, fittings and hoses, and a slowdown in its military business as the government ended production of the F-15 fighter. Successful integration of Plastic-Lined Piping Products into its operations yielded important production, administrative, sales and supply chain synergies. A new ERP system linked the company's plants in Marion, North Carolina, and Bay City, Michigan, with the defense business in Jacksonville, Florida. Resistoflex also introduced its flangeless Conquest(R) system for creating leakproof, welded connections of Teflon-lined pipe, designed to address safety and environmental concerns and reduce installation and maintenance costs. It also acquired a new facility in Singapore to serve the strengthening Asian chemical and pharmaceutical markets. In 2000, the company will focus significant resources, including e-commerce initiatives, on increasing its small market share in Teflon-lined flexible hose. 6 Crane Co 1999 Annual Report Sales Up at Crane Plumbing Crane Plumbing increased sales by 7%, but price competition and substantial investments in new product and sales initiatives led to a loss for the year before a special charge of $3.1 million for a product liability issue related to a facility that was closed in 1990. The company gained volume and share in Canadian retail markets, and now supplies every major retailer with Crane china and steel lavatories, toilets, tubs and showers, with Home Depot as its largest customer. From a modest base, sales to U.S. wholesale customers increased, and the company plans to push into U.S. retail markets. Wholesale volume in Canada dipped as construction declined in Quebec and British Columbia, but sales increased in the key Ontario market. Crane plans to introduce a new line of gelcoat shower products positioned between its economy steel and high-end acrylic products. A new ERP system and several Six Sigma projects achieved significant cost reductions. Polyflon Operating Profit Rises Polyflon, Crane's smallest business, improved its operating profit on slightly lower sales of its capacitors and proprietary microwave materials. Outlook Sales and operating profit should increase in 2000, although less than in 1999. Kemlite's transportation, recreational vehicle and building products markets are expected to remain strong, CorTec's sales and operating margins should improve, and Resistoflex should benefit from recovering Asian and European markets and a second-half pickup in domestic chemical processing markets. Crane Plumbing and Polyflon also look for modest sales and operating profit growth.
- ----------------------------------------------------------------------------------------------------------------------------------- Business Unit Products Markets Served - ----------------------------------------------------------------------------------------------------------------------------------- Kemlite Fiberglass-reinforced plastic (frp) panels used as Recreational vehicle, truck trailer and side-walls and roofs commercial and residential construction - ----------------------------------------------------------------------------------------------------------------------------------- CorTec Fiberglass-reinforced laminated composite panels Trucks and truck trailers, special-purpose trailers, marine houseboats and general construction - ----------------------------------------------------------------------------------------------------------------------------------- Resistoflex Corrosion-resistant plastic-lined Pharmaceutical, chemical processing, pulp and pipe, fittings, tanks, paper, ultra-pure water, waste management valves, expansion joints and hose assemblies, industries, military and aerospace contractors high-performance aerospace fittings - ----------------------------------------------------------------------------------------------------------------------------------- Crane Plumbing Plumbing and sanitary fixtures Residential, industrial, commercial and institutional construction and renovation markets in Canada - ----------------------------------------------------------------------------------------------------------------------------------- Polyflon Microwave laminates, circuit processing, high-voltage Wireless communications, magnetic resonance imaging, RF capacitors, radomes microwave and radar system manufacturers - -----------------------------------------------------------------------------------------------------------------------------------
Crane Co 1999 Annual Report 7 Merchandising Systems - -------------------------------------------------------------------------------- Sales, Operating Profit Growth in Merchandising Systems (dollars in millions) 1999 1998 - -------------------------------------------------------------------------------- Sales $201.9 $191.9 Operating Profit 35.8 33.5 Operating Margins 17.7% 17.5% - -------------------------------------------------------------------------------- The Merchandising Systems segment achieved a 7% earnings gain in 1999 on a 5% increase in sales. National Rejectors, Crane's European coin-validation equipment business, generated a significant operating profit increase. Strong Prospects for National Vendors At National Vendors, the larger of the segment's two businesses, sales advanced moderately despite a flat domestic market, stiff price competition in European markets, and delayed introduction of new Office Coffee Service products. National Vendors held onto and expanded its 1998 market share gains, and several positive developments positioned the business for strong growth. The October 1999 acquisition of Stentorfield, a leading U.K. manufacturer of coffee machines, gave National Vendors a needed strong entry into Europe's large coffee machine market. National Vendors, with its new Millennia-styled machines, was already the clear market leader in snack and food machines in the U.K. but its coffee machines were less popular. National Vendors is integrating Stentorfield products into its strong snack and food machine businesses in France and Germany, and has folded its U.K. unit, UMC, into Stentorfield to provide both Office Coffee Service (OCS) and snack and food machine sales and service to the U.K. and certain European distributors. Although sales were flat in the U.K. and declined slightly in France, National Vendors' German unit had a banner year, with successful marketing initiatives aimed primarily at Germany but also at Holland, Austria, Hungary and the Middle East. The company took share from competitors in the German market by focusing on quality service. After a worldwide competition, National Vendors received its largest order ever late in the year from Smith's, a leading Australian snack company owned by PepsiCo, giving the company a strong, immediate presence in a large, new overseas market. National Vendors increased its penetration of Latin American markets by winning other large orders from Nestle Mexico, considered a bellwether for other Nestle units in the region, and Sodexho, a French worldwide catering company that selected National Vendors as its preferred vending machine supplier for Chile and Argentina. National Vendors expanded its potential in the domestic OCS market by introducing four new, single-cup-brewing office coffee machines in early November. Two are compact models for office shelves; two are improved or high-traffic versions of the full-sized Cafe 7 machine. The company's new-product focus responds to operators' desire for glass-front machines, which generate much higher merchandising sales. One product being introduced domestically in 2000 is an all-weather, outdoor snack machine, the ATM (All Temperature Machine) Snack. The machine, rigorously tested under harsh outdoor conditions at 26 customer locations around the U.S., provides operators access to outdoor snack sales for the first time. NRI Increases Sales, Operating Profit National Rejectors (NRI) increased sales of its coin changers and validators by 12% on solid demand for its new four-tube changer and its electronic coin-validation equipment for outdoor cigarette machines. Improved manufacturing efficiency and lowered costs for some products, largely the result of Six Sigma cost reduction projects, strengthened margins, leading to a strong operating profit gain. Delays by some European mints in issuing sample euro coins continued to slow the process of finalizing software requirements to operate euro-capable changers and validators, leading many NRI customers to postpone orders. Euro coins, still differing slightly from country to country but acceptable throughout the euro region, will begin to circulate in 2002. NRI will start shipping its Euromatic(R) validator and changer equipment during the first quarter, and expects accelerating bookings as vending operators rush to modernize. NRI's sales were strong in Spain and France, but slower in the highly competitive U. K. market. Sales to Canada for the Canadian lottery declined slightly, but volume in Chile, where NRI products are used in bus ticketing, was strong. Outlook Both National Vendors and NRI expect strong sales and operating profit gains in 2000. National Vendors' new products and increased presence and offerings in the U.K., continental Europe, Australia and Latin America, and a full-year contribution from Stentorfield will boost results significantly. NRI expects solid gains in bookings, sales and operating profit as customers begin to prepare for the advent of the euro coin. 8 Crane Co 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------ Business Unit Products Markets Served - ------------------------------------------------------------------------------------------------------------------------------------ National Vendors Electronic vending merchandisers for refrigerated Automated merchandising, office coffee service and frozen foods, hot and cold beverages, office coffee services (OCS), snack foods, coin and currency changers - ------------------------------------------------------------------------------------------------------------------------------------ National Rejectors, Inc. Electronic coin validators and changers, chip card Automated merchandising GmbH (NRI) cash-less payment systems - ------------------------------------------------------------------------------------------------------------------------------------
Aerospace - -------------------------------------------------------------------------------- Decline in Aerospace Sales, Operating Profit (dollars in millions) 1999 1998 - -------------------------------------------------------------------------------- Sales $363.1 $394.5 Operating Profit 96.1* 118.2 Operating Margins 26.5% 30.0% - -------------------------------------------------------------------------------- *Before special charges of $9.0 million. Aerospace continued to be Crane's most profitable segment, but sales fell below the exceptionally strong 1998 results, and margins and operating profit declined. Order backlog totaled $233 million at December 31, 1999, compared with $281 million in the prior year. Special charges recorded in the third and fourth quarters of 1999 reflect costs incurred to reduce staffing levels, rationalize product lines, and address a product warranty issue. The cost of these actions totaled $9 million ($5.5 million cash, $3.5 million non-cash). Annual savings from these actions are expected to total $11.5 million. Staff levels in the Aerospace businesses have been reduced by 446 people, or 18%, since the beginning of 1999. Boeing, the segment's largest single customer, built more airplanes in 1999, but fewer widebody, twin-aisle versions that utilize more Crane products. The resulting drop in sales to Boeing was greater than expected. So, too, was a decline in sales of provisioning spares, normally purchased by aircraft operators when new models go into service. ELDEC, which provides power supplies and proximity systems for Boeing and other airframe manufacturers, had lower sales of replacement parts because of improved reliability of its products, coupled with customers' more sophisticated purchasing and inventory control. In a major strategic move, the segment's four companies -- ELDEC, Hydro-Aire, Interpoint and Lear Romec -- formally became part of Crane Aerospace in August. The combination provides critical mass in dealing with OEMs and airlines and, through integrating products, can significantly expand Crane's product/system offerings. At the new Crane Aerospace Technology Center, located in Lynnwood, Washington, Hydro-Aire and ELDEC are working on a weight-saving integrated brake control product. Three of the companies -- Lear Romec was the exception -- had lower sales, and all four had lower operating profit. The companies reacted quickly to the downturn with aggressive cost-cutting, staff reductions, and process improvements. At ELDEC, a quick-response version of lean manufacturing techniques cut cycle times by 20% and halved the volume of work-in-process. Six Sigma projects focused on eliminating unnecessary work from the production process. Hydro-Aire reduced costs through Six Sigma projects, work force reductions, long-term supplier agreements and process reengineering. A focused factory production approach boosted on-time deliveries to well over 90%. Crane Co 1999 Annual Report 9
- ----------------------------------------------------------------------------------------------------------------------------------- Business Unit Products Markets Served - ----------------------------------------------------------------------------------------------------------------------------------- ELDEC Position indication and control systems, proximity Commercial, business and military aerospace, sensors, pressure sensors, mass fuel flowmeters, defense, electronics, and telecommunications power conversion systems and equipment - ----------------------------------------------------------------------------------------------------------------------------------- Hydro-Aire Aircraft brake control and anti-skid systems, Commercial transport, business and commuter, general including electro-hydraulic servo valves and aviation military and government aerospace, repair manifolds, software and redundant, rugged electronic and overhaul controls, hydraulic control valves and landing gear sensors, fuel pumps - ----------------------------------------------------------------------------------------------------------------------------------- Lear Romec Lubrication and fuel pumps for aircraft, engines Commercial and military aerospace, defense industry and radar cooling systems - ----------------------------------------------------------------------------------------------------------------------------------- Interpoint Standard and custom miniature (hybrid) DC-to-DC Commercial, space and military aerospace, defense power converters and custom miniature (hybrid) industry, medical industries including implantable electronic circuits medical devices and industrial markets - -----------------------------------------------------------------------------------------------------------------------------------
Interpoint imposed spending cuts and work force reductions as sales and bookings fell sharply, reflecting lower aerospace business, the loss of a key medical product program, and the residual effects of the company's production problems in 1997. Interpoint's strong 1998 sales and earnings reflected its success in cleaning up delinquent backlog, making for a difficult comparison with 1999. Lear Romec had a solid gain in sales of its fuel, lube and scavenge pumps, but slightly lower operating profit and margin, reflecting higher manufacturing costs. The company sells to aircraft engine makers and also to airframe manufacturers, such as Boeing, Airbus, Bombardier, Embraer, Learjet and Cessna. Aggressive sales and new-product initiatives had a positive impact in 1999. ELDEC, the market leader in aircraft proximity sensing systems and power supplies, was chosen to equip the new Embraer 70 and 90 regional jets. Its new battery charging system is being installed in all new Boeing aircraft except the 777 and retrofitted by many airlines. ELDEC also became the exclusive supplier to the Displays and Controls Division of Britain's Smiths Industries for high- and low-voltage power supplies for commercial and military aircraft avionics systems. Hydro-Aire, the world leader in aircraft anti-skid brake control systems, recorded solid gains in general aviation and repair and overhaul sales, despite lower overall OEM and aftermarket sales. It won all four of the new jet aircraft contracts for which it competed, including the Bombardier 100 and Cessna 525 business jets, and the Embraer 140 and 170/190 regional jet families. Interpoint is focusing its microelectronic product development efforts on medical markets, which are expected to grow 17% annually through 2006, and on custom and aerospace applications, including higher-voltage input/lower-voltage output power converters. Outlook Crane Aerospace sales and operating profit are likely to decline further in 2000, but the segment will remain Crane's largest profit contributor. Sales to regional and business jet OEMs and, in ELDEC's case, to Airbus, will partially offset lower sales to Boeing, particularly at Hydro-Aire and ELDEC, reflecting Boeing's lower aircraft build-rates. Operating margins will remain strong. Interpoint's sales and profits are projected to fall below 1999 levels, but margins should gradually improve. Lear Romec expects flat sales and slightly lower operating profit for 2000. 10 Crane Co 1999 Annual Report Fluid Handling - -------------------------------------------------------------------------------- Fluid Handling Reports a Small Profit After Special Charges (dollars in millions) 1999 1998 - -------------------------------------------------------------------------------- Sales $502.2 $557.8 Operating Profit 22.9* 35.0 Operating Margins 4.6% 6.3% - -------------------------------------------------------------------------------- *Before special charges of $18.9 million. Sales and operating profit dropped significantly in Crane's Fluid Handling business. Before special charges of $18.9 million, operating profit totaled $22.9 million, or 4.6% of sales, compared with $35 million, or 6.3% of sales, in 1998. After special charges, operating profit was $4 million for the year. Order backlog at December 31, 1999, was $79 million, down $5 million from the prior year. Fluid Handling results in 1999 were severely impacted by weak demand from the oil and gas industry and Asian markets. Engineered and commercial valve shipments declined 29% and 20%, respectively, and the pump/water treatment business operating margin declined to 8.5% of sales compared with 11.3% in 1998 because of exceptional workers' compensation, medical and product warranty expenses. On the positive side, operating profit in the Valve Services business and Crane Supply were up 45% and 13%, respectively, on higher revenue. To address the business downturn, actions were taken in the third and fourth quarters to reduce significantly the fixed cost structure of Fluid Handling businesses. These actions included closure of four manufacturing facilities and five peripheral facilities, staff reductions, and product line rationalizations. The cost of these actions totaled $18.9 million, comprising $6.1 million in cash expenditures and $12.8 million in non-cash asset write- downs. Annual savings are expected to total $13.4 million. The global weakness in the oil and gas industry, including key North Sea and Asian markets, severely curtailed sales of engineered valves, which are designed for specific applications or customers. Although this market is expected to improve in 2000 with the increase in oil and gas prices, two manufacturing facilities were closed in 1999 to reduce fixed costs related to this specific market, and staffing levels were reduced by 239 people, or 27%, since the beginning of the year. New products introduced in 1999 should enhance results in engineered valves in 2000. These products include a triple offset rotary valve for high-pressure, high-temperature applications in power plants and hydrocarbon production, and two series of butterfly valves for the food and beverage and industrial markets. Introduction of a complete line of pneumatic and electrical actuators to automate valve operations moved Crane into a market it had not previously served. The Valve Services business, now encompassing nuclear power plant and out-of-production industrial valves and parts, plus testing products and nuclear and commercial services, gained in sales and operating profit on full-year results from the September 1998 acquisition of Liberty Technologies Inc. and increased demand for nuclear services and testing products. Sales were up 37% in 1999 to $49.1 million, and operating margins improved to 11.1% of sales from 10.5% in 1998. Commercial valve shipments were down $31 million (20%) from the prior year level, and the business operated at a loss because of market weakness in North America and England stemming from industry overcapacity. To address these issues, Crane consolidated its cast steel manufacturing facility in Rogers, Arkansas, into its Washington, Iowa, plant and closed a small manufacturing facility in the U.K., and two peripheral facilities. In addition, staffing levels have been reduced by over 400 people, 30% of the work force, since the beginning of the year. Crane Co 1999 Annual Report 11
- ----------------------------------------------------------------------------------------------------------------------------------- Business Unit Products Markets Served - ----------------------------------------------------------------------------------------------------------------------------------- Engineered Valves Quarter turn, wafer check, pressure seal, HF Hydrocarbon and chemical processing, power acid, cast and stainless steel valves generation, marine and shipbuilding, commercial building and industrial applications - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Valves Bronze and iron gate, globe, check, ball and Commercial building, HVAC, refining and chemical butterfly, cast and stainless steel valves processing - ----------------------------------------------------------------------------------------------------------------------------------- Valve Services Nuclear valves and diagnostic services, service Nuclear power, hydrocarbon, chemical processing and centers, nuclear services, industrial services power generation industries - ----------------------------------------------------------------------------------------------------------------------------------- Pumps/Water Submersible, sealed and sealless horizontal Municipal, residential, industrial, utility, Treatment centrifugal, turbine, air-operated diaphragm, construction, pharmaceutical, pulp and paper, metering pumps and pumping systems, water and chemical and hydro-carbon processing and commercial wastewater treatment units and systems markets, original equipment manufacturers (OEMs) and government contractors - ----------------------------------------------------------------------------------------------------------------------------------- Crane Supply Distributor of pipe, valves and fittings Mechanical contractors, industrial plants, fabricators and engineering procurement and construction companies and maintenance, repair and overhaul (MRO) - -----------------------------------------------------------------------------------------------------------------------------------
Crane Pumps & Systems' operating profit dropped on slightly lower volume, a less favorable product mix and the combination of price/cost pressures in 1999 versus 1998. Results in 2000 should benefit from Six Sigma cost-reduction projects, lean manufacturing techniques, global sourcing, and aggressive sales initiatives. Cochrane completed the integration of its 1998 acquisition of Environmental Products, a global supplier of reverse osmosis systems, and strengthened its focus on energy-related water purification applications. Volume declined for the year, but sales and operating profit began to rebound in the second half. Crane Supply reported a modest gain in sales and a larger increase in operating profit in a flat market for the pipes, valves and fittings it distributes across Canada. Strong sales in Quebec and Atlantic Canada offset a drop in oil and gas business in Western Canada. Six Sigma projects reduced costs and led to the MRO (Maintenance, Repair and Overhaul) initiative, in which the company has leveraged its inventory control expertise by contracting to procure and manage customers' inventories of maintenance products. Outlook Improving oil and gas markets, a strong power generation market, accelerating economic recovery in Asia and operating improvements in fixed cost structure should assure solid profitability in 2000. Overall sales are expected to be in line with the 1999 level, with gains at Crane Supply and the pump businesses, flat sales at engineered valves, and a slight decline in the commercial valve business, largely caused by Crane's policy of not accepting unprofitable business. 12 Crane Co 1999 Annual Report Controls - -------------------------------------------------------------------------------- Controls Sales, Operating Profit Dip (dollars in millions) 1999 1998 - -------------------------------------------------------------------------------- Sales $121.2 $132.3 Operating Profit 4.1* 8.9 Operating Margins 3.4% 6.7% - -------------------------------------------------------------------------------- *Before special charges of $3.4 million. Sales declined 8% in the Controls segment in 1999 on widespread market weakness, particularly in the oil and gas sector. Operating profit margins fell to 3.4% of sales before special charges of $3.4 million, compared with 6.7% in 1998. After special charges, operating profit was $.7 million for the year. Order backlog at December 31, 1999, was $28 million, a slight improvement from the prior year level. The special charges of $3.4 million taken in the third and fourth quarters of 1999 included costs to close the Ferguson manufacturing facility in Greenwood, Mississippi, to reduce staffing levels, and to rationalize inventory. Two companies had solid earnings performances despite lower sales. Sales declined slightly at Barksdale, the segment's largest business, but operating profit rose 12%. Powers Process Controls also saw sales decline, but operating profit rose 16%. Addition of the Beta controls line from the Liberty Technologies acquisition in September 1998 increased Dynalco's sales, but integration costs and costs related to a new enterprise resource planning (ERP) system reduced operating profit. Ferguson's shipments declined 17%, and it operated at a loss for the year. Bookings and backlog increased at Azonix, but the company experienced a slight loss for the year on lower sales, reflecting the depressed oil and gas market. At Barksdale, 1999 was a transition year marked by new leadership and successful implementation of ERP systems in the U.S. and Germany. The new systems, along with lean manufacturing techniques and Six Sigma projects undertaken in 1999, should improve customer service and help strengthen margins in 2000. Weakness in the oil and gas industry hurt sales of Barksdale's blowout- preventer controls for oil exploration and production equipment, but an upturn is now expected. Barksdale's ride-leveling air suspension valves enjoyed increasing use among U.S. heavy truck OEMs and sparked interest from trailer manufacturers. A new electronic pressure switch was well received in Germany, Italy and France, and Barksdale hopes to expand by designing new products for a broader market rather than specific customers. Ferguson's U.S. and European businesses faced weak capital markets for their indexers and other custom-engineered, precision motion control products in 1999. In Europe, new leadership and a reorganized management team took hold, and a new ERP system was implemented. In the U.S., Ferguson reduced its work force early in 1999 and began consolidating all domestic production in St. Louis, Missouri, using lean manufacturing techniques, and began the closure of its Greenwood, Mississippi, manufacturing facility. Powers Process Controls turned in a solid operating profit gain despite a sales decline stemming largely from earlier management and operating problems. These problems impeded Powers' ability to take full advantage of a strong Canadian commercial plumbing market -- particularly hospital and health care facility construction -- at a time when its industrial process controls markets were flat and price competition in the thermostatic shower controls market was intensifying. Powers has launched initiatives to reduce the cost of its thermostatic valves. The company expects sales and operating profit to grow modestly in 2000. Azonix, known for its MMI (man-machine interface) hardware and software products for hazardous environments, such as oil drilling rigs, diversified into harsh environment applications in 1999. Timing, however, led to a decline in revenue and a loss for the year as initial penetration of the harsh market did not offset the decline in the hazardous market. Azonix expects much improved results in 2000 from an oil and gas upturn and from increased penetration of the much broader harsh environment market. Crane Co 1999 Annual Report 13 A fall-off in revenue from gas transmission markets, new product integration costs, and costs related to a new ERP system depressed Dynalco's 1999 profits, despite the addition of the Beta product line from the Liberty Technologies acquisition in 1998. The company reduced product costs throughout the year, and launched two initiatives aimed at expanding its sales. One extends coverage in the market for engine controls, sensors, analyzers and other instruments by establishing additional regional sales and service offices, with two scheduled for the coming year. The other initiative is to pursue automation solutions with oil and gas customers that traditionally buy its monitoring and control packages. With oil and gas bookings and shipments rising in the year's final four months, Dynalco expects improved results in 2000. Outlook All businesses in the segment anticipate improved sales and earnings in 2000, largely the result of determined cost-reduction efforts, new marketing or product development initiatives, and a resurgence in the oil and gas markets. Management's Discussion and Analysis of Operations continues on page 30.
- ----------------------------------------------------------------------------------------------------------------------------------- Business Unit Products Markets Served - ----------------------------------------------------------------------------------------------------------------------------------- Barksdale Solid state and electromechanical pressure Manufacturers of compressors, machine tools, switches and transducers, level switches and trucks, oil and gas exploration, compactors, and indicators, temperature switches and bailers directional control valves - ----------------------------------------------------------------------------------------------------------------------------------- Powers Process Controls Thermal shock protection shower valves and Light commercial and institutional facilities, systems, process control valves and instruments chemical and food processing, pharmaceutical and temperature control regulators manufacturing and water and wastewater treatment - ----------------------------------------------------------------------------------------------------------------------------------- Dynalco Controls Rotational speed sensors, instruments and Industrial engine manufacturers and users, oil and monitors, microprocessor-based engine controls, gas industry, utilities, construction and engine and compressor analyzers, machinery agricultural equipment manufacturers controls - ----------------------------------------------------------------------------------------------------------------------------------- Azonix Operator interfaces and measurement and control Oil and gas service, petrochemical, pharmaceutical, systems, intelligent data acquisition products, primary metal processing, compressor manufacturers, high-precision thermometers and calibrators rail transport, semiconductor production equipment, military ship control - ----------------------------------------------------------------------------------------------------------------------------------- Ferguson Mechanical and electronic index drives, Assembly, packaging, processing and metal working pick-and-place robots, indexing conveyors, machinery manufacturers for the automotive, rotary tables, clutches and custom cams electrical, food, health care, and electronics industries - -----------------------------------------------------------------------------------------------------------------------------------
14 Crane Co 1999 Annual Report Consolidated Statements of Income
For Years Ended December 31, (in thousands except per share data) 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Net Sales $ 1,553,657 $ 1,561,055 $ 1,411,328 Operating Costs and Expenses: Cost of sales 1,052,756(b) 1,017,648 933,951 Selling, general and administrative 270,067(c) 275,573 249,627 Depreciation and amortization 61,280 55,873 50,991 - --------------------------------------------------------------------------------------------------------------------------- 1,384,103 1,349,094 1,234,569 - --------------------------------------------------------------------------------------------------------------------------- Operating Profit 169,554(a) 211,961 176,759 Other Income (Expense): Interest income 9,750 9,496 7,354 Interest expense (27,854) (27,661) (23,632) Miscellaneous -- net 4,345 (1,007) 541 - --------------------------------------------------------------------------------------------------------------------------- (13,759) (19,172) (15,737) - --------------------------------------------------------------------------------------------------------------------------- Income Before Taxes 155,795(a) 192,789 161,022 Provision for Income Taxes 54,897 67,947 57,306 - --------------------------------------------------------------------------------------------------------------------------- Income from Continuing Operations 100,898(a) 124,842 103,716 - --------------------------------------------------------------------------------------------------------------------------- Income from Discontinued Operations, Net of Taxes 13,672 13,596 9,055 - --------------------------------------------------------------------------------------------------------------------------- Net Income $ 114,570(a) $ 138,438 $ 112,771 - --------------------------------------------------------------------------------------------------------------------------- Basic Net Income per Share: Income from Continuing Operations $ 1.51(a) $ 1.82 $ 1.51 Income from Discontinued Operations .20 .20 .13 - --------------------------------------------------------------------------------------------------------------------------- Net Income $ 1.71(a) $ 2.02 $ 1.64 - --------------------------------------------------------------------------------------------------------------------------- Average Basic Shares Outstanding 66,981 68,555 68,565 Diluted Net Income per Share: Income from Continuing Operations $ 1.50(a) $ 1.80 $ 1.50 Income from Discontinued Operations .20 .20 .13 - --------------------------------------------------------------------------------------------------------------------------- Net Income $ 1.70(a) $ 2.00 $ 1.63 - --------------------------------------------------------------------------------------------------------------------------- Average Diluted Shares Outstanding 67,460 69,368 69,384 - ---------------------------------------------------------------------------------------------------------------------------
(a) Includes pre-tax special charges of $34,987 ($22,567 after tax or $.33 per diluted share.) (b) Includes special charges of $32,013. (c) Includes special charges of $2,974. See Notes to Consolidated Financial Statements 15 Crane Co 1999 Annual Report Consolidated Balance Sheets
Balance at December 31, (in thousands except share data) 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 3,245 $ 16,195 Accounts receivable 206,468 236,217 Inventories Finished goods 107,006 109,135 Finished parts and subassemblies 57,667 58,643 Work in process 23,471 36,571 Raw materials 71,330 82,865 - ------------------------------------------------------------------------------------------------------------------- Total inventories 259,474 287,214 Net assets of discontinued operations -- 120,660 Other current assets 35,973 44,830 - ------------------------------------------------------------------------------------------------------------------- Total Current Assets 505,160 705,116 Property,Plant and Equipment at Cost: Land 29,033 29,631 Buildings and improvements 124,220 132,062 Machinery and equipment 426,010 412,637 - ------------------------------------------------------------------------------------------------------------------- Gross property, plant and equipment 579,263 574,330 Less accumulated depreciation 322,614 304,069 - ------------------------------------------------------------------------------------------------------------------- Net Property, Plant and Equipment 256,649 270,261 Other Assets 40,521 32,661 Intangibles 43,796 47,372 Cost in Excess of Net Assets Acquired 329,321 324,321 - ------------------------------------------------------------------------------------------------------------------- $ 1,175,447 $ 1,379,731 - ------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt $ 385 $ 468 Loans payable 13,271 50,401 Accounts payable 87,611 87,664 Accrued liabilities 116,098 129,796 U.S. and foreign taxes on income 16,150 16,967 - ------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 233,515 285,296 Long-Term Debt 286,772 357,710 Other Liabilities 25,927 27,735 Accrued Postretirement Benefits 31,709 33,512 Accrued Pension Liabilities 3,548 5,955 Deferred Income Taxes 25,866 26,289 Preferred Shares, par value $.01; 5,000,000 shares authorized -- -- Common Shareholders' Equity: Common shares, par value $1.00; Authorized: 200,000,000 shares; Issued: 72,426,139 shares; -- -- Outstanding: 62,802,471 shares (68,495,894 in 1998) after deducting 9,623,668 shares in treasury (3,930,245 in 1998) 72,426 72,426 Capital surplus 98,289 96,262 Retained earnings 623,421 574,797 Accumulated other comprehensive income (loss) (22,481) (18,036) Common shares held in treasury (203,545) (82,215) - ------------------------------------------------------------------------------------------------------------------- Total Common Shareholders' Equity 568,110 643,234 - ------------------------------------------------------------------------------------------------------------------- $ 1,175,447 $ 1,379,731 - -------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements 16 Crane Co 1999 Annual Report Consolidated Statements of Cash Flows
For Years Ended December 31,(in thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------ Operating Activities: Income from continuing operations $ 100,898 $ 124,842 $ 103,716 Non-cash special charges 16,765 -- -- Depreciation 37,250 35,024 33,623 Amortization 24,030 20,849 17,368 Deferred income taxes 6,489 4,412 5,355 Cash provided from (used for) operating working capital 36,678 (8,129) (27,650) Other (11,406) (4,279) (5,521) - ------------------------------------------------------------------------------------------------------------------------ Total Provided from Operating Activities 210,704 172,719 126,891 - ------------------------------------------------------------------------------------------------------------------------ Investing Activities: Capital expenditures (28,988) (48,743) (37,301) Proceeds from disposition of capital assets 6,253 8,013 4,389 Purchase of equity investments (2,029) (750) -- Sale of equity investments 5,361 -- -- Payments for acquisitions, net of cash and liabilities assumed of $7,004 in 1999, $13,725 in 1998,and $33,537 in 1997 (32,760) (177,512) (69,615) Proceeds from divestitures 6,881 4,276 7,453 - ------------------------------------------------------------------------------------------------------------------------ Total Used for Investing Activities (45,282) (214,716) (95,074) - ------------------------------------------------------------------------------------------------------------------------ Financing Activities: Equity: Dividends paid (26,704) (25,199) (22,870) Reacquisition of shares -- open market (124,024) (11,329) (20,529) Reacquisition of shares -- stock incentive program (780) (10,895) (4,448) Stock options exercised 6,191 9,250 7,382 - ------------------------------------------------------------------------------------------------------------------------ (145,317) (38,173) (40,465) - ------------------------------------------------------------------------------------------------------------------------ Debt: Issuance of long-term debt 181,200 143,565 -- Repayments of long-term debt (265,114) (5,317) (3,071) Net increase (decrease) in short-term debt (23,594) (19,929) 1,099 - ------------------------------------------------------------------------------------------------------------------------ (107,508) 118,319 (1,972) - ------------------------------------------------------------------------------------------------------------------------ Total (Used for) Provided from Financing Activities (252,825) 80,146 (42,437) - ------------------------------------------------------------------------------------------------------------------------ Cash Provided from (Used for) Discontinued Operations 75,091 (31,381) 7,223 Effect of exchange rate on cash and cash equivalents (638) 905 (1,440) - ------------------------------------------------------------------------------------------------------------------------ Increase (Decrease) in Cash and Cash Equivalents (12,950) 7,673 (4,837) Cash and cash equivalents at beginning of year 16,195 8,522 13,359 - ------------------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 3,245 $ 16,195 $ 8,522 ======================================================================================================================== Detail of Cash Provided from (Used for) Operating Working Capital (Net of Effects of Acquisitions): Accounts receivable $ 31,934 $ 276 $ (23,616) Inventories 17,335 (11,266) (7,821) Other current assets 8,283 (5,129) 1,992 Accounts payable (5,688) (3,694) 5,504 Accrued liabilities (14,551) 6,449 2,849 U.S.and foreign taxes on income (635) 5,235 (6,558) - ------------------------------------------------------------------------------------------------------------------------ Total $ 36,678 $ (8,129) $ (27,650) - ------------------------------------------------------------------------------------------------------------------------ Supplemental Disclosure of Cash Flow Information: Interest paid $ 28,726 $ 25,142 $ 22,865 Income taxes paid $ 54,825 $ 63,358 $ 54,842 - ------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements 17 Crane Co 1999 Annual Report Consolidated Statements of Changes in Common Shareholders' Equity
Common Accumulated Shares Other Treasury Issued at Capital Retained Comprehensive Comprehensive Stock (in thousands except share data) Par Value Surplus Earnings Income Income (Loss) at Cost - ----------------------------------------------------------------------------------------------------------------------------------- At January 1, 1997 $ 72,426 $ 86,083 $ 371,702 $ (7,368) $ (60,174) - ----------------------------------------------------------------------------------------------------------------------------------- Net income 112,771 $ 112,771 Cash dividends (22,870) Reacquisition of 981,455 shares (24,977) Exercise of stock options, 652,523 shares 7,382 Tax benefit-exercise of stock options 3,541 Restricted stock awarded, 151,873 shares, net (921) 4,131 Currency translation adjustment (9,182) (9,182) - ----------------------------------------------------------------------------------------------------------------------------------- Comprehensive income 103,589 - ----------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1997 72,426 89,624 460,682 (16,550) (73,638) - ----------------------------------------------------------------------------------------------------------------------------------- Net income 138,438 138,438 Cash dividends (25,199) Reacquisition of 702,276 shares (22,224) Exercise of stock options, 780,902 shares 9,250 Tax benefit-exercise of stock options 6,638 Restricted stock awarded, 104,787 shares, net 876 4,397 Currency translation adjustment (1,486) (1,486) - ----------------------------------------------------------------------------------------------------------------------------------- Comprehensive income 136,952 - ----------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1998 72,426 96,262 574,797 (18,036) (82,215) - ----------------------------------------------------------------------------------------------------------------------------------- Net income 114,570 114,570 Dividend of Huttig shares (42,382) Cash dividends (26,704) Reacquisition of 6,063,254 shares (126,469) Exercise of stock options 419,914 shares 6,191 Tax benefit-exercise of stock options 2,027 Restricted stock forfeited, 50,083 shares, net 3,140 (1,052) Currency translation adjustment (4,445) (4,445) - ----------------------------------------------------------------------------------------------------------------------------------- Comprehensive income 110,125 - ----------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1999 $ 72,426 $ 98,289 $ 623,421 $ (22,481) $(203,545) - -----------------------------------------------------------------------------------------------------------------------------------
Total Common Shareholders' (in thousands except share data) Equity - ---------------------------------------------------------- At January 1,1997 $ 462,669 - ---------------------------------------------------------- Net income 112,771 Cash dividends (22,870) Reacquisition of 981,455 shares (24,977) Exercise of stock options, 652,523 shares 7,382 Tax benefit-exercise of stock options 3,541 Restricted stock awarded, 151,873 shares, net 3,210 Currency translation adjustment (9,182) - ---------------------------------------------------------- Comprehensive income - ---------------------------------------------------------- Balance December 31, 1997 532,544 - ---------------------------------------------------------- Net income 138,438 Cash dividends (25,199) Reacquisition of 702,276 shares (22,224) Exercise of stock options, 780,902 shares 9,250 Tax benefit-exercise of stock options 6,638 Restricted stock awarded, 104,787 shares, net 5,273 Currency translation adjustment (1,486) - ---------------------------------------------------------- Comprehensive income - ---------------------------------------------------------- Balance December 31, 1998 643,234 - ---------------------------------------------------------- Net income 114,570 Dividend of Huttig shares (42,382) Cash dividends (26,704) Reacquisition of 6,063,254 shares (126,469) Exercise of stock options 419,914 shares 6,191 Tax benefit-exercise of stock options 2,027 Restricted stock forfeited,50,083 shares,net 2,088 Currency translation adjustment (4,445) - ---------------------------------------------------------- Comprehensive income - ---------------------------------------------------------- Balance December 31, 1999 $ 568,110 - ---------------------------------------------------------- See Notes To Consolidated Financial Statements. 18 Crane Co 1999 Annual Report Notes To Consolidated Financial Statements Accounting Policies Principles of Consolidation -- The consolidated financial statements include all majority-owned subsidiaries. Prior year amounts have been restated to reflect the distribution of Huttig Building Products, Inc. to shareholders on December 16, 1999. Prior year amounts have been reclassified to conform to this treatment. Investments in affiliates over which Crane exercises significant influence but which it does not control (generally 20% to 50% ownership) are accounted for under the equity method. All intercompany items have been eliminated. All share and per share data have been retroactively restated to reflect the three-for-two split of common stock effected in the form of a 50% stock dividend in 1998. General -- The company's financial statements are prepared in conformity with generally accepted accounting principles. These require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimated. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary. Revenue Recognition -- Revenues are recorded generally when title passes to the customer. Income Taxes -- Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes using currently enacted tax rates. Net Income Per Share -- The company's basic earnings per share calculations are based on the weighted average number of common shares outstanding. Diluted earnings per share include all stock options. The company has no stock warrants or convertible securities. (In thousands, except per share data) 1999 1998 1997 - -------------------------------------------------------------------------------- Income from continuing operations $100,898 $124,842 $103,716 Income from discontinued operations 13,672 13,596 9,055 - -------------------------------------------------------------------------------- Net income $114,570(a) $138,438 $112,771 Average basic shares outstanding 66,981 68,555 68,565 Effect of dilutive stock options 479 813 819 - -------------------------------------------------------------------------------- Average diluted shares outstanding 67,460 69,368 69,384 - -------------------------------------------------------------------------------- Basic Net Income Per Share: Income from continuing operations $ 1.51 $ 1.82 $ 1.51 Income from discontinued operations .20 .20 .13 - -------------------------------------------------------------------------------- Net Income $ 1.71(a) $ 2.02 $ 1.64 - -------------------------------------------------------------------------------- Diluted Net Income Per Share: Income from continuing operations $ 1.50 $ 1.80 $ 1.50 Income from discontinued operations .20 .20 .13 - -------------------------------------------------------------------------------- Net Income $ 1.70(a) $ 2.00 $ 1.63 - -------------------------------------------------------------------------------- (a) Includes pre-tax special charges of $34,987 ($22,567 after taxes or $.33 per diluted share.) Cash and Cash Equivalents -- Marketable securities with original maturities of three months or less are considered to be cash equivalents. Accounts Receivable -- Receivables are carried at net realizable value. A summary of the allowance for doubtful accounts, cash discounts, returns and allowances activity at December 31, follows: (in thousands) for years ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------- Balance at beginning of year $ 6,199 $ 5,636 $ 5,805 Provisions 5,928 2,665 4,356 Deductions (5,054) (2,102) (4,525) - -------------------------------------------------------------------------------- Balance at end of year $ 7,073 $ 6,199 $ 5,636 - -------------------------------------------------------------------------------- Inventories -- Inventories are stated at the lower of cost or market principally on the last-in, first-out (LIFO) method of inventory valuation. The reduction of inventory quantities has resulted in a liquidation of LIFO inventories acquired at lower costs prevailing in prior years. Liquidations have reduced cost of sales by $2.7 million in 1999 and $.6 million in 1998 and 1997.Replacement cost would have been higher by $23.1 million and $27.5 million at December 31, 1999 and 1998, respectively. 19 Crane Co Annual Report Property, Plant and Equipment -- Depreciation is provided primarily by the straight-line method over the estimated useful lives of the respective assets, which range from three to twenty-five years. Intangibles -- Intangible assets are being amortized on a straight-line basis over their estimated useful lives, which range from five to twenty years. The accumulated amortization was $22 million and $18.6 million at December 31, 1999 and 1998, respectively. Cost in Excess of Net Assets Acquired -- Cost in excess of net assets acquired is being amortized on a straight-line basis ranging from fifteen to forty years. The accumulated amortization was $60.1 million and $44.6 million at December 31, 1999 and 1998, respectively. Valuation of Long-Lived Assets -- The company periodically evaluates the carrying value of long-lived assets, including goodwill and other intangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Stock-Based Compensation Plans -- The company records compensation expense for its stock-based employee compensation plans in accordance with the intrinsic-value method prescribed by APB No. 25, "Accounting for Stock Issued to Employees." Intrinsic value is the amount by which the market price of the underlying stock exceeds the exercise price of the stock option or award on the measurement date, generally the date of grant. Currency Translation -- Assets and liabilities of subsidiaries that prepare financial statements in currencies other than U.S. dollars are translated at the rate of exchange in effect on the balance sheet date; results of operations are translated at the average rates of exchange prevailing during the year. The related translation adjustments are included in accumulated other comprehensive income (loss) in a separate component of shareholders' equity. Financial Instruments -- The company periodically enters into interest rate swap agreements to moderate its exposure to interest rate changes and to lower the overall cost of borrowings. The differential to be paid or received is accrued as interest rates change and is recognized in income over the life of the agreements. No agreements were outstanding at December 31, 1999 and 1998. In addition, the company periodically uses forward foreign exchange contracts to hedge firm purchase and sales commitments. Gains and losses on such contracts are deferred and recognized as part of the related transactions. Amounts outstanding at December 31, 1999 and 1998 for such contracts were not material. Recently Issued Accounting Standards -- The company is required to implement the Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" in the first quarter of fiscal 2001. The company has historically made limited use of derivative instruments and financial hedges and believes any impact of the new accounting pronouncement on the financial statements will be immaterial. Special Charges The pre-tax special charges in 1999 of $35.0 million ($18.4 million in the third quarter and $16.6 million recorded in the fourth quarter) were principally for a series of actions to reduce the fixed cost base in the Engineered Materials, Aerospace, Fluid Handling and Controls segments by closing or consolidating facilities, reducing staff, rationalizing product lines and for other unusual items. In total, five manufacturing facilities have been or are in the process of being closed, along with eight peripheral facilities. The facility closings are expected to be completed during 2000. Severance costs have been recognized in connection with the involuntary termination of 550 employees, of whom 380 were terminated prior to December 31, 1999, and 170 will be terminated in the first half of 2000. No additional special charges are expected in 2000. A summary of the special charges and the liability balance (in thousands) at December 31, 1999, is as follows: Liability Balance at Description Total Deductions December 31, 1999 - ----------------------------------------------------------------------- Severance costs $ 6,258 $ 4,931 $ 1,327 Facility closure costs 3,553 1,858 1,695 Product liability costs 7,347 469 6,878 Other items 1,064 1,006 58 - ----------------------------------------------------------------------- Total cash $18,222 $ 8,264 $ 9,958 - ----------------------------------------------------------------------- Inventory markdowns 12,248 Asset impairments and disposals 4,517 - ----------------------------------------------------------------------- Total non-cash 16,765 - ----------------------------------------------------------------------- Total $34,987 ======================================================================= Research and Development Research and development and engineering costs were approximately $58.9 million, $70.9 million and $56.3 million in 1999, 1998, and 1997, respectively. Included in these amounts were approximately $7.4 million, $15.8 million and $9.6 million received in 1999, 1998 and 1997,respectively,for customer-sponsored research and development. 20 Crane Co Annual Report Discontinued Operations On December 6, 1999, the company's Board of Directors approved the spin-off of its Huttig Building Products ("Huttig" subsidiary) effective December 16, 1999, to shareholders of record as of December 8, 1999. Huttig common shares were distributed on the basis of one share of Huttig for every 4.5 shares of Crane Co. common stock. Prior to the spin-off, Huttig transferred $68 million to the company, which the company used to pay down debt. The consolidated financial results of the company have been restated to reflect the divestiture of Huttig. Huttig net assets, results of operations and cash contributions to Crane have been reflected in the accompanying financial statements as a discontinued operation. Summarized financial information for discontinued operations is set forth below: (in thousands except per share amounts) 1999 1998 1997 - -------------------------------------------------------------------------------- Net sales $760,723 $707,450 $625,503 Income before taxes 21,833(a) 21,851 14,814 Net income 13,672 13,596 9,055 Diluted earnings per share .20 .20 .13 ================================================================================ (a) Includes pension plan curtailment gain of $7.2 million. Net assets of discontinued operations at December 31,1998,were $121 million, consisting of $115 million of current assets and $81 million of other assets, net of third-party liabilities of $75 million. Miscellaneous -- Net (in thousands) for years ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------- Gain on disposition of capital assets $1,712 $ 307 $479 Gain on sale of equity investment 2,582 -- -- Other 51 (1,314) 62 - -------------------------------------------------------------------------------- $4,345 $(1,007) $541 ================================================================================ Income Taxes Income (loss) before taxes is as follows: (in thousands) for years ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------- U.S. operations $160,888 $176,030 $142,427 Non-U.S. operations (5,093) 16,759 18,595 - -------------------------------------------------------------------------------- $155,795 $192,789 $161,022 - -------------------------------------------------------------------------------- The provision for income taxes consists of: (in thousands) for years ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------- Current: U.S. federal tax $41,007 $54,066 $42,313 State and local tax 2,100 3,548 4,322 Non-U.S. tax 5,301 5,921 5,316 - -------------------------------------------------------------------------------- 48,408 63,535 51,951 - -------------------------------------------------------------------------------- Deferred: U.S. federal tax 8,799 3,150 4,599 State and local tax 2,194 386 373 Non-U.S. tax (4,504) 876 383 - -------------------------------------------------------------------------------- 6,489 4,412 5,355 - -------------------------------------------------------------------------------- Total income taxes $54,897 $67,947 $57,306 ================================================================================ Reconciliation of the statutory U.S. federal rate to the effective tax rate is as follows: (in thousands) for years ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------- Statutory U.S. federal tax at 35% $54,528 $67,476 $56,358 Increase (reduction) from: Non-U.S. taxes 2,606 931 (809) State and local taxes 2,879 2,595 3,121 Non-deductible goodwill 4,836 3,391 2,533 Foreign Sales Corporation (6,033) (2,974) (2,886) Other (3,919) (3,472) (1,011) - -------------------------------------------------------------------------------- Provision for income taxes $54,897 $67,947 $57,306 - -------------------------------------------------------------------------------- Effective tax rate 35.2% 35.2% 35.6% - -------------------------------------------------------------------------------- At December 31, 1999, the company had unremitted earnings of foreign subsidiaries of $93.3 million. Because these earnings, which reflect full provision for non-U.S. income taxes, are indefinitely reinvested in non-U.S. operations or can be remitted substantially free of additional tax, no provision has been made for taxes that might be payable upon remittance of such earnings. The components of deferred tax assets and liabilities included on the balance sheet at December 31 are as follows: (in thousands) December 31, 1999 1998 - -------------------------------------------------------------------------------- Deferred tax assets: Postretirement benefits $12,333 $13,035 Inventory 5,691 6,848 Insurance 6,259 7,091 Environmental 3,884 3,847 Tax loss and credit carryforwards 8,869 7,395 Deferred compensation 5,684 8,273 Other 15,792 12,776 - -------------------------------------------------------------------------------- Total 58,512 59,265 Less valuation allowance on tax loss and credit carryforwards 4,375 3,086 - -------------------------------------------------------------------------------- Total deferred tax assets, net 54,137 56,179 - -------------------------------------------------------------------------------- Deferred tax liabilities: Depreciation 32,329 30,098 Intangibles 12,668 13,675 Pension 9,165 5,599 - -------------------------------------------------------------------------------- Total deferred liabilities 54,162 49,372 - -------------------------------------------------------------------------------- Net deferred (liability) asset $ (25) $ 6,807 ================================================================================ Balance sheet classification: Other current assets $25,841 $33,096 Deferred income taxes 25,866 26,289 - -------------------------------------------------------------------------------- Net deferred (liability) asset $ (25) $ 6,807 ================================================================================ 21 Crane Co 1999 Annual Report As of December 31, 1999, the company had net operating loss (NOL) carryforwards and U.S. tax credit carryforwards that will expire, if unused, as follows: Non-U.S. U.S. U.S. U.S. (in thousands) National State Federal R&D year of expiration NOL NOL NOL Credit - ------------------------------------------------------------------------ 2000-2003 $ 1,176 $14,414 $ 803 $ 2 After 2003 290 33,615 2,184 615 Indefinite 15,450 -- -- -- - ------------------------------------------------------------------------ Total $16,916 $48,029 $ 2,987 $ 617 ======================================================================== Deferred tax asset on tax carryforwards $ 5,311 $ 1,896 $ 1,045 $ 617 - ------------------------------------------------------------------------ Of the total $8.9 million deferred tax asset on tax carryforwards, $4.4 million has been offset by the valuation allowance because of the uncertainty of ultimately realizing these future benefits. Accrued Liabilities (in thousands) December 31, 1999 1998 - ---------------------------------------------------------------- Employee-related expenses $ 51,878 $ 61,352 Insurance 9,202 10,130 Environmental 2,648 4,232 Warranty and product liability 13,473 11,388 Professional fees 2,781 3,265 Sales allowances 7,003 5,196 Customer advanced payments 1,772 3,911 Interest 4,478 5,350 Taxes other than income 3,285 2,616 Pensions 4,859 3,218 Other 14,719 19,138 - ---------------------------------------------------------------- $116,098 $129,796 ================================================================ Other Liabilities (in thousands) December 31, 1999 1998 - ----------------------------------------------------------------- Environmental $ 7,337 $ 9,605 Insurance 6,893 8,104 Minority interest 2,215 3,669 Other 9,482 6,357 - ----------------------------------------------------------------- $ 25,927 $ 27,735 ================================================================== Pension and Postretirement Benefits The company and most of its subsidiaries have defined benefit pension plans for their employees. The company also has a defined benefit plan for its directors. The plans generally provide benefit payments using a formula based on length of service and final average compensation, except for some hourly employees for whom the benefits are a fixed amount per year of service. The company's policy is to fund at least the minimum amount required by the applicable governmental regulations. Postretirement healthcare and life insurance benefits are provided for certain domestic and non-U.S. employees hired before January 1,1990, who meet minimum age and service requirements. The company does not pre-fund these benefits and has the right to modify or terminate the plan. The following table sets forth the amounts recognized in the company's balance sheet at December 31, for company-sponsored defined benefit pension and post-retirement benefit plans: Pension Benefits Postretirement Benefits - -------------------------------------------------------------------------------- (in thousands) December 31, 1999 1998 1999 1998 - -------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $329,032 $304,725 $20,390 $ 21,269 Service cost 12,574 11,062 146 173 Interest cost 20,427 18,860 1,163 1,378 Plan participants' contributions 964 1,509 1,445 1,444 Amendments 1,334 565 (959) -- Actuarial (gain) loss (24,813) 6,694 (1,569) (422) Benefits paid (15,837) (15,297) (3,619) (3,452) Foreign currency exchange rate (gain) loss (1,072) (1,636) -- -- Acquisition/divestitures (4,717) 2,550 -- -- - -------------------------------------------------------------------------------- Benefit obligation at end of year 317,892 329,032 16,997 20,390 - -------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year 436,508 416,608 Actual return on plan assets 26,939 33,788 Foreign currency exchange rate gain (loss) (565) (3,062) Employer contributions 1,019 641 Plan participants' contributions 964 1,509 Benefits paid (15,837) (15,297) Acquisition/divestitures 2,086 2,321 - -------------------------------------------------------------------------------- Fair value of plan assets at end of year 451,114 436,508 - -------------------------------------------------------------------------------- Funded status 133,222 107,476 (16,997) (20,390) Unrecognized actuarial (gain) loss (105,194) (90,225) (14,712) (13,122) Unrecognized prior service cost 1,793 3,145 -- -- Unrecognized transition (asset)/obligation (4,694) (4,101) -- -- - -------------------------------------------------------------------------------- Prepaid (accrued) benefit cost $ 25,127 $ 16,295 $(31,709) $ (33,512) ================================================================================ 22 Crane Co Annual Report Pension Benefits - --------------------------------------------------------- (in thousands) December 31, 1999 1998 - --------------------------------------------------------- Balance sheet classification: Other assets $29,505 $22,193 Accrued liability 1,719 334 Accrued pension liability 2,659 5,564 - --------------------------------------------------------- $25,127 $16,295 ========================================================= (Dollars in thousands) Pension Benefits Postretirement Benefits - -------------------------------------------------------------------------------- December 31, 1999 1998 1997 1999 1998 1997 - -------------------------------------------------------------------------------- Weighted average assumptions as of December 31: Discount rate 6.92% 6.68% 6.30% 7.5% 6.75% 7.25% Expected rate of return on plan assets 8.12% 8.27% 7.91% -- -- -- Rate of compensation increase 4.53% 4.81% 4.41% 4.5% 4.00% 4.50% - -------------------------------------------------------------------------------- Components of net periodic benefit cost: Service cost $12,574 $11,062 $10,293 $ 146 $ 173 $203 Interest cost 20,427 18,860 17,186 1,163 1,378 1,533 Expected rate of return on plan assets (32,461) (30,833) (26,321) -- -- -- Amortization of prior service cost (748) (678) 282 (95) -- -- Recognized net actuarial loss (gain) (2,092) (1,161) (1,341) (959) (958) (924) - -------------------------------------------------------------------------------- Net periodic benefit cost $(2,300) $(2,750) $ 99 $ 255 $ 593 $812 ================================================================================ The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $9.7 million, $8.8 million, $7.6 million and $11.0 million, $9.9 million and $8.4 million, as of December 31, 1999 and 1998, respectively. At December 31, 1999, substantially all plan assets are invested in listed stocks and bonds. These investments include common stock of the company, which represents 3% of plan assets. The company participates in several multi-employer pension plans, which provide benefits to certain employees under collective bargaining agreements. Total contributions to these plans were approximately $1.1 million in 1999, $1.0 million in 1998 and $1.1 million in 1997. Crane subsidiaries ELDEC Corporation and Interpoint Corporation have a money purchase plan to provide retirement benefits for all eligible employees. The annual contribution is 5% of each eligible participant's gross compensation. The contributions for 1999, 1998 and 1997 were $2.5 million, $2.2 million and $1.7 million, respectively. The company and its subsidiaries sponsor savings and investment plans that are available to eligible employees of the company and its subsidiaries. The company made contributions to the plans of approximately $5.4 million, $4.7 million and $3.7 million in 1999, 1998 and 1997, respectively. For the purpose of estimating the postretirement liability, the cost of covered benefits was assumed to increase 7.7% for 1999, and then to decrease gradually to 5.0% by 2005 and remain at that level thereafter. In 1998, the cost of covered benefits was assumed to increase 8.5%, and then to decrease gradually to 4.75% by 2005 and remain at that level thereafter: 1 Percentage 1 Percentage (in thousands) Point Increase Point Decrease - -------------------------------------------------------------------------------- Effect on total of service and interest cost components $ 152 $ 133 Effect on postretirement benefit obligation 1,444 1,275 - -------------------------------------------------------------------------------- Short-Term Financing The weighted average interest rate for loans payable, consisting of short-term bank borrowings of $13.3 million and $50.4 million at December 31, 1999 and 1998, was 5.9% and 6.4%, respectively. As of December 31, 1999, the company had unused domestic lines of credit totaling $150.0 million and unused foreign lines of credit totaling $48.9 million. These lines of credit are typically available for borrowings up to 364 days and are renewable at the option of the lender. Short-term obligations of $46.8 million at December 31, 1999, and $150 million at December 31, 1998, were classified as long-term debt because the company had entered into finance agreements that permit it to refinance short-term obligations on a long-term basis. 23 Crane Co 1999 Annual Report Long-Term Financing (in thousands) December 31, 1999 1998 - --------------------------------------------------------------------- Crane Co. Senior debt: 7.25% notes due 1999 $ -- $ 150,000 Original issue discount -- (29) Deferred financing costs -- (205) - --------------------------------------------------------------------- -- 149,766 - --------------------------------------------------------------------- 8.50% notes due 2004 100,000 100,000 Original issue discount (352) (436) Deferred financing costs (290) (358) - --------------------------------------------------------------------- 99,358 99,206 - --------------------------------------------------------------------- 6.75% notes due 2006 100,000 100,000 Original issue discount (253) (290) Deferred financing costs (849) (998) - --------------------------------------------------------------------- 98,898 98,712 - --------------------------------------------------------------------- 6.68% Other debt--due 2003 66,800 -- Deferred financing costs (88) -- - --------------------------------------------------------------------- 66,712 -- - --------------------------------------------------------------------- Total Crane Co. 264,968 347,684 - --------------------------------------------------------------------- Subsidiaries Industrial revenue bonds 1,485 1,677 Various loans--6.0% average rate 20,704 8,817 - --------------------------------------------------------------------- Total Subsidiaries 22,189 10,494 - --------------------------------------------------------------------- Total long-term debt 287,157 358,178 Less current portion 385 468 - --------------------------------------------------------------------- Long-term debt, net of current portion $ 286,772 $ 357,710 ===================================================================== At December 31, 1999, the principal amounts of long-term debt repayments required for the next five years are $.4 million in 2000, $7.2 million in 2001, $.8 million in 2002, $66.8 million in 2003, and $113.8 million in 2004. At December 31, 1999, the company had a $300 million contractually committed long-term bank credit facility under which the company can borrow, repay or, to the extent permitted by the agreement, prepay loans and reborrow at any time prior to the termination date of November 2003. Proceeds may be used for general corporate purposes or to provide financing for acquisitions. The agreement contains certain covenants, including limitations on indebtedness and liens. A loan for $20 million was outstanding under this agreement at year end. The company has a $300 million shelf registration filed with the Securities and Exchange Commission, all of which remains unissued. Fair Value of Financial Instruments The carrying value of investments and short-term debt approximates the fair value. Long-term debt rates currently available to the company for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange. The estimated fair value of long-term debt at December 31, 1999, was $285 million compared with a carrying value of $287 million. Crane is a party to a contractually committed off-balance sheet chattel paper financing facility that enables its National Vendors operation to offer various sales support financing programs to its customers. Recourse to Crane for all uncollectible loans made to National Vendors' customers by the banks under this agreement is limited. Leases The company leases certain facilities, vehicles and equipment. Future minimum payments, by year, and in the aggregate, under leases with initial or remaining terms of one year or more consisted of the following at December 31, 1999: Minimum Operating Sublease (in thousands) December 31, Leases Income Net - ---------------------------------------------------------------- 2000 $ 7,871 $137 $ 7,734 2001 6,150 112 6,038 2002 4,915 65 4,850 2003 4,071 63 4,008 2004 3,015 63 2,952 Thereafter 3,058 7 3,051 - ---------------------------------------------------------------- Total minimum lease payments $29,080 $447 $28,633 ================================================================ Rental expense was $9.7 million, $9.3 million and $10.7 million for 1999, 1998 and 1997, respectively. 24 Crane Co 1999 Annual Report Contingencies The company has established insurance programs to cover product and general liability losses. These programs have deductible amounts of $5 million per claim, $10 million aggregate per policy year before coverage begins, with the exception of aircraft products, and non-U.S. claims, which have first-dollar coverage. The company does not deem its deductible exposure to be material. As of December 31, 1999, the company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on the company's financial condition and results of operations. The company continues to be involved in various remediation actions to clean up hazardous wastes as required by federal and state laws. Estimated future environmental remediation cost was $10.0 million at December 31, 1999, which was fully accrued. In certain of these actions, the company is one of several potentially responsible parties ("PRPs"). As a PRP, the company could be liable for all clean-up cost despite the involvement of other PRPs. Given the financial stability of the other PRPs, the company believes this is unlikely and the accrual represents management's best estimate, based on current facts and circumstances, with respect to the ultimate liability that will be apportioned to the company. The company spent $2.1 million on environmental costs in 1999, and expects to pay remediation costs of approximately $2.6 million in 2000. The annual level of future remediation expenditures is difficult to estimate because of the many uncertainties relating to conditions of individual sites, as well as uncertainties about the status of environmental laws and regulations and developments in remedial technology. In addition, the company is a minor/de minimis potentially responsible party (PRP) at certain third-party environmental remediation sites where remediation obligations are joint and several, and the company, as part of its estimate of potential liability, periodically reviews whether the major PRPs have the ability to fulfill their portion of such remediation obligations. The company is not aware of any significant additional liability that would result from the inability of other PRPs to fulfill their obligations. Overall, the company's liability for the required remedial actions being implemented or engineered is not, individually or in the aggregate, expected to be material. As of December 31, 1999, Crane Co. was a defendant (among a number of defendants,typically 15 to 40) in approximately 2,400 actions filed in various state and federal courts alleging injury or death as a result of exposure to asbestos in products allegedly manufactured or sold by the company. Because of the unique factors inherent in each case and the fact that most are in preliminary stages, the company lacks sufficient information upon which judgments can be made as to their validity or ultimate disposition. Based on the information available to the company and its experience in the disposition of lawsuits of this type,the company believes that pending and reasonably anticipated future asbestos actions are not likely to have a material effect on its results of operations or financial condition. Acquisitions, Divestitures and Investments The company reviews potential acquisition candidates with market and technology positions that provide meaningful opportunities in the markets in which it already has a presence, or which afford significant financial reward, and may dispose of operations when consistent with its overall goals and strategies. In October 1999, the company acquired Stentorfield, Ltd., based in Chippenham, England, for $32.8 million. Stentorfield is a premier designer and manufacturer of hot and cold beverage vending machines, serving the U.K. and European market with a broad line of full-size and tabletop products, for the hotel, restaurant, office coffee service and vending industries. Stentorfield is known in the industry to provide high quality, reliable and easily serviced products and excellent customer service. This business was integrated with Crane's National Vendors business,which is the leading North American designer and manufacturer of full-line vending machines, for snack, food and beverage. The acquisition provides the means for National Vendors to satisfy the growing U.K. and European demand for a broader "one-stop" product offering, consisting of Stentorfield's drinks machines and National Vendors' snack and food machines. During 1998,the company completed four acquisitions at a total cost of $178 million. In May, the company acquired Environmental Products USA, Inc. This business manufactures membrane-based water treatment systems for industrial, commercial and institutional markets. In August,the company acquired Sequentia Holdings, Inc., a manufacturer of fiberglass-reinforced plastic panels for the construction and building products markets. Sequentia complements the company's Kemlite subsidiary, which provides fiberglass-reinforced plastic panels for the transportation and recreational vehicle markets. In September, the company acquired Liberty Technologies, Inc. which develops, manufactures, markets and sells valve, motor, engine and compression condition monitoring products and related services to the nuclear power generation and industrial process markets worldwide. Liberty complements the company's nuclear valve business, which provides valves, valve diagnostic equipment and related services to the nuclear power industry, and the company's Dynalco Controls business, which provides sensors, instrumentation, control products and automation systems for use in industrial engine applications. Also in the fourth quarter of 1998, the company acquired the Plastic-Lined Piping Products ("PLPP") division of The Dow Chemical Company. PLPP was integrated with the company's Resistoflex division, which supplies lined pipe and valves to the chemical process and industrial markets. In April 1999,the company sold Southwest Foundry, acquired as part of the Stockham Valves & Fittings, Inc. transaction, for $.4 million. In December 1999, the company sold its Crane Defense Systems business for $6.4 million in cash and a $.8 million note due in 2002. In May of 1998, the company sold two foundry operations acquired as part of the Stockham Valves & Fittings, Inc. transaction. Accu-Cast, Inc. in Chattanooga, Tennessee, and the Aliceville Foundry in Aliceville, Alabama, were sold for a total of $4.3 million. 25 Crane Co 1999 Annual Report During 1997, the company completed four acquisitions at a total cost of $70 million. In March, the company acquired the transportation products business of Sequentia, Inc. This business, which produces fiberglass-reinforced plastic panels for the truck body, trailer and container market, has been integrated with the company's Kemlite subsidiary. Also in March, the company acquired Polyvend Inc., a manufacturer of snack and food vending machines. Polyvend was completely integrated into National Vendors' modern St. Louis facility by the end of the third quarter of 1997, significantly expanding distribution sales channels. In April, the company acquired the Nuclear Valve business of ITI MOVATS from Westinghouse. MOVATS is a leading supplier of valve diagnostic equipment and valve services to the commercial nuclear power industry. In December, the company acquired certain operations and product lines of Stockham Valves & Fittings, Inc. The acquired product lines and related manufacturing operations were integrated into the company's engineered valve and commercial bronze and iron valve businesses. In 1997, the company sold its Valve Systems and Controls division for $7.5 million in cash and $1.5 million in preferred stock. All acquisitions were accounted for by the purchase method. The results of operations for all acquisitions have been included in the financial statements from their respective dates of purchase. The following unaudited pro forma financial information presents the combined results of operations of the company and Environmental Products, Sequentia, Liberty Technologies and Plastic-Lined Piping Products as if the acquisitions had taken place at the beginning of 1997. The pro forma amounts give effect to certain adjustments including the amortization of goodwill and intangibles, increased interest expense and income tax effects. This pro forma information does not necessarily reflect the results of operations as they would have been if the businesses had been managed by the company during these periods and is not indicative of results that may be obtained in the future. Pro forma 1998 and 1997 results are as follows: net sales of $1.64 billion and $1.55 billion, net income of $121.2 million and $97.2 million and diluted net income per share of $1.75 and $1.40, respectively. Preferred Share Purchase Rights On June 27, 1998, the company adopted a Shareholder Rights Plan to replace the existing Plan, which expired on that date. The company distributed one preferred share purchase right for each outstanding share of common stock. The preferred rights were not exercisable when granted and may only become exercisable under certain circumstances involving actual or potential acquisitions of the company's common stock by a person or affiliated persons. Depending upon the circumstances, if the rights become exercisable, the holder may be entitled to purchase shares of the company's Series A Junior Participating Preferred Stock,or shares of common stock of the acquiring person. Preferred shares purchasable upon exercise of the rights will not be redeemable. Each preferred share will be entitled to preferential rights regarding dividend and liquidation payments, voting power, and, in the event of any merger, consolidation or other transaction in which common shares are exchanged, a preferential exchange rate. The rights will remain in existence until June 27, 2008, unless they are earlier terminated, exercised or redeemed. The company has authorized five million shares of $.01 par value preferred stock of which 500,000 shares have been designated as Series A Junior Participating Preferred Stock. Stock-Based Compensation Plans The company has three stock-based compensation plans: the Stock Option Plan, the Restricted Stock Award Plan and the Non-Employee Director Restricted Stock Plan.In accounting for its stock-based compensation plans, the company applies the intrinsic value method prescribed by APB No.25, "Accounting for Stock Issued to Employees". Intrinsic value is the amount by which the market price of the underlying stock exceeds the exercise price of the stock option or award on the measurement date, generally the date of grant. No compensation expense is recognized for the company's stock option plan. Compensation expense recognized for its restricted stock award plans was $2.1 million in 1999, $5.0 million in 1998, and $5.2 million in 1997. The pro forma net income and earnings per share listed below reflect the impact of measuring compensation expense for options granted in 1999,1998 and 1997 in accordance with the fair-value-based method prescribed by SFAS 123, "Accounting for Stock-Based Compensation." These amounts may not be representative of future years' amounts as options vest over a three-year period and, generally, additional awards are made each year. (in thousands except per share data) 1999 1998 1997 - ------------------------------------------------------------------- Net income As reported $114,570 $138,438 $112,771 Pro forma 108,340 133,071 110,339 Net income per share Basic As reported 1.71 2.02 1.64 Pro forma 1.62 1.94 1.61 - ------------------------------------------------------------------- Diluted As reported 1.70 2.00 1.63 Pro forma 1.61 1.92 1.59 - ------------------------------------------------------------------- 26 Crane Co. 1999 Annual Report The weighted average fair value of options granted was $5.66 per share in 1999, $11.01 per share in 1998 and $6.89 per share in 1997. These estimates were based on the Black-Scholes multiple option-pricing model with the following weighted average assumptions: 1999 1998 1997 - ------------------------------------------------------------- Dividend yield 1.85% .92% 1.48% Volatility 25.14% 24.22% 24.98% Risk-free interest rates 5.07% 5.60% 6.76% Expected lives in years 5.12 5.29 5.10 - ------------------------------------------------------------- Options are granted under the Stock Option Plan to officers and other key employees at an exercise price equal to the fair market value of the shares on the date of grant. Options become exercisable at a rate of 50% the first year, 75% the second year and 100% the third year after the date of grant, and expire ten years after the date of grant. A summary of stock option activity follows: Weighted Number Average (Shares in thousands) of Shares Exercise Price - ------------------------------------------------------------------------------- 1997 - ------------------------------------------------------------------------------- Options outstanding at beginning of year 3,597 $12.45 Granted 871 20.84 Exercised (709) 10.44 Canceled (156) 17.58 - ------------------------------------------------------------------------------- Options outstanding at end of year 3,603 14.67 Options exercisable at end of year 2,309 12.21 1998 - ------------------------------------------------------------------------------- Granted 1,482 33.44 Exercised (847) 10.97 Canceled (28) 23.12 - ------------------------------------------------------------------------------- Options outstanding at end of year 4,210 21.95 Options exercisable at end of year 2,184 14.76 1999 - ------------------------------------------------------------------------------- Granted 1,577 21.66 Exercised (456) 13.59 Canceled (194) 28.20 - ------------------------------------------------------------------------------- Options outstanding at end of year 5,137 22.36 Options exercisable at end of year 2,718 20.11 - ------------------------------------------------------------------------------- A summary of information regarding stock options outstanding at December 31, 1999, follows: (Shares in thousands) Options Outstanding Options Exercisable - ------------------------------------------------------------------------------- Weighted Weighted Weighted Number Average Average Number Average Range of of Remaining Exercise of Exercise Exercise Prices Shares Life (Years) Price Shares Price - ------------------------------------------------------------------------------- $25.63-33.54 1,368 8.29 $33.38 682 $33.31 17.16-24.62 2,227 8.76 21.38 494 20.73 9.15-16.96 1,542 5.12 13.99 1,542 13.99 - ------------------------------------------------------------------------------- The Restricted Stock Award Plan provides for awards of common stock to officers and other key employees, subject to resale restrictions. The restrictions on outstanding awards are scheduled to lapse upon the achievement of certain performance objectives or over time. The company awarded 189,900 shares with a weighted average fair value of $23.11 in 1999. In addition, 70,884 shares were issued in conjunction with the Huttig spin-off. As of December 31, 1999, there were available for future awards a total of 1,257,966 shares. Under the Non-Employee Director Restricted Stock Plan, directors who are not full-time employees of the company receive the portion of their annual retainer that exceeds $15,000 in shares of common stock. The shares are issued each year after the company's annual meeting, are forfeitable if the director ceases to remain a director until the company's next annual meeting, and may not be sold for a period of five years, or until the director leaves the Board. As a group, non-employee directors received 5,140 shares with a weighted average fair value of $23.82 in 1999. Segment Information The company's segments are reported on the same basis used internally for evaluating segment performance and for allocating resources. The company has five segments: Engineered Materials, Merchandising Systems, Aerospace, Fluid Handling and Controls. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The company accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. 27 Crane Co 1999 Annual Report Information by industry segments follows: (in thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Engineered Materials - -------------------------------------------------------------------------------- Net Sales -- Outside $353,534 $275,969 $222,789 Net Sales -- Intersegment 3,539 2,985 2,771 Operating Profit 59,879(a) 39,655 30,093 Assets 249,961 263,576 109,578 Capital Expenditures 4,380 6,094 8,210 Depreciation and Amortization 14,085 9,633 6,178 Merchandising Systems - -------------------------------------------------------------------------------- Net Sales -- Outside 201,941 191,927 179,905 Net Sales -- Intersegment -- -- -- Operating Profit 35,838 33,548 31,034 Assets 150,197 117,858 109,190 Capital Expenditures 6,979 2,815 5,089 Depreciation and Amortization 7,128 7,201 6,426 Aerospace - -------------------------------------------------------------------------------- Net Sales -- Outside 363,128 394,401 343,900 Net Sales -- Intersegment -- 65 -- Operating Profit 96,078(a) 118,175 90,055 Assets 269,154 296,668 277,704 Capital Expenditures 8,245 17,515 13,496 Depreciation and Amortization 13,041 12,563 12,785 Fluid Handling - -------------------------------------------------------------------------------- Net Sales -- Outside 502,170 554,210 496,553 Net Sales -- Intersegment 57 3,567 3,282 Operating Profit 22,870(a) 34,961 36,869 Assets 330,528 393,277 362,651 Capital Expenditures 6,390 17,195 7,640 Depreciation and Amortization 15,797 13,101 11,025 Controls - -------------------------------------------------------------------------------- Net Sales -- Outside 120,166 131,052 130,284 Net Sales -- Intersegment 1,051 1,265 1,237 Operating Profit 4,071(a) 8,927 11,640 Assets 129,240 127,702 121,432 Capital Expenditures 1,905 4,264 2,538 Depreciation and Amortization 6,866 6,555 6,502 - -------------------------------------------------------------------------------- (a) Before special charges for Engineered Materials ($3.2 million), Aerospace ($9.0 million), Fluid Handling ($18.9 million), and Controls ($3.4 million). (in thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Consolidated Net Sales Other $ 12,717 $ 13,496 $ 37,897 Intersegment Elimination (4,646) (7,882) (7,290) - -------------------------------------------------------------------------------- Total Net Sales $ 1,553,657 $ 1,561,055 $ 1,411,328 ================================================================================ Operating Profit Other $ (546) $ (424) $ 353 Corporate (13,598) (22,937) (23,425) Special charges (34,987) -- -- Intersegment Elimination (51) 56 140 - -------------------------------------------------------------------------------- Total Operating Profit $ 169,554 $ 211,961 $ 176,759 ================================================================================ Assets Other $ 2,970 $ 13,003 $ 12,266 Corporate 43,397 46,987 49,383 Net Assets of Discontinued Operations -- 120,660 89,279 - -------------------------------------------------------------------------------- Total Assets $ 1,175,447 $ 1,379,731 $ 1,131,483 ================================================================================ Capital Expenditures Other $ 274 $ 810 $ 245 Corporate 815 50 83 - -------------------------------------------------------------------------------- Total Capital Expenditures $ 28,988 $ 48,743 $ 37,301 ================================================================================ Depreciation and Amortization Other $ 335 $ 269 $ 416 Corporate 4,028 6,551 7,659 - -------------------------------------------------------------------------------- Total Depreciation and Amortization $ 61,280 $ 55,873 $ 50,991 ================================================================================ Information by geographic segments follows: (in thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Net Sales United States $ 1,012,090 $ 977,587 $ 864,683 Canada 202,899 194,723 197,039 Europe 238,320 260,607 213,681 Other International 100,348 128,138 135,925 - -------------------------------------------------------------------------------- Total Net Sales $ 1,553,657 $ 1,561,055 $ 1,411,328 ================================================================================ Operating Profit United States $ 154,350 $ 162,800 $ 134,753 Canada 10,351 14,673 15,773 Europe 8,465 37,715 32,016 Other International 10,376 19,710 17,642 Corporate (13,988) (22,937) (23,425) - -------------------------------------------------------------------------------- Total Operating Profit $ 169,554 $ 211,961 $ 176,759 ================================================================================ Assets United States $ 874,568 $ 1,079,451 $ 842,661 Canada 91,367 81,570 83,510 Europe 148,715 151,950 141,011 Other International 17,400 19,773 14,918 Corporate 43,397 46,987 49,383 - -------------------------------------------------------------------------------- Total Assets $ 1,175,447 $ 1,379,731 $ 1,131,483 ================================================================================ 28 Crane Co. 1999 Annual Report Management's Responsibility for Financial Reporting The accompanying consolidated financial statements of Crane Co. and subsidiaries have been prepared by management in conformity with generally accepted accounting principles and, in the judgment of management, present fairly and consistently the company's financial position and results of operations and cash flows. These statements by necessity include amounts that are based on management's best estimates and judgments and give due consideration to materiality. The accounting systems and internal accounting controls of the company are designed to provide reasonable assurance that the financial records are reliable for preparing consolidated financial statements and maintaining accountability for assets and that, in all material respects, assets are safeguarded against loss from unauthorized use or disposition. Qualified personnel throughout the organization maintain and monitor these internal accounting controls on an ongoing basis. In addition, the company's internal audit department systematically reviews the adequacy and effectiveness of the controls and reports thereon. The consolidated financial statements have been audited by Deloitte & Touche LLP, independent auditors, whose report appears on this page. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with management and with the company's internal auditors and independent auditors to review matters relating to the quality of financial reporting and internal accounting control and the nature, extent and results of their audits. The company's internal auditors and independent auditors have free access to the Audit Committee. /s/ R. S. Evans R. S. Evans Chairman and Chief Executive Officer /s/ D. S. Smith D. S. Smith Vice President,Finance and Chief Financial Officer Independent Auditors' Report [LOGO OF DELOITTE & TOUCHE LLP] To The Shareholders of Crane Co. We have audited the accompanying consolidated balance sheets of Crane Co. and its subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, cash flows and changes in common shareholders' equity for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Crane Co. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Stamford, Connecticut January 20, 2000 29 Crane Co 1999 Annual Report 1998 Review Management's Discussion and Analysis of Operations Engineered Materials - -------------------------------------------------------------------------------- (dollars in millions) 1998 1997 - -------------------------------------------------------------- Sales $279.0 $225.6 Operating Profit 39.7 30.1 Operating Margins 14.2% 13.3% - -------------------------------------------------------------- Operating profit rose 32% on a 24% increase in sales in the Engineered Materials segment, reflecting substantial growth at Kemlite and the acquisition of Sequentia. Strong transportation and building supply markets benefited Kemlite, Sequentia, and CorTec, which all manufacture fiberglass-reinforced plastic (frp) materials. Partly offsetting their results were a small loss at Crane Plumbing and modestly lower earnings at Resistoflex. Order backlog was $24 million at year end compared with $29 million in 1997. Increasing use of lightweight, thermally efficient frp roofs for refrigerated trucks and trailers and translucent frp roofs in dry van trailers and trucks, along with strong markets for truck and trailer liner panels, recreational vehicle panels and building panels,boosted Kemlite's sales in 1998. The increased volume, coupled with successful cost reduction efforts,led to improved margins and record operating profits. The substitution of translucent frp roofs for aluminum on dry van trailers appeared to plateau, but the use of non-translucent frp roofs on refrigerated trucks and trailers increased. In addition, Korean container manufacturers increased their purchases of Kemlite frp panels in 1998. Crane's $125 million acquisition of Sequentia Holdings in August 1998 significantly expanded Kemlite's penetration of the corrugated, translucent and flat embossed building products markets, particularly in the home center chains. Crane bought Sequentia's transportation product line in early 1997. CorTec reported a profit gain on increased sales, consistent with strong medium truck and dry van trailer markets. Resistoflex modestly increased sales of its corrosion-resistant plastic-lined pipes and fittings, despite lagging demand from the chemical process industry and soft export markets. The September acquisition of Plastic-Lined Piping Products (PLPP), a competitor,for $23 million boosted sales, but overall margins and operating profits were moderately lower. The company's primarily military aerospace fittings business was strong in 1998, with profitability enhanced by new machining centers, but competition for new military contracts intensified. Marginally profitable in 1997, Crane Plumbing operated at a small loss on an 8% decline in revenue in 1998, prompting a management change. The Montreal-based company makes china, steel and acrylic plumbing fixtures for new construction, repair and renovation, serving residential, industrial, commercial and institutional markets, primarily in Canada.In spite of well-received new lavatory products, wholesale demand dipped on a nationwide decline in housing starts, particularly in Quebec and in British Columbia. Retail sales, however,rose 21%, as Crane gained major home centers and hardware chains as customers. Polyflon, which provides proprietary materials and circuit processing services to the microwave industry, had level profits on slightly lower sales, as a better business mix strengthened margins. Merchandising Systems - -------------------------------------------------------------------------------- (dollars in millions) 1998 1997 - -------------------------------------------------------------- Sales $191.9 $179.9 Operating Profit 33.5 31.0 Operating Margins 17.5% 17.3% - -------------------------------------------------------------- The Merchandising Systems segment turned in a solid overall performance in 1998, with increased sales and operating profits that reflected both energetic sales efforts and successful cost-cutting. National Vendors, the larger of the segment's two businesses, reported moderate sales gains and maintained its strong margins and profits, while the other business, National Rejectors, improved its margins and profits on slightly lower sales. Order backlog totaled $22 million at December 31, 1998, up 20% over 1997. National Vendors moved ahead briskly on several fronts in 1998, achieving increased sales and higher profits domestically and in Europe. National Vendors' UMC unit in the U.K. had its best year ever,and the company's German operation also improved its performance, as corporate downsizing and cost-cutting resulted in substitution of vending machines for employee cafeterias. National Vendors also began selling in China, a promising market, and strengthened its Latin American operations by establishing three distributors in Mexico and expanding its operations in Chile and Colombia. National Vendors reduced from 58 to 26 the number of distributors for its "GPL"brand of machines, intended as a lower-cost 30 Crane Co 1999 Annual Report solution for smaller operators. The network now includes only one GPL distributor in most major metropolitan markets in order to avoid overlaps with other GPL distributors or with National Vendors' direct sales. The use of exclusivity is aimed at sharpening the distributor's focus on GPL products. Internationally, GPL sales expanded in Canada and the U.K., contributing to record National Vendors shipments in both countries. National Rejectors' shipments of coin-validation machines were down modestly from 1997. Weakness in the amusement industry and stiffer competition in the U.K. and Spain, two major markets, off-set continuing strong sales of validators for outdoor cigarette machines in Germany. Cost reductions, product redesign and productivity improvements strengthened NRI's margins, resulting in a solid gain in profits. In the past two years, NRI has upgraded many of Germany's estimated 800,000 mechanical outdoor cigarette machines with new electronic validators that can be programmed to accept euro coins when they are introduced in 2002. However, many more cigarette machines, and several hundred thousand other vending machines, remain to be refitted, promising strong sales of NRI products in Germany and Europe in coming years. NRI derives some 57% of its revenue from Germany and 40% from other European markets, including Spain and the U.K., where its German-made validators compete with locally made products. NRI also sells to other international markets, supplying validators for Canada's lottery machines, for example, and validators and coin-changers for South American markets. Aerospace - -------------------------------------------------------------------------------- (dollars in millions) 1998 1997 - -------------------------------------------------------------- Sales $394.5 $343.9 Operating Profit 118.2 90.1 Operating Margins 30.0% 26.2% - -------------------------------------------------------------- Crane's aerospace businesses were extremely strong in 1998, increasing their combined operating profits by 31% on a 15% gain in sales. All four businesses in the segment reported higher sales, and three had higher earnings fueled by strong commercial, business and general aviation markets. Order backlog totaled $281 million at year end, compared with $297 million in 1997. Record Results for Hydro-Aire Hydro-Aire, the world market leader in aircraft anti-skid brake control systems, turned in a record performance, with operating profits up 23% on a 19% increase in sales. Every Boeing airplane uses its high-performance brake control systems, and many use its fuel pumps. For instance, the high-volume Boeing 737-700 series incorporates many Hydro-Aire products, including brake control units, wheelspeed transducers, anti-skid control valves, jettison pumps and boost pumps. After-market sales of parts and repair and overhaul services also grew substantially. With its brake control systems on all Embraer and many Bombardier aircraft, Hydro-Aire further strengthened its position in regional jets in 1998, winning the brake control systems on the Dornier 528, 728 and 928. It also won the brake control systems contract for a new Raytheon Beech business jet. ELDEC, Crane's largest aerospace business, also set sales and earnings records in 1998,increasing its operating profits by 41% on a sales gain of 15%. Strong OEM sales, particularly to Boeing, fueled the increases. ELDEC is a market leader in proximity sensing systems, battery systems, transformer rectifiers and fuel flowmeters. During 1998, both Rolls Royce and Pratt & Whitney chose ELDEC's new solid-state pressure transducers, designed for high accuracy under harsh conditions,for their new aircraft engines. In its power supply business, ELDEC has developed strong relationships with such major aerospace equipment suppliers as the U.K.'s Smiths Industries, positioning the company to provide power supplies for products such as avionics on the planned Eurofighter. After successfully implementing an Enterprise Resource Planning system in 1997, ELDEC improved its internal operations in 1998, increasing its on-time deliveries to customers. In its second full year as a Crane company, Interpoint had record results, with operating profits rising 55% on a 10% increase in sales, as the company cut costs while increasing output, reorganized and refocused on growth opportunities in the custom, medical and space markets. Interpoint makes proprietary, high-density power converters and microelectronic hybrid devices and is the only Class K, space-qualified supplier of dc-to-dc power converters. Satellites typically use scores of these highly reliable, lightweight devices. In addition, Interpoint has a small but growing share in the expanding markets for medical electronic devices included in products such as pacemakers, defibrillators, heart assist pumps, surgical saws and insulin pumps. Significant up-front engineering investments on recent development programs, critical to sustaining the business, modestly reduced Lear Romec's margins and operating profits, despite a 10% increase in sales. Commercial OEM markets for Lear Romec's lubrication and scavenge pumps and centrifugal fuel pumps were strong, as were general aviation, regional and business jet markets, while military sales were flat. Aftermarket sales, including civilian and military spares and repair and overhaul contracts, increased substantially. Sales of parts manufactured for Hydro-Aire also increased. Continuing cost reductions and productivity improvements, including cell manufacturing, helped Lear Romec compete successfully in price-sensitive markets. 31 Crane Co 1999 Annual Report Fluid Handling - -------------------------------------------------------------------------------- (dollars in millions) 1998 1997 - -------------------------------------------------------------- Sales $557.8 $499.8 Operating Profit 35.0 36.9 Operating Margins 6.3% 7.4% - -------------------------------------------------------------- Sales increased 12% in the Fluid Handling segment in 1998, but operating profits declined by 5%, as markets for many of its products -- valves, pumps and water treatment systems -- worsened as the year progressed. The increase was derived from acquisitions and strong first-half sales for many of the businesses in the group. The gain was smaller than expected as a result of Asia's economic problems and plunging oil prices, which constrained capital goods purchases and intensified price competition worldwide. Canadian-based Crane Supply sales and profits were slightly down and losses in commercial valves and profit declines in water treatment systems more than offset solid gains in engineered valves. Order backlog totaled $79 million, down $34 million from the prior year. In the engineered valve group, most of the cast steel, butterfly and check valve businesses performed well, with solid sales gains and modest profit increases fueled in part by the addition of the Stockham businesses, acquired in December, 1997. Crane Australia, which makes steel valves for the oil and gas and petrochemical industries, had slightly lower sales and earnings. Crane's manufacturing joint venture in Ningjin, China, had a strong year, increasing shipments 95% over the prior year. Westad, Crane's marine valve manufacturer in Norway, increased its sales and earnings in 1998, but sales are expected to drop sharply in 1999 as a result of the decline in Korean shipbuilding. In Crane's service business, which varies with utilities' nuclear plant outages, sales and profits declined as expected after an exceptionally strong 1997. In commercial valves, difficulties in absorbing Stockham's bronze production led to supply shortages and lost business, contributing to a loss for the year. In addition, Crane U.K. installed a new business system, and right- sized the business for current market conditions, which were down 13% from the prior year. As a result, $3.2 million of restructuring costs were incurred in 1998, producing a loss for the year. Sales and earnings were up slightly at Crane Pumps & Systems. Individual brands' results varied as the company's products serve major municipal, military and industrial markets. Barnes commercial pumps and pressure sewer products performed well. Burks Pumps, which serves the original equipment machinery market, was impacted by the reduction in capital spending in the semiconductor industry, and sales of Weinman's HVAC pumps were constrained by depressed high-rise construction in the Far East. Deming benefited from a large order for pumps used in hazardous material destruction. Government orders generally were down as military spending continued to decline. Deferral of major project awards in the chemical process and automotive industries affected sales and profits at Chempump and Process Systems, though not their market share. The May 1998 acquisition of Environmental Products USA, a manufacturer of state-of-the-art, membrane-based water treatment systems, helped Cochrane reposition its business away from heavy industrial filtration markets toward light industrial, beverage and other potable water treatment systems. With the acquisition, over-all sales rose but profits were off sharply from 1997 as Cochrane's important Asia markets weakened and industry pricing pressures intensified. Canadian-based Crane Supply sales and operating profits were down slightly in U.S. dollar terms but it was able to maintain its operating margins at 6.2% of sales. In Canadian dollars, Crane Supply achieved modestly higher profits on a solid sales increase that reflected share gains in generally flat Canadian markets. Controls - -------------------------------------------------------------------------------- (dollars in millions) 1998 1997 - --------------------------------------------------------------- Sales $132.3 $131.5 Operating Profit 8.9 11.6 Operating Margins 6.7% 8.9% - --------------------------------------------------------------- Sales increased marginally in the Controls segment in 1998, but operating profits fell by 23% as Crane's businesses faced weak export markets and stiffening price competition. Order backlog totaled $28 million at year end, compared with $32 million in 1997. Barksdale continued to win acceptance in domestic and European markets for its unique air suspension valves, but operating profits dropped on flat sales. In oil and gas markets, traditionally Barksdale's most profitable, demand fell sharply as oil prices sank. The costs of implementing an Enterprise Resource Planning system offset positive initial results from Six Sigma cost reduction projects. Ferguson's domestic and European businesses felt the ripple effect of lagging machinery exports to Asia, Latin America and Eastern Europe, which led to softening of capital equipment markets in the U.S. and Europe. Overall sales and operating profits declined, as did bookings, except in automotive assembly equipment. Ferguson supplies machinery manufacturers with products and devices ranging from indexers and pick-and-place robots to rotary tables and custom cams. A fall-off in sales of large indexers, typically used in large installations, stemmed from both the Asian downturn and the long General Motors strike. Lower overall volume and a less favorable product mix resulted, reducing margins and operating profits. 32 Crane Co 1999 Annual Report A moderate decline in sales and bookings and a larger drop in operating profits marked 1998 for Powers Process Controls. Shipments of Powers' core products -- water-mixing and thermal shock protection shower systems, water and process controls, valves and temperature regulators -- slipped in the face of stiffening price competition and newer technology. Powers' Canadian plumbing brass operation encountered supply chain problems in the second half of the year, reducing sales and profits. Acquisition of a new product line and strong sales to agricultural equipment OEMs increased Dynalco's volume, while improved margins led to a solid gain in profits. Dynalco acquired Liberty Technologies' Beta line of engine and compressor analyzers in September, when the rest of Liberty was acquired by Crane Nuclear. These products serve essentially the same markets as Dynalco's speed, temperature and pressure sensors and controls for rugged environments. Azonix Corporation, whose man-machine interface (MMI) products for hazardous environments are already dominant in domestic oil and gas exploration, increased sales by expanding into focused harsh environment applications. Operating profits were level with strong 1997 results, largely because of a lower-margin product mix. Sales of higher-margin measurement and control products also gained in 1998, but overall bookings fell, primarily reflecting the oil industry downturn. - -------------------------------------------------------------------------------- Liquidity and Capital Resources Cash Flow Operating activities in 1999 generated $211 million in cash flow, allowing the company to invest $33 million expanding its core businesses by making an acquisition, invest $29 million in capital equipment and return $151 million to shareholders through dividends and share repurchases. This represents the sixth consecutive year that Crane has generated cash in excess of $100 million from operations and the first year over $200 million. Net cash used for investing decreased compared with the prior year, mainly because of the four acquisitions made in 1998. Capital expenditures in 1999 totaled $29 million and primarily funded manufacturing and business process system projects. Net cash used for financing activities in 1999 includes $124 million for the repurchase of 6 million shares of Crane common stock and $27 million for the payment of dividends. Debt repayments totaled $289 million. Capital Structure The following table sets forth the company's capitalization: (dollars in thousands) December 31 1999 1998 - ------------------------------------------------------------------------- Short-term debt $ 13,656 $ 50,869 Long-term debt 286,772 357,710 - ------------------------------------------------------------------------- Total debt 300,428 408,579 Less cash 3,245 16,195 - ------------------------------------------------------------------------- Total net debt 297,183 392,384 Shareholders' equity 568,110 643,234 - ------------------------------------------------------------------------- Total capitalization $865,293 $1,035,618 % of net debt to shareholders' equity 52.3% 61.0% % of net debt to total capitalization 34.3% 37.9% - ------------------------------------------------------------------------- As of December 31, 1999, the company had unused domestic lines of credit totaling $150.0 million and unused foreign lines of credit totaling $48.9 million. These lines of credit are typically available for borrowings up to 364 days and are renewable at the option of the lender. Short-term obligations of $46.8 million at December 31, 1999, and $150 million at December 31, 1998, were classified as long-term debt because the company had entered into finance agreements that permit it to refinance short-term obligations on a long-term basis. At December 31, 1999, the company had a $300 million contractually committed long-term bank credit facility under which the company can borrow, repay or, to the extent permitted by the agreement, prepay loans and reborrow at any time prior to the termination date of November 2003. Proceeds may be used for general corporate purposes or to provide financing for acquisitions. The agreement contains certain covenants, including limitations on indebtedness and liens. A loan for $20 million was outstanding under this agreement at year end. The company has a $300 million shelf registration filed with the Securities and Exchange Commission, all of which remains unissued. Crane is a party to a contractually committed off-balance sheet chattel paper financing facility that enables its National Vendors operation to offer various sales support financing programs to its customers. Recourse to Crane for all uncollectible loans made to National Vendors' customers by the banks under this agreement is limited. In addition, the company's U.K. subsidiary was also party to a contractually committed long-term line of credit in the U.K. This facility permits borrowing up to $3.2 million, all of which was outstanding at December 31, 1999. The company's Canadian subsidiary was party to a contractually committed long-term line of credit in Canada. This facility permits borrowing of up to $17.3 million, of which $13.8 million was outstanding at December 31, 1999. As of December 31, 1999, the company's senior unsecured debt was rated BBB+ by Standard and Poor's and Baa1 by Moody's Investors Service. The company believes it has adequate access to both public and private credit markets to meet all of its operating and strategic objectives. 33 Crane Co 1999 Annual Report Environmental The company continues to be involved in various remediation actions to clean-up hazardous wastes as required by federal and state laws. Estimated future environmental remediation cost was $10.0 million at December 31, 1999, which was fully accrued. In certain of these actions, the company is one of several potentially responsible parties ("PRPs"). As a PRP, the company could be liable for all clean-up cost despite the involvement of other PRPs. Given the financial stability of the other PRPs, the company believes this is unlikely, and the accrual represents management's best estimate, based on current facts and circumstances, with respect to the ultimate liability that will be apportioned to the company. The company spent $2.1 million on environmental costs in 1999, and expects to pay remediation costs of approximately $2.6 million in 2000. The annual level of future remediation expenditures is difficult to estimate because of the many uncertainties relating to conditions of individual sites as well as uncertainties about the status of environmental laws and regulations and developments in remedial technology. In addition, the company is a minor/de minimis potentially responsible party (PRP) at certain third-party environmental remediation sites where remediation obligations are joint and several, and the company, as part of its estimate of potential liability, periodically reviews whether the major PRPs have the ability to fulfill their portion of such remediation obligations. The company is not aware of any significant additional liability that would result from the inability of other PRPs to fulfill their obligations. Overall, the company's liability for the required remedial actions being implemented or engineered is not, individually or in the aggregate, expected to be material. Impact of the Year 2000 The Year 2000 Issue related to most computer software programs using two digits, rather than four, to define the applicable year for dates. Any of the company's information technology (IT) and non-information technology (non-IT) systems and its products might have recognized a date using "00" as the year 1900, rather than the year 2000. This could have resulted in system failures or miscalculations, causing disruptions in operations, including the inability to process transactions and engage in similar normal business activities within the company and with third parties. In 1997, Crane initiated a program to address the company's Year 2000 exposure. The program was substantially completed on schedule in 1999. Crane experienced no material adverse effects related to the arrival of 2000. Cost of the Year 2000 program was approximately $28.3 million, of which $10.0 million was expensed and $18.3 million was capitalized. These costs were funded from normal operating cash flows of the business. Estimated future costs related to the Year 2000 program are insignificant. The company believes that modifications and conversions of its software and hardware systems were successful. However, there remains the possibility of latent Year 2000 problems in systems that could cause a failure in the company's systems. Such failure could result in an interruption in, or a failure of, certain normal business activities or operations, which could have a material adverse effect on the company's results of operations, liquidity or financial condition. The company believes that such an occurrence is unlikely. However, based on current information, the most reasonably likely worst-case scenario would involve the temporary disruption of the company's ability to fulfill customer orders, and no material adverse effect on the company's financial condition is expected from this specific scenario. Quantitive and Qualitive Disclosures about Market Risks 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 markets risks through internally established policies and procedures and, when deemed appropriate, through the use of interest rate swap agreements and forward exchange contracts. Long-term debt outstanding of $287 million at December 31, 1999, was generally at fixed rates of interest ranging from 6.68% to 8.50%. At December 31, 1999, 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. Risk Factors Throughout this Annual Report to shareholders, particularly in the Chairman's Letter to Shareholders on pages 2-4 and in the sections of Management's Discussion and Analysis of Operation on pages 6-14 the company makes numerous statements about expectations of future performance and market trends, and statements about plans and objectives and other matters, which because they are not historical fact may constitute "forward looking statements" within the meaning of the Private Securities and Litigation Reform Act of 1995. Similar forward looking statements are made periodically in reports to the Securities and Exchange Commission, press releases, reports, and documents and in written and oral presentations to investors, shareholders, analysts and others, regarding future results or expected developments. Because the company wishes to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, readers are cautioned to consider, among others, the risk factors that will be described in the company's Form 10-K for the period ended December 31, 1999, to be filed with the Securities and Exchange Commission before March 31, 2000, when evaluating such forward looking statements about future results or developments. Copies of the company's Form 10-K can be obtained after it is filed by writing to the company at the address on the back cover, from the Securities and Exchange Commission, or through the Internet at the company's Web site at www.craneco.com. 34 Crane Co 1999 Annual Report Five Year Summary of Selected Financial Data
Years Ended December 31, (in thousands except per share data) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net Sales $1,553,657 $1,561,055 $1,411,328 $1,252,544 $1,211,454 Depreciation and Amortization 61,280 55,873 50,991 44,474 43,537 Operating Profit 169,554(a) 211,961 176,759 144,049 124,059 Interest Expense 27,854 27,661 23,632 23,203 26,528 Income Before Taxes 155,795(a) 192,789 161,022 124,263 101,374 Provision for Income Taxes 54,897 67,947 57,306 44,441 36,888 - ------------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations 100,898(a) 124,842 103,716 79,822 64,486 - ------------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations per Diluted Share 1.50(a) 1.80 1.50 1.16 0.94 Cash Dividends per Common Share 0.40 0.37 0.33 0.33 0.33 Total Assets 1,175,447 1,379,731 1,131,483 1,035,311 951,835 Long-Term Debt 286,772 357,710 259,001 265,721 278,553 ====================================================================================================================================
Quarterly Results for the Year
Years Ended December 31, (in thousands except per share data) First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------------------------------ 1999 Net Sales $ 400,046 $ 405,268 $ 384,193 $ 364,150 $1,553,657 Cost of Sales 261,255 265,336 270,684 255,481 1,052,756 Depreciation and Amortization(b) 12,603 12,667 12,537 14,524 52,331 Gross Profit 126,188 127,265 100,972 94,145 448,570 Income from Continuing Operations 32,435 36,098 18,347 14,018 100,898(a) Net Income 33,666 39,311 22,355 19,238 114,570(a) Income from Continuing Operations per Diluted Share 0.47 0.53 0.27 0.22 1.50(a) ==================================================================================================================================== 1998 Net Sales $ 379,959 $ 390,618 $ 393,229 $ 397,249 $1,561,055 Cost of Sales 252,283 254,368 254,776 256,221 1,017,648 Depreciation and Amortization(b) 10,296 9,768 12,019 12,490 44,573 Gross Profit 117,380 126,482 126,434 128,538 498,834 Income from Continuing Operations 28,933 33,944 31,672 30,293 124,842 Net Income 29,899 36,557 36,775 35,207 138,438 Income from Continuing Operations per Diluted Share 0.42 0.49 0.46 0.44 1.80 ====================================================================================================================================
(a) Includes special charges of $34,987 ($22,567 after tax or $.33 per share) (b) Amount included in cost of sales. Note: Earnings per share are computed independently for each of the quarters presented. Therefore,the sum of the quarters' earnings per share in 1999 and 1998 does not equal the total computed for the year. Market and Dividend Information--Crane Co. Common Shares
New York Stock Exchange Composite Price Per Share Dividends Per Share - ---------------------------------------------------------------------------------------------------------------------------------- 1999 1999 1998 1998 1999 1998 Quarter High Low High Low - ---------------------------------------------------------------------------------------------------------------------------------- First $31 1/2 $23 3/16 $35 1/2 $26 3/4 $ .1000 $ .0825 Second 32 3/4 23 11/16 37 9/16 31 .1000 .0825 Third 30 $21 1/2 35 43/64 23 5/16 .1000 .1000 Fourth 23 3/8 16 1/6 $32 3/4 21 3/4 .1000 .1000 - ---------------------------------------------------------------------------------------------------------------------------------- On December 31, 1999, there were approximately 5,100 holders of record of Crane Co. common stock. $.4000 $.3650 --------------------------
35 Crane Co. 1999 Annual Report Corporate Information Directors E.Thayer Bigelow, Jr. (1, 3) Senior Advisor, Time Warner, Inc. Media and Entertainment Robert S. Evans (1) Chairman and Chief Executive Officer of the Company Eric C. Fast President and Chief Operating Officer of the Company Richard S. Forte (2) President, Dawson Forte Cashmere Company Importer Dorsey R. Gardner (2, 3) President, Kelso Management Company,Inc. Investment Management John J. Lee (2) Chairman and Chief Executive Officer of Hexcel Corporation Manufacturer of Composite Materials and Engineered Products William E. Lipner Chairman, President and Chief Executive Officer NFO Worldwide, Inc. Marketing Information / Research Services Worldwide Dwight C. Minton (1, 3) Chairman, Church & Dwight Co.,Inc. Manufacturer of Consumer and Specialty Products Charles J. Queenan, Jr. (2) Senior Counsel, Kirkpatrick & Lockhart LLP Attorneys at Law James L. L. Tullis (1, 3) Chairman, Tullis-Dickerson & Co. Venture Capital to Health Care Industry Corporate Officers Robert S. Evans Chairman and Chief Executive Officer Eric C. Fast President and Chief Operating Officer Gil A. Dickoff Treasurer Augustus I. DuPont Vice President, General Counsel and Secretary Bradley L. Ellis Vice President, Chief Information Officer Thomas M. Noonan Vice President, Taxes John R. Packard Vice President, Human Resources Anthony D. Pantaleoni Vice President, Environment, Health and Safety Michael L. Raithel Vice President, Controller David S. Smith Vice President, Finance and Chief Financial Officer (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Organization and Compensation Committee 36 Crane Co. 1999 Annual Report Shareholder Information Crane Co. Internet Homepage and Shareholder Information Line Copies of Crane Co.'s report on Form 10-K for 1999 as filed with the Securities and Exchange Commission as well as other financial reports and news from Crane Co. may be read and downloaded off the Internet at www.craneco.com. If you do not have access to the Internet, you may request printed materials by telephone, toll-free, from our Crane Co. Shareholder Direct(R) hotline 1-888-CRANECR (1-888-272-6327). Both services are available 24 hours a day,7 days a week. Annual Meeting The Crane Co. annual meeting of shareholders will be held at 10:00 A.M. on Monday, April 10, 2000 at the Westin Stamford Hotel, One First Stamford Place, Stamford, CT 06902. Stock Listing Crane Co. common stock is traded on the New York Stock Exchange,listed under the symbol "CR". Auditors Deloitte & Touche LLP Stamford Harbor Park Stamford, CT 06902 Equal Employment Opportunity Policy Crane Co. is an equal opportunity employer. It is the policy of the company to recruit, hire, promote and transfer to all job classifications without regard to race, color, religion, sex, age, disability or national origin. Environment, Health & Safety Policy Crane Co. is committed to protecting the environment and will strive to protect the biosphere by taking responsibility to prevent serious or irreversible environmental degradation through efficient operations and activities. Crane Co. recognizes environmental management among its highest priorities throughout the corporation, and has established policies and programs which are integral and essential elements of the business plan of each of the business units. Additionally, Crane Co. has established the position of Vice President- Environment, Health and Safety, which is responsible for assuring compliance, measuring environmental performance and conducting regular environmental audits in order to provide appropriate information to the Crane Co. management team and to regulatory authorities. Stock Transfer Agent and Registrar of Stock EquiServe/First Chicago Trust Division Customer Service: 1-201-324-1225 Non-Postal Deliveries 525 Washington Blvd. Jersey City, NJ 07310 Dividend Reinvestment & Optional Payments P.O. Box 13531 Newark, NJ 07188-0001 General Correspondence & Changes of Address P.O. Box 2500 Jersey City, NJ 07303-2500 Transfer of Stock Certificates P.O. Box 2506 Jersey City, NJ 07303-2506 Bond Trustee and Disbursing Agent The Bank of New York Corporate Trust Department 1-800-438-5473 101 Barclay Street -- 7 East New York, NY 10286 Dividend Reinvestment and Stock Purchase Plan Crane offers shareholders the opportunity to participate in a Dividend Reinvestment and Stock Purchase Plan. The plan provides two convenient methods for increasing your investment in Crane Co. common shares, without paying fees and commissions. Dividend Reinvestment: for all or part of your dividends on Crane common shares; and Voluntary Cash Payments:of any amount from $10 to a maximum of $5,000 a month. Under terms of the Plan, EquiServe/First Chicago Trust Division will act as agent for shareholders interested in purchasing additional Crane common shares automatically, on a regular basis. The details of this plan and its benefits to you as a Crane shareholder are described in a brochure available by writing to: EquiServe/First Chicago Trust Division Dividend Reinvestment Plan Crane Co. P.O. Box 2598 Jersey City, NJ 07303-2598 37 Crane Co 1999 Annual Report - ------- CRANE - ------- Crane Co. Executive Offices 100 First Stamford Place Stamford, CT 06092 (203) 363-7300 www.craneco.com EX-21 6 SUBSIDIARIES OF THE REGISTRANT CRANE CO. Exhibit 21 to FORM 10-K Annual Report for the Year Ended December 31, 1999 Subsidiaries of Registrant The following is a list of active subsidiaries of the registrant and their jurisdictions of incorporation. Except as noted, all of these subsidiaries are wholly owned, directly or indirectly, and all are included in the consolidated financial statements. The names of several other subsidiaries have been omitted, as they would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary. Cochrane, Inc Delaware Crane Australia Pty., Ltd. Australia P.T. Crane Indonesia (51%) Indonesia Crane GmbH Germany National Rejectors, Inc. GmbH Germany NRI Iberica, S.A. Spain Crane International Holdings, Inc. Delaware Crane Canada, Inc. Canada Crane Capital Corporation, LLC Delaware Crane Center-Line Valve Co. Delaware Crane Ningjin Valve Co., Ltd. (70%) China Crane FSC Corporation Barbados Crane Ltd. England Crane Europe Ltd. Scotland Grenson Electronics Ltd. England Stockham Valve Ltd. England UMC Industries Ltd. England Stentorfield Ltd. England Crane Pumps & Systems, Inc. Delaware Barnes Pumps, Inc. Ohio Barnes Pumps Canada, Inc. Ontario Dyrotech Industries, Inc. Delaware ELDEC Corporation Washington ELDEC France S.A.R.L. France Ferguson Machine Co. S.A. Belgium Hydro-Aire, Inc. California Interpoint Corporation Washington Interpoint GmbH Germany Interpoint S.A.R.L. France Interpoint Taiwan Corporation Republic of China Interpoint U.K. Ltd. England (continued) Subsidiaries of Registrant (continued) Kemlite Company, Inc. Delaware Sequentia Incorporated Ohio Mark Controls Corporation Delaware Azonix Corporation Massachusetts Azonix S.A.R.L. France Barksdale, Inc. Delaware Barksdale Control Products GmbH Germany Dynalco Controls Corporation Delaware Mark Controls Norway A/S Norway Westad Industri A/S Norway Powers Process Controls, Ltd. Ontario Resistoflex (Asia) Pte., Ltd. Singapore Kessel (Thailand) Pte., Ltd. (49%) Thailand Resistoflex Sdn. Bhd. Malaysia Crane Nuclear, Inc. Delaware Stockham Valve Australia Pty., Ltd. Australia EX-23 7 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-50489 on Form S-8, Registration Statement No. 333-50487 on Form S-8, Registration Statement No. 333-50495 on Form S-8, Registration Statement No. 33-53709 on Form S-3, Registration Statement No. 33-36735 on Form S-8, Post- Effective Amendment No. 1 to Registration Statement No. 33-59389 on Form S- 8, Post-Effective Amendment No. 1 to Registration Statement No. 33-59475 on Form S-8 and Registration Statement No. 333-16555 on Form S-8 of our report dated January 20, 2000, appearing in and incorporated by reference in this Annual Report on Form 10-K of Crane Co. for the year ended December 31, 1999. /s/ DELOITTE & TOUCHE LLP Stamford, Connecticut February 28, 2000 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CRANE CO.'S CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999, CRANE'S CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR 1999 AND THE RELATED NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS, THAT ARE CONTAINED IN CRANE'S 1999 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1999 DEC-31-1999 3,245 0 206,468 0 259,474 505,160 579,263 322,614 1,175,447 233,515 286,772 0 0 62,802 505,308 1,175,447 1,553,657 1,553,657 1,052,756 1,384,103 4,345 0 18,104 155,795 54,897 100,898 13,672 0 0 114,570 1.71 1.70
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