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
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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%
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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
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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)%
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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%
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(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
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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
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Strong Gains in Engineered Materials
(dollars in millions) 1999 1998
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Sales $357.1 $279.0
Operating Profit 59.9* 39.7
Operating Margins 16.8% 14.2%
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*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.
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Business Unit Products Markets Served
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Kemlite Fiberglass-reinforced plastic (frp) panels used as Recreational vehicle, truck trailer and
side-walls and roofs commercial and residential construction
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CorTec Fiberglass-reinforced laminated composite panels Trucks and truck trailers, special-purpose
trailers, marine houseboats and general construction
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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
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Crane Plumbing Plumbing and sanitary fixtures Residential, industrial, commercial and
institutional construction and renovation markets in
Canada
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Polyflon Microwave laminates, circuit processing, high-voltage Wireless communications, magnetic resonance imaging,
RF capacitors, radomes microwave and radar system manufacturers
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Crane Co 1999 Annual Report 7
Merchandising Systems
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Sales, Operating Profit Growth in Merchandising Systems
(dollars in millions) 1999 1998
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Sales $201.9 $191.9
Operating Profit 35.8 33.5
Operating Margins 17.7% 17.5%
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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
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Business Unit Products Markets Served
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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
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National Rejectors, Inc. Electronic coin validators and changers, chip card Automated merchandising
GmbH (NRI) cash-less payment systems
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Aerospace
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Decline in Aerospace Sales, Operating Profit
(dollars in millions) 1999 1998
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Sales $363.1 $394.5
Operating Profit 96.1* 118.2
Operating Margins 26.5% 30.0%
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*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
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Business Unit Products Markets Served
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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
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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
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Lear Romec Lubrication and fuel pumps for aircraft, engines Commercial and military aerospace, defense industry
and radar cooling systems
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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
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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
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CRANE
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Crane Co.
Executive Offices
100 First Stamford Place
Stamford, CT 06092
(203) 363-7300
www.craneco.com