<PAGE>
CRANE CO.
ANNUAL REPORT - FORM 10-K
YEAR END DECEMBER 31, 1994
<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1994
-----------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-1657
------
CRANE CO.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1952290
- ------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
100 First Stamford Place, Stamford, CT 06902
- ---------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 363-7300
-------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
----------------------- -------------------------
Common shares, par value $1.00 New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
7 1/4% senior notes due June, 1999
8 1/2% senior notes due March, 2004
-------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2)has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
Based on the closing sales price of January 31, 1995 the aggregate market value
of the voting stock held by nonaffiliates of the registrant was $822,737,968.
The number of shares outstanding of the registrant's common stock, $1.00 par
value was 30,054,355 at January 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the annual shareholders report for the year ended December 31, 1994
are incorporated by reference into Parts I, II and IV.
Portions of the proxy statement for the annual shareholders meeting May 8, 1995
are incorporated by reference into Parts I and III.
<PAGE>
PART I
------
Item 1. Business
--------
Crane is a diversified manufacturer of engineered industrial products
and the nation's largest American distributor of doors, windows and millwork.
Founded in 1855, Crane employs over 10,700 people in North America, Europe,
Asia and Australia.
Strategy
--------
The company's strategy is to grow the earnings of niche businesses
with high market share, build an aggressive and committed management team
whose interests are directly aligned to those of the shareholders, and
maintain a focused, efficient corporate structure.
Acquisitions
------------
In the past five years, the company has completed ten acquisitions.
The company completed three acquisitions at a total cost of $240 million in
1994. These three entities had aggregate net sales of approximately $300
million for the year ended December 31, 1993.
The company, through its wholly-owned subsidiary Huttig Sash & Door
Company, acquired a moulding and millwork manufacturing operation in
Prineville, Oregon in May 1994.
In April, 1994, the company purchased Mark Controls Corporation, a
manufacturer of automatic and manually operated valves, and specialized
instruments and controls, for commercial and industrial customers.
The company acquired ELDEC Corporation in March 1994. ELDEC's products
are used worldwide on all major commercial and business aircraft and include:
position indication and control systems, proximity switches and components,
true mass fuel flowmeters, and power conversion components and systems.
In 1993, the company completed five acquisitions at a total cost of
$106 million. In December, the company acquired Burks Pumps, Inc., which has
manufacturing facilities in Piqua, Ohio and Decatur, Illinois and provides
engineered pumps for an array of specialized commercial, industrial and
municipal fluid handling applications. The products are marketed under the
Barnes, Burks, Weinman and Prosser brand names. Also included was a line of
tank cleaning equipment sold under the Sellers brand name for the industrial
clean-in-place market. This acquisition substantially increased Crane's
involvement in niche pump markets.
In October 1993, the company acquired Filon, a manufacturer of
fiberglass-reinforced plastic (FRP) panels. Filon was integrated with the
company's Kemlite unit in the fourth quarter of 1993. The Filon acquisition
significantly expanded Kemlite's position as a supplier of fiberglass-
reinforced plastic (FRP) panels to the recreational vehicle market.
In April and May 1993 Huttig Sash and Door Company expanded its
nationwide millwork distribution by acquiring Rondel's Inc., a millwork
distributor serving the eastern Washington/western Idaho region, and the
Whittier-Ruhle Millwork Company, serving the Mid-Atlantic region.
Perf low Instruments, Ltd., a British manufacturer of pressure and
flow measurement equipment, was added to Crane Ltd in 1993.
In 1992, certain assets of Jenkins Canada, Inc., a manufacturer of
bronze and iron valves, were acquired as an addition to the company's North
American valve unit.
In 1990 the company acquired Lear Romec, a manufacturer of oil
lubrication and fuel boost pumps for the aerospace industry.
-1-
<PAGE>
PART I
------
Item 1. Business (continued)
--------
Divestitures
------------
In the past five years, the company has divested five businesses. In
December, 1994, Huttig sold its window manufacturing business for $2.4
million. The transaction excluded real estate and receivables. In July, 1994,
the company sold Modulinc, the fiber optic channel product line of ELDEC. In
April 1993, the company sold its precision ordnance business, UniDynamics/
Phoenix for approximately $6 million. In 1990 the company sold Sea-Pac Sales
Co., a distributor of floor covering products, and its McAvity division, a
Canadian manufacturer of waterwork valves and hydrants for an aggregate sales
price of approximately $19 million.
Long-Term Financing
-------------------
In June 1994 the company sold $150,000,000 7 1/4% notes that will
mature on June 15, 1999. During March 1992 the company sold $100,000,000 8
1/2% notes that will mature on March 15, 2004.
Business Segments
-----------------
See pages 28 and 29 of the Annual Report to Shareholders for sales,
operating profit and assets employed of each business segment.
Fluid Handling
--------------
The Fluid Handling segment consists of a valve business that serves
the global valve market and a pump business which manufactures pumps used in
the chemical, general industrial and commercial industries. The Crane valve
business with manufacturing facilities in North America, the United Kingdom
and Australia, sells a wide variety of valves and fluid control products for
the chemical and hydrocarbon processing, power, general industrial and
commercial construction industries. The North American unit also provides a
full range of valve aftermarket services including parts, repairs and
modifications. The company's subsidiary in the United Kingdom also maintains
repair and service facilities for valves, compressors, heat exchangers and
similar equipment. In 1994, the company purchased Mark Controls, whose valve
products are sold under the Pacific Valves and Flowseal/Centerline brands.
Crane Pumps & Systems, Inc., which includes Burks Pumps purchased in December
1993, manufactures pumps used in the chemical and hydrocarbon processing,
power, and the municipal, general industrial and commercial construction
industries. The company's Cochrane Environmental Systems division designs and
markets water and wastewater equipment for almost every major industry.
The Mark Controls acquisition strengthened the Crane valve business.
This acquisition brings to Crane the Flowseal and Centerline brand of quarter
turn valves and the Pacific pressure seal and HF Acid valves. To focus
resources, the Crane valve business was reorganized on a global basis under
one management structure in 1994. This has allowed Crane to greatly expand
sales distribution channels world-wide and eliminate overlapping coverage.
This is especially true of the Mark Controls quarter turn line where
distribution channels have been expanded to Europe, the Middle East, Asia, and
Australia through Crane's established network.
The Burks Pumps acquisition in December 1993 tripled Crane's pump
business to $93 million in 1994. The pump business has been consolidated under
a new entity named Crane Pumps & Systems with world-wide responsibility for
the manufacturing and marketing of the Chempump, Deming, Barnes, Burks,
Weinman and Prosser/Enpo product lines.
Products in this segment are sold directly to end users through
Crane's sales organizations and through independent distributors and
manufacturers' representatives.
-2-
<PAGE>
PART I
------
Item 1. Business (continued)
--------
Aerospace
---------
The Aerospace segment consists of ELDEC, Hydro-Aire, and Lear Romec.
The ELDEC acquisition in 1994 brought a strong technology base and
high market share, with established products on all major commercial and
business aircraft. ELDEC designs, manufactures and markets custom position
indication and control systems, proximity switches and components, true mass
fuel flowmeters, power conversion components and systems for the commercial,
business and military aerospace industries. These products are custom designed
for specific aircraft to meet technically demanding requirements of the
aerospace industry. ELDEC has promising new products in development including
an infrared-based gate to aircraft high speed data link, as well as new
applications of its core power conversion technology within the
telecommunications and industrial markets.
Hydro-Aire designs, manufactures and sells anti-skid and automatic
braking systems, fuel and hydraulic pumps, and coolant pumps and systems,
hydraulic and pneumatic valves and regulators, actuators and solid state
components for the commercial, business and military aerospace industries as
original equipment. In addition, the company designs and manufactures systems
similar to those above for the retrofit of aircraft with improved systems and
manufactures replacement parts for systems installed as original equipment by
the aircraft manufacturer. All of these products are largely proprietary to
the company and, to some extent, are custom designed to the requirements and
specifications of the aircraft manufacturer or program contractor. These
systems and replacement parts are sold directly to airlines, governments, and
aircraft maintenance and overhaul companies.
Lear Romec designs, manufactures and sells lubrication pumps and fuel
pumps for aircraft and aircraft engines for the commercial and military
aerospace industries. Lear Romec has a leading share of the non-captive
market for turbine engine lube and scavenge oil pumps. Also, it is the
leading supplier of fuel boost and transfer pumps for commuter and business
aircraft.
-3-
<PAGE>
PART I
------
Item 1. Business (continued)
--------
Engineered Materials
--------------------
The Engineered Materials segment consists of five businesses: Kemlite,
Cor Tec, Resistoflex, Polyflon and Crane Plumbing.
Kemlite manufactures fiberglass-reinforced plastic panels for use
principally by the transportation industry in refrigeration and dry van truck
trailers and recreational vehicles. Kemlite products are also sold to the
commercial construction industry for food processing, fast food restaurant and
supermarket applications, and to institutions where fire rated materials with
low smoke generation and minimum toxicity are required. Kemlite sells its
products directly to the truck trailer and recreational vehicle manufacturers.
Kemlite uses distributors to serve its commercial construction market and some
segments of the recreational vehicle market.
Cor Tec is the leading domestic manufacturer of fiberglass-reinforced
laminated panels serving the truck and truck trailer segment of the
transportation industry. Cor Tec markets its products directly to the truck
and truck trailer manufacturers.
Resistoflex is engaged in the design, manufacture and sale of
corrosion-resistant, plastic-lined steel pipes, fittings, valves, bellows and
hose used primarily by the pharmaceutical, chemical processing, pulp and
paper, petroleum distribution, and waste management industries. It also
manufactures high-performance, separable fittings for operating pressures to
8,000 PSI and flexible plastic-lined assemblies used primarily in the
aerospace industry. Resistoflex sells its industrial products through
distributors who provide stocking and fabrication services to industrial users
in the United States. Its aerospace products are sold directly to the
aerospace industry.
Polyflon manufactures radio frequency and microwave components,
capacitors, circuit processing, substrates and antennas for commercial and
aerospace uses, and resonating structures for the medical industry.
Crane Plumbing manufactures plumbing fixtures in Canada. Its products
are sold through distribution in Canada and it has a large share of the
Canadian plumbing fixtures market.
Crane Controls
--------------
This segment originated from the Mark Controls acquisition in April
1994 and includes five businesses: Barksdale, Powers Process Controls, Dynalco
Controls, Azonix, and Ferguson. The companies in this segment design,
manufacture and market industrial and commercial products that control flows
and processes in various industries including the petroleum, chemical,
construction, food and beverage, power generation industries and
transportation.
Barksdale manufactures solid state and electromechanical pressure and
vacuum switches, pressure transducers, temperature switches, and directional
control valves which serve a broad range of commercial and industrial
applications. It has manufacturing and marketing facilities in the United
States and Germany.
Powers Process Controls designs, manufactures and markets
microprocessor-based process controllers and instrumentation, pneumatic
actuated control valves, self-contained temperature regulators, water mixing
and thermal shock protection shower valves and plumbing brass for industrial
applications and the institutional construction industry.
Dynalco Controls designs and manufactures rotational speed sensors,
monitoring instruments, and ignition and air to fuel control systems.
Dynalco's products are used worldwide by industries in a variety of
applications, including stationary natural gas engines, power generation, oil
and gas production and transmissions, and agriculture equipment.
-4-
<PAGE>
PART I
------
Item 1. Business (continued)
--------
Azonix manufactures high precision data acquisition, control systems
and operator interfaces for a wide range of industries which require equipment
to withstand harsh environments.
Ferguson designs and manufactures in the United States and through
Ferguson Machine S.A. in Europe, precision index and transfer systems for use
on and with machines which perform automatic forming, assembly, metal cutting,
testing and inspection operations, Products include index drives and tables,
mechanical parts handlers, in line transfer machines, rotary tables, press
feeds and custom cams.
The products in this segment are sold directly to end users, and
engineering contractors through the company's own sales forces and
cooperatively with sales representatives, stocking specialists and industrial
distributors.
Merchandising Systems
---------------------
National Vendors is the industry leader in the design and manufacture
of electronic vending machines for the automatic merchandising industry in the
United States. Products include machines which dispense snacks foods and
confections, refrigerated and frozen foods, hot drinks, and cold beverages.
National Vendors introduced the Cafe System "7" in 1994 designed as an
alternative to traditional batch brew coffee services. It has enabled National
Vendors to penetrate the office coffee service market. National Vendors also
introduced its Ice Cream Center, a single serve dispenser of novelty ice cream
products. All these products are marketed in North America directly to vending
machine operators. In Europe products are marketed through wholly-owned
subsidiaries with operations located in the United Kingdom, Germany and
France. In 1993 National Vendors introduced its Glasco product line which is
marketed through domestic and international distribution channels.
National Rejectors, GmbH designs and manufactures electronic coin
validators and handling systems for vending operations throughout Europe.
These devices are sold directly to the vending, amusement, soft-drink, and
ticket issuing industries.
Wholesale Distribution
----------------------
The company distributes millwork products through its wholly-owned
subsidiary, Huttig Sash & Door Company ("Huttig"). These products include
doors, windows, mouldings and related building products. Huttig assembles
certain of these products to customer specification prior to distribution.
Its principal customers are building material dealers and building contractors
that service the new construction and remodeling markets. Wholesale
operations are conducted nationally through forty-four branch warehouses
throughout the United States, in both major and medium-sized cities. Huttig's
sales are made on both a direct shipment and out-of-warehouse basis entirely
through its own sales force.
Huttig maintains a saw mill and a manufacturing plant in Montana,
where it produces certain of the above products and other finished lumber, the
bulk of which is sold directly to third parties, some of whom compete with
Huttig branches. Huttig acquired a specialty moulding and millwork
manufacturing operation in Prineville, Oregon in 1994. The majority of the
moulding products are sold to third parties but Huttig is the largest
customer.
Valve Systems and Controls is a value added industrial distributor
providing power operated valves and flow control systems to the petroleum,
chemical, power and general processing industries. It services its customers
through facilities in Texas, Louisiana, and Oklahoma.
-5-
<PAGE>
PART I
------
Item 1. Business (continued)
--------
Crane Supply, a distributor of plumbing supplies, valves and piping in
Canada, maintains thirty-eight branches throughout Canada and is the largest
single distributor for Crane manufactured products in that country. Crane
Supply also distributes products which are both complementary to and partly
competitive with Crane's own manufactured products.
Other
-----
The other segment consists of Crane Defense Systems, which is the only
Crane business focused on defense industry products. Crane Defense Systems is
engaged in the development and manufacture of specialized handling systems,
elevators, winches, ground support equipment cranes and associated
electronics. These products are sold directly to the government and defense
contractors and represent less than 1% of 1994 sales.
Competitive Conditions
----------------------
The company's lines of business are conducted under actively
competitive conditions in each of the geographic and product areas they serve.
Because of the diversity of the classes of products manufactured and sold,
they do not compete with the same companies in all geographic or product
areas. Accordingly, it is not possible to estimate the precise number of
competitors or to identify the principal methods of competition. Although
reliable statistics are not available, the company believes that it is an
important supplier to a number of market niches and geographic areas.
The company's products have primary application in the industrial,
construction, aerospace, automated merchandising, transportation, and fluid
handling industries. As such, they are dependent upon numerous unpredictable
factors, including changes in market demand, general economic conditions,
residential and commercial building starts, and capital spending. Because
these products are also sold in a wide variety of markets and applications,
the company does not believe it can reliably quantify or predict the possible
effects upon its business resulting from such changes.
Seasonality is a factor in Huttig and the Canadian operations.
Order backlog totalled approximately $420 million as of December 31,
1994, compared with $226 million as of December 31, 1993. The 1994
acquisitions accounted for the majority of the increase. Backlog is not
material to understanding Crane's overall business because long-term contracts
are not customary to significant portions of its business, except within the
aerospace related businesses.
There is a world-wide shortage of glass fiber reinforcement that has
caused this key raw material for Kemlite to be allocated. Kemlite's markets
will remain strong in 1995 positioning them for further expansion when the
supply is eased.
The company's engineering and product development activities are
directed primarily toward improvement of existing products and adaptation of
existing products to particular customer requirements. While the company owns
numerous patents and licenses, none are of such importance that termination
would materially affect its business. Product development and engineering
costs aggregated approximately $46,400,000 in 1994 ($18,400,000 and
$23,300,000 in 1993 and 1992, respectively). Included in these amounts were
approximately $9,500,000 and $4,100,000 received by the company in 1994 and
1992, respectively, for customer sponsored research and development. The
increase in 1994 was mainly due to the ELDEC acquisition.
-6-
<PAGE>
PART I
------
Item 1. Business (continued)
--------
Costs of compliance with federal, state and local laws and regulations
involving the discharge of materials into the environment or otherwise
relating to the protection of the environment are not expected to have a
material effect upon the company or its competitive position.
Item 2. Properties
----------
<TABLE>
<CAPTION>
MANUFACTURING FACILITIES* NUMBER AREA
------------------------- ------ ----
<S> <C> <C>
Fluid Handling
United States 13 1,405,000 sq. ft.
Canada 2 137,000 sq. ft.
Other International 5 879,000 sq. ft.
Aerospace
United States 4 569,000 sq. ft.
Other International 1 8,000 sq. ft.
Engineered Materials
United States 7 695,000 sq. ft.
Canada 3 601,000 sq. ft.
Crane Controls
United States 7 464,000 sq. ft.
Other International 3 81,000 sq. ft.
Merchandising Systems
United States 2 730,000 sq. ft.
Other International 1 124,000 sq. ft.
Wholesale Distribution 2 888,000 sq. ft.
Other 1 113,000 sq. ft.
</TABLE>
*Includes plants under lease agreements
<TABLE>
<CAPTION>
Leased Leases
Manufacturing Expiring
Facilities Number Area Through
------------- ------ ---- --------
<S> <C> <C> <C>
United States 8 354,000 sq. ft. 2017
Canada 1 10,000 sq. ft. 1995
Other International 5 91,000 sq. ft. 2013
</TABLE>
Fluid Handling operates four valve service centers in the United
States, of which two are owned. This segment operates internationally five
distribution and five service centers.
Crane Controls operates two distribution centers internationally.
Merchandising Systems operates eight distribution centers in the
United States and six internationally.
Wholesale Distribution has forty-four Huttig branch warehouses in the
United States, of which twenty-seven are owned. The Canadian wholesale
operation maintains thirty-eight distribution branch warehouses in Canada, of
which fifteen are owned. Valve Systems and Controls operates three leased
distribution facilities in the United States.
In the opinion of management, properties have been well maintained,
are in sound operating condition, and contain all necessary equipment and
facilities for their intended purposes.
-7-
<PAGE>
PART I
------
Item 3. Legal Proceedings
-----------------
Neither the company, nor any subsidiary of the company has become a
party to, nor has any of their property become the subject of any material
legal proceeding other than ordinary routine litigation incidental to their
businesses.
The following proceeding is included herein because it has been
reported in the media. On September 22, 1992 the company was served with a
complaint filed in the U.S. District Court, Eastern District of Missouri
naming the company and its former subsidiary CF&I Steel Corporation ("CF&I")
as defendants and alleging violations of the False Claims Act in connection
with the distribution of CF&I to the company's shareholders in 1985 (Civil
Actions Nos. 91-0429-C-1 and 4:92CVOO5144JCH). The complaint alleges a
continuing agreement and concerted action between the company and CF&I to
distribute CF&I to the company's shareholders, thereafter to terminate CF&I's
pension plan so as to cause the Pension Benefit Guaranty Corporation ("PBGC")
to assume CF&I's liability for unfunded pension liabilities and to prevent the
PBGC from obtaining any reimbursement from the company, and to publish and
file misleading information in furtherance of that objective. The complaint
alleges unfunded pension liabilities of $140 million and the company is
informed that the complaint is proposed to be amended to increase such
unfunded liability amount to in excess of $270 million. The complaint as
originally filed and as proposed to be amended seeks treble damages and
attorney's fees. The company believes the plaintiff has no standing, the False
Claims Act does not apply and that the allegations are without merit. On June
1, 1993 the federal court in the Eastern District of Missouri dismissed the
complaint for lack of standing of the plaintiff and the plaintiff appealed. In
November, 1994 the Eighth Circuit Court of Appeals reinstated the action. The
company intends to file a petition for certiorari to the U.S. Supreme Court.
In all events the company will vigorously defend itself against this
litigation and believes that the complaint will ultimately be dismissed.
The following proceedings are not considered by the company to be
material to its business or financial condition and are reported herein
because of the requirements of the Securities and Exchange Commission with
respect to the descriptions of administrative or judicial proceedings by
governmental authorities arising under federal, state or local provisions
regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment.
In a letter dated October 15, 1992 the office of the Attorney General
of the State of Ohio advised Cor Tec, a division of Dyrotech Industries, Inc.
which is a subsidiary of the company, that Cor Tec's plant facility in
Washington Court House, Ohio, had operated numerous air contaminant sources in
its manufacturing process which emitted air pollutants for an extended period
of time without the required state permits. The Ohio Attorney General's office
also alleged that certain contaminant sources at the Cor Tec facility were
installed without obtaining permits to install. The main air contaminant in
question is styrene, a volatile organic compound that is alleged to be a
carcinogen. Cor Tec recently constructed an air remediation system in its
plant which included the installation of a hood, vent and incinerator to
capture and incinerate the styrene emissions. At a meeting in Columbus, Ohio
on March 4, 1993 the Attorney General's office proposed that Cor Tec and the
company sign a Consent Decree which would include general injunctive relief
and civil penalties in the amount of $4.6 million. Cor Tec has refused to
execute such a Decree or pay a penalty. No formal complaint has been filed by
the Ohio Attorney General against the company or Cor Tec with regard to the
styrene emissions. Cor Tec believes it has adequate defenses to the
allegations made by the Attorney General and it plans to vigorously resist
paying any damages, fines, or penalties.
On July 12, 1985 the company received written notice from the United
States Environmental Protection Agency (the "EPA") that the EPA believes the
company may be a potentially responsible party ("PRP") under the Federal
Comprehensive Environmental Response Compensations and Liability Act of 1980
("CERCLA") to pay for investigation and corrective measures which may be
required to be taken at the Roebling Steel Company site in Florence Township,
Burlington County, New
-8-
<PAGE>
PART I
------
Item 3. Legal Proceedings (continued)
-----------------
Jersey (the "Site") of which its former subsidiary, CF&I Steel Corporation
("CF&I") was a past owner and operator prior to the enactment of CERCLA. The
stated grounds for the EPA's position was the EPA's belief that the company
had owned and/or operated the Site. The company had advised the EPA that such
was not the case and does not believe that it is responsible for any testing
or clean-up at the Site based on current facts. CF&I also has received notice
from the State of New Jersey Department of Environmental Protection, Office of
Regulatory Services ("NJDEP)", advising CF&I that an investigation by the
NJDEP had identified what was considered an existing and potential
environmental problem at the Site. As a past owner and operator at the Site,
CF&I was notified of the NJDEP's belief that further investigatory action was
needed to identify all potential environmental problems at the Site and
thereafter formulate and implement a remedial plan to address any identified
problems. The NJDEP has subsequently requested information from CF&I, and CF&I
has cooperated in providing information, including results of tests which CF&I
has conducted at the Site. The EPA identified sources of contamination, which
must be examined for potential environmental damage, including: chemical waste
drums, storage tanks, transformers, impressed gas cylinders, chemical
laboratories, bag house dust, rubber tires, inactive railroad cars, wastewater
treatment plants, lagoons, slag disposal areas, and a landfill. On November 7,
1990 CF&I filed a petition for reorganization and protection under Chapter 11
of the United States Bankruptcy Code. The EPA has disclosed that two surface
clean-ups have been performed at a cost in excess of $2,000,000 and a further
surface clean-up has been announced at an estimated cost of approximately
$5,000,000.
On July 1, 1991 the company received a letter from the EPA
providing an update of the clean-up at the Site. The EPA's July 1, 1991 letter
describes a proposed third phase of the investigation, including a Focused
Feasibility Study which defined the nature of contaminants and evaluated
remedial alternatives for two portions of the Site. The estimated cost for the
preferred remedy selected by the EPA for these locations is $12,000,000. In
the bankruptcy proceeding of CF&I the EPA was allowed an unsecured claim
against CF&I for $27.1 million related to EPA's environmental investigations
and remediation at the Roebling Site. Based on the analysis above, the company
does not believe it is responsible for any portion of the clean-up.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There have been no matters submitted to a vote of security holders
during the fourth quarter of 1994.
-9-
<PAGE>
PART I
------
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The executive officers of the registrant are as follows:
<TABLE>
<CAPTION>
Officer
Name Position Business Experience Age Since
- ---- -------- ------------------- ------- -------
<S> <C> <C> <C> <C>
Robert S. Evans Chairman, Chief Chairman, Chief 51 1974
Executive Officer Executive Officer and
and President President of the
company
L.Hill Clark(2) Executive Vice Executive Vice President of 50 1994
President the company, previously
President of Lear Romec,
and previously held
various positions within
Allied Signal Inc.
Robert J. Muller, Jr. Executive Vice Executive Vice President of 48 1988
President the company
Paul R. Hundt Vice President Vice President, Secretary 55 1976
Secretary and and General Counsel of the
General Counsel company
Anthony D. Pantaleoni Vice President Vice President - Environment, 40 1989
Environment, Health & Safety
Health & Safety
Richard B. Phillips Vice President Vice President - Human 51 1987
Human Resources Resources of the company
David S. Smith(1) Vice President- Vice President - Finance 38 1991
Finance and and Chief Financial Officer
Chief Financial of the company, previously
Officer Vice President - Corporate
Development of the company,
and previously Vice President
of Corporate Finance of
Bankers Trust Company
Michael L. Raithel Controller Controller of the company 47 1985
Gil A. Dickoff Treasurer Treasurer of the company, 33 1992
previously Assistant Treasurer
of the company
</TABLE>
(1) Effective March 21, 1994
(2) Effective January 27, 1994
-10-
<PAGE>
PART II
The information required by Items 5 through 8 is hereby
incorporated by reference to Pages 8 through 31 of the Annual Report
to Shareholders.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
-------------------------------------------------------------------
Not applicable
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information required by Item 10 is incorporated by reference
to the definitive proxy statement which the company will file with
the Commission pursuant to Regulation l4A except that such
information with respect to Executive Officers of the Registrant is
included, pursuant to Instruction 3, paragraph (b) of Item 401 of
Regulation S-K, under Part I.
Item 11. Executive Compensation
----------------------
The information required by Item l1 is incorporated by reference
to the definitive proxy statement which the company will file with
the Commission pursuant to Regulation l4A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by Item 12 is incorporated by reference
to the definitive proxy statement which the company will file with
the Commission pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required by Item 13 is incorporated by reference
to the definitive proxy statement which the company will file with
the Commission pursuant to Regulation 14A.
-11-
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
---------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Financial Statements and Schedule:
Independent Auditors' Report................................... 15
Schedule VIII Valuation and Qualifying Accounts................ 16
</TABLE>
The consolidated balance sheets of Crane Co. and subsidiaries as
of December 31, 1994 and 1993 and the related consolidated statements
of income, changes in common shareholders' equity and cash flows for
the years ended December 31, 1994, 1993 and 1992 and the financial
review, appearing on Pages 8 through 31 of Crane Co.'s Annual Report
to Shareholders which will be furnished with the company's proxy
statement as required by Regulation 14A, Rule 14a-3(c), are
incorporated herein by reference and are supplemented by the schedule
on Page 16 of this report.
All other statements and schedules for which provision is made in the
applicable regulation of the Securities and Exchange Commission have
been omitted because they are not required under related instructions
or are inapplicable, or the information is shown in the financial
statements and related notes.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended
December 31, 1994.
(c) Exhibits to Form 10-K:
(3) Exhibit A-By-laws
There is incorporated by reference herein:
(a) The company's Articles of Incorporation contained in
Exhibit D to the company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1987.
(4) Instruments Defining the Rights of Security Holders, including
Indentures:
(a) There is incorporated by reference herein:
(1) Preferred Share Purchase Rights Agreement
contained in Exhibit 1 to the company's Report
on Form 8-K filed with the Commission on July
12, 1988.
(2) Amendment to Preferred Share Purchase Rights
Agreement contained in Exhibit 1 to the
company's Report on Form 8-K filed with the
Commission on June 29, 1990.
-12-
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(continued)
(b) There is incorporated by reference herein:
1) Indenture dated as of April 1,1991 between
the Registrant and the Bank of New York
contained in Exhibit 4 to Registration
Statement No. 33-39658.
(10) Material Contracts:
------------------
(iii)Compensatory Plans
Exhibit B: EVA Incentive Compensaton Plan for Executive
Officers
Exhibit C: The forms of Employment/Severance Agreement
between the company and Messrs. Evans, Hundt
and Smith (form I) and Clark and Muller (form
II) which provide for the continuation of
certain employee benefits upon a change of
control.
There is incorporated by reference herein:
(a) The Crane Co. Restricted Stock Award Plan as amended
through May 10,1993 contained in Exhibit A to the
company's annual report on Form 10-K for the fiscal
year ended 12/31/93.
(b) The Crane Co. Non-Employee Directors Restricted Stock
Award Plan as amended through May 10, 1993 contained
in Exhibit B to the company's annual report on Form
10-K for the fiscal year ended 12/31/94.
(c) The Crane Co. Restricted Stock Award Plan contained in
Exhibit 4.1.1 to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement No. 33-22904 on
Form S-8 filed on July 6, 1988 and the related
agreements filed as Exhibit 4.4.2-2 to Post-Effective
Amendment No. 4, Exhibit 4.4.2-3 to Post-Effective
Amendment No. 5 and Exhibit 4.4.2-4 to Post-Effective
Amendment No. 6, and Exhibit 4.4.2-5 to Post-Effective
Amendment No. 7.
(d) The indemnification agreements entered into with Mr.
R. S. Evans, each other director of the company and
Mr. P. R. Hundt the form of which is contained in
Exhibit C to the company's definitive proxy statement
filed with the Commission in connection with the
company's April 27, 1987 Annual Meeting.
(e) The Crane Co. Retirement Plan for Non-Employee
Directors contained in Exhibit E to the company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1988.
(f) The Crane Co. Stock Option Plan as amended through May
6, 1991 contained in Exhibit 1(a)(2) to Post-Effective
Amendment No. 2 to the company's Registration
Statement No. 33-18251 on Form S-8 filed with the
Commission on November 2, 1987.
(11) Statement re computation of per share earnings:
Exhibit D: Computation of net income per share.
(13) Annual report to security holders:
Exhibit E: Annual Report to shareholders for the year
ended December 31, 1994.
(21) Subsidiaries of the Registrant:
Exhibit F: Subsidiaries of the Registrant.
(23) Consent of Experts and Counsel
Exhibit G: Independent auditors' consent.
All other exhibits are omitted because they are not applicable
or the required information is shown elsewhere in this Annual
Report on Form 10-K.
-13-
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRANE CO.
----------------------
(Registrant)
By D. S. Smith
---------------------------
D. S. Smith
Vice President-Finance
Date 2/27/95
-----------------
Pursuant to the requirements of the Securities Exchange Act of l934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
OFFICERS
--------
R. S. Evans
- --------------------------
R. S. Evans
Chairman, Chief Executive Officer, President and Director
Date 2/27/95
-----------------------
D. S. Smith M. L. Raithel
- --------------------------- ------------------------
D. S. Smith M. L. Raithel
Vice President-Finance Controller
Date 2/27/95 Date 2/27/95
----------------------- --------------------
DIRECTORS
---------
C. J. Queenan, Jr.
-------------------------
C. J. Queenan, Jr.
Date 2/27/95
---------------------
M. Anathan, III E. T. Bigelow A. A. Seeligson, Jr.
- ------------------------ ---------------------- -------------------------
M. Anathan, III E. T. Bigelow A. A. Seeligson, Jr.
Date 2/27/95 Date 2/27/95 Date 2/27/95
-------------------- ------------------ ---------------------
R. S. Forte' D. C. Minton B. Yavitz
- ------------------------ ---------------------- -------------------------
R. S. Forte' D. C. Minton B. Yavitz
Date 2/27/95 Date 2/27/95 Date 2/27/95
-------------------- ------------------ ---------------------
D. R. Gardner
-------------------------
D. R. Gardner
Date 2/27/95
---------------------
-14-
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Shareholders of Crane Co.:
We have audited the consolidated financial statements of Crane Co. and
subsidiaries as of December 31, 1994 and 1993, and for each of the three years
in the period ended December 31, 1994 and have issued our report thereon dated
January 23, 1995; such financial statements and report are included in your 1994
Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the consolidated financial statement schedule of Crane Co.,
listed in Item 14. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
schedule based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
January 23, 1995
-15-
<PAGE>
CRANE CO. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance
Beginning Charged to at End
Description of Year Cost & Expenses Deductions of Year
- ----------- ---------- --------------- ---------- -------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
- -----------------------------
Allowance for doubtful accounts $ 2,054 $ 8,434 $ 8,288 $ 2,200
Allowance for cash discounts,
returns and allowances 1,000 17,096 16,603 1,493
------- -------- -------- -------
$ 3,054 $ 25,530 $ 24,891 $ 3,693
======= ======== ======== =======
Year Ended December 31, 1993:
- -----------------------------
Allowance for doubtful accounts $ 859 $ 2,747 $ 1,552 $ 2,054
Allowance for cash discounts,
returns and allowances 812 11,839 11,651 1,000
------- -------- -------- -------
$ 1,671 $ 14,586 $ 13,203 $ 3,054
======= ======== ======== =======
Year Ended December 31, 1992:
- -----------------------------
Allowance for doubtful accounts $ 1,268 $ 1,038 $ 1,447 $ 859
Allowance for cash discounts,
returns and allowances 708 7,805 7,701 812
------- ------- ------- -------
$ 1,976 $ 8,843 $ 9,148 $ 1,671
======= ======== ======== =======
</TABLE>
-16-
<PAGE>
EXHIBIT A
Adopted in Connection with
Merger of Crane Co. (Illinois)
into Crane Co. (Delaware) May 14, 1985 -
Last Amended December 5, 1994
CRANE CO.
BY-LAWS
ARTICLE I
Definitions, Offices
Section 1. Definitions. When used herein, "Board" shall mean the
-----------
Board of Directors of the Corporation, "Chairman" shall mean the Chairman of the
Board and "Corporation" shall mean this Corporation.
Section 2. Principal Office. The principal office of the Corporation
----------------
shall be located in the City of New York, State of New York.
Section 3. Other Offices. The Corporation may have and maintain such
-------------
other business office or offices, either within or without the State of New
York, as the Board of Directors may from time to time determine.
Section 4. Registered Office. The registered office of the
-----------------
corporation shall be at such address as from time to time the Board of Directors
may determine.
ARTICLE II
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of
--------------
the corporation shall be held at the hour of ten o'clock a.m. on the fourth
Monday of April in each year beginning in 1986 unless the Board shall fix a
different date and time, for the election of Directors and for the transaction
of such other business as may properly come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. If the election of Directors shall
not be held on
<PAGE>
the day designated herein for the annual meeting, or at any adjournment thereof,
the Board of Directors shall cause the election to be held at a special meeting
of the stockholders as soon thereafter as such meeting can conveniently be
convened and held.
Section 2. Special Meetings. Special meetings of the stockholders
----------------
for any purpose may be called at any time only by a majority of the entire Board
or by the Chairman of the Board.
A call for a special meeting of stockholders shall be in writing,
filed with the Secretary,and shall specify the time and place of holding such
meeting and the purpose or purposes for which it is called.
Section 3. Stockholder Action. Any action required or permitted to
------------------
be taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the Corporation and may not
be effected by any consent in writing by such stockholders.
Section 4. Place of Meetings. The annual meeting of stockholders and
-----------------
all special meetings of stockholders for the election of directors shall be held
either at the principal office of the Corporation or at such other place
suitable for the holding of a stockholders' meeting as shall be designated in
the notice thereof. Special meetings of stockholders for a purpose or purposes
other than the election of directors may be held at such place, either within or
without the State of New York, as shall be specified or fixed in the call for
such meeting and the notice thereof as the place for the holding of a special
meeting for any purpose or purposes.
Section 5. Notice of Meetings. Except as otherwise provided by
------------------
statute, written or printed notice stating the place, day and hour of the
meeting and, in case of a special meeting, stating the purpose or purposes for
which the meeting is called, shall be delivered not less than 10 nor more than
60 days before the date of the meeting, either personally or by mail, by or at
the direction of the Secretary, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail in a sealed envelope addressed to the
stockholder at his last known post office address as it appears on the stock
record books of the Corporation, with postage thereon prepaid.
Attendance of a person at a meeting of stockholders, in person or by
proxy, constitutes a waiver of notice of the meeting, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not
-2-
<PAGE>
lawfully called or convened.
Section 6. Record Dates. The Board may fix in advance a date, not
------------
more than 60 nor fewer than 10 days prior to the date of any meeting of
stockholders, nor more than 60 days prior to the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, and in such case such stockholders and only such stockholders as shall
the stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.
Section 7. Voting Lists. The officer or agent having charge of the
------------
transfer book for shares of the Corporation shall prepare and make, at least 10
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder present. The original share or stock ledger or transfer book or a
duplicate thereof, shall be the only evidence as to who are the stockholders
entitled to examine such list or share ledger or transfer book or to vote at any
meeting of stockholders.
Section 8. Quorum. At any meeting of stockholders the holders of a
------
majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes unless a greater
or lesser quorum shall be provided by law or by the Certificate of Incorporation
and in such case the representation of the number so required shall constitute a
quorum. The stockholders present in person or by proxy at a meeting at which a
quorum is present
-3-
<PAGE>
may continue to do business until adjournment, notwithstanding withdrawal of
enough stockholders to leave less than a quorum.
Whether or not a quorum is present the meeting may be adjourned from
time to time by a vote of the holders of a majority of the shares present. At
any such adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting if held at the
time specified in the notice thereof.
Section Q. Voting and Proxies. Each holder of Common Stock shall be
------------------
entitled to one vote per share held of record upon each matter on which
stockholders generally are entitled to vote.
At all meetings of stockholders, a stockholder entitled to vote may
vote in person or by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. Unless otherwise provided by
law, all questions touching the validity or sufficiency of the proxies shall be
decided by the Secretary.
Directors shall be elected by a plurality of the votes cast at an
election.
All other action (unless a greater plurality is required by law or by
the Certificate of Incorporation or by these By-laws) shall be authorized by a
majority of the votes cast by the holders of shares entitled to vote thereon,
present in person or represented by proxy, and where a separate vote by class is
required, by a majority of the votes cast by stockholders of such class, present
in person or represented by proxy.
Section 10. Voting of Shares by Certain Holders.
-----------------------------------
(a) Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxy as the By-
laws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may
determine.
(b) Shares standing in the name of a deceased person may be
voted by his administrator or his executor either in person or by
proxy.
(c) Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into his
name,
-4-
<PAGE>
if authority so to do be contained in an appropriate order of the
court by which such receiver was appointed, and a certified copy of
such order is filed with the Secretary of the Corporation before or at
the time of the meeting.
(d) A stockholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name
of the pledgee, and thereafter the pledgee shall be entitled to vote
the shares so transferred.
(e) Shares of the Corporation belonging to it shall not be
voted, directly or indirectly, at any meeting, and shall not be
counted in determining the total number of outstanding shares at any
given time, but shares of the Corporation held by it in a fiduciary
capacity may be voted and shall be counted in determining the number
of outstanding shares at any given time.
Section 11. Inspectors. At each meeting of stockholders, the
----------
chairman of the meeting may appoint one or more inspectors of voting whose duty
it shall be to receive and count the ballots and make a written report showing
the results of the balloting.
ARTICLE III
Directors
Section 1. Number. The business and affairs of the Corporation shall
------
be managed under the direction of the Board which shall consist of not less than
three nor more than fifteen persons. The exact number of directors within the
minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by the board pursuant to a resolution adopted by a
majority of the entire Board.
Section 2. Election and Terms. The directors shall be divided into
------------------
three classes, as nearly equal in number as reasonably possible, with the term
of office of the first class to expire at the 1986 annual meeting of
stockholders, the term of office of the second class to expire at the 1987
annual meeting of stockholders and the term of office of the third class to
expire at the 1988 annual meeting of stockholders. At each annual meeting of
stockholders, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election.
-5-
<PAGE>
Section 3. Newly Created Directorships and Vacancies. Newly created
-----------------------------------------
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled only by a
majority vote of the directors then in office, and directors so chosen shall
hold office for a term expiring at the annual meeting of stockholders at which
the term of the class to which they have been elected expires. No decrease in
the number of directors constituting the Board shall shorten the term of any
incumbent director.
Section 4. Removal. Any director, or the entire Board, may be
-------
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least two-thirds of the voting power of the shares of
the Corporation then entitled to vote at an election of directors, voting
together as a single class.
Section 5. Regular Meetings. The regular annual meeting of the Board
----------------
shall be held at such time and place as the Board may by resolution determine
from time to time without other notice than as set forth in such resolution.
The regular monthly meetings of the Board shall be held at such time
and place as the Board may by resolution determine from time to time.
The Board may by resolution change the times and places, either within
or without the State of New York, for the holding of such regular monthly
meetings, and such times and places for the holding of other regular meetings
without notice other than such resolution.
Section 6. Special Meetings. Special meetings of the Board may be
----------------
held at any time on the call of the Chairman or at the request in writing of a
majority of the directors. Special meetings of the Board may be held at such
place, either within or without the State of New York, as shall be specified or
fixed in the call for such meeting or notice thereof.
Section 7. Notice of Special Meetings. Notice of each special
--------------------------
meeting shall be deposited in the United States mail by or at the direction of
the Secretary to each director addressed to him at his residence or usual place
of business at least seventy-two (72) hours before the day on which the meeting
is to be held, or shall be sent to him by telegram, be delivered personally, or
be given orally at least twenty-four (24) hours before the day on which the
meeting is to be held. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail in a sealed envelope so addressed, with
postage thereon prepaid. If notice be given by telegraph, such
-6-
<PAGE>
notice shall be deemed to be delivered when the same is delivered to the
telegraph company. If the Secretary shall fail or refuse to give any such
notice, then notice may be given by the officer or any one of the directors
making the call.
Notice may be waived in writing by any director, either before or
after the meeting. Any meeting of the Board of Directors shall be a legal
meeting without any notice thereof having been given if all directors shall be
present thereat, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting, and any and all business may be
transacted thereat.
Section 8. Quorum. A majority of the members of the Board then in
------
office, or of a committee thereof, shall constitute a quorum for the transaction
of business, except that the presence of the Chairman of the Board shall be
necessary to constitute a quorum of the Executive Committee of the Board, and
the vote of a majority of the members present at a meeting at which a quorum is
present shall be the act of the Board or of the Committee thereof, except for
the amendment of the By-laws which shall require the vote of not less than a
majority of the members of the Board then in office.
Section 9. Action without a Meeting. Action required or permitted to
------------------------
be taken pursuant to authorization voted at a meeting of the Board, or a
committee thereof, may be taken without a meeting if, before or after the
action, all members of the Board or of the Committee consent thereto in writing.
The written consents shall be filed with the minutes of the proceedings of the
Board or Committee. The consent shall have the same effect as a vote of the
Board or Committee thereof for all purposes.
Section 10. Organization. At all meetings of the Board the Chairman,
------------
the Vice Chairman of the Board, the President, an Executive Vice President or a
Vice President, or in their absence a member of the Board to be selected by the
members present, shall preside as Chairman of the meeting. The Secretary or an
Assistant Secretary of the Corporation hall act as Secretary of all meetings of
the Board, except that in their absence the Chairman of the meeting may
designate any other person to act as secretary.
-7-
<PAGE>
At meetings of the Board business shall be transacted in such
order as from time to time the Board may determine.
Section 11. Compensation. In the discretion of the Board, directors
------------
may be paid a fixed fee for attendance at meetings and allowed reimbursement for
expenses incurred in such attendance or otherwise in performance of duties as
directors. In addition each director may be paid a fixed annual fee, in an
amount to be determined by the Board, payable in convenient installments.
Directors shall also be entitled to receive compensation for services rendered
to the Corporation as officers, committee members, employees, or in any other
capacity than as directors.
Section 12. Presence at Meeting. A member of the Board or of a
-------------------
Committee designated by the Board may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in this
manner constitutes presence in person at the meeting.
Section 13. Executive Committee. The Board, by resolution adopted by
-------------------
a majority of the entire board, may designate two or more directors to
constitute an Executive Committee, which committee, to the extent Provided in
such resolution or in these By-laws, shall have and exercise all of the
authority of the Board in the management of the Corporation provided such
Committee shall not have the authority of the Board in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation
involving the corporation, recommending to the stockholders the sale, lease, or
exchange of all or substantially all of the property and assets of the
Corporation, recommending to the stockholders a dissolution of the Corporation
or a revocation thereof, filling vacancies on the Board or on any committee of
the Board (including the Executive Committee), amending, altering or repealing
any By-laws of the Corporation, electing or removing officers of the
Corporation, fixing the compensation of any member of the Executive Committee or
amending, altering or repealing any resolution of the Board which by its terms
provides that it shall not be amended, altered or repealed by the Executive
Committee.
Section 14. Committees of the Board. The Board may designate one or
-----------------------
more other committees, each consisting of one or more directors of the
Corporation as members and one or more directors as alternate members, with such
power and authority as prescribed by the By-laws or as provided in a resolution
adopted
-8-
<PAGE>
by a majority of the Board. Each Committee, and each member thereof, shall serve
at the pleasure of the Board.
ARTICLE IV
Officers
Section 1. Officers' Number. The officers of the Corporation shall
----------------
be a Chairman of the Board, a President, a Vice Chairman, one or more Executive
Vice Presidents, Senior Vice Presidents and Vice Presidents, a Secretary, a
Treasurer, a Controller, and such other subordinate corporate or divisional
officers as may be elected or appointed in accordance with the provisions of
Section 3 of this Article IV. The Board may designate a variation in the title
of any officer. Any two or more offices may be held by the same person except
the offices of President and Secretary.
Section 2. Election, Term of Office, and Qualifications. The
--------------------------------------------
officers of the Corporation shall be elected annually by the Board at the first
meeting of the Board held after the annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as the same can conveniently be held. Each officer,
except such officers as may be elected or appointed in accordance with the
provisions of Section 3 of this Article IV, shall hold his office until his
successor shall have been duly elected and shall have qualified or until his
death, resignation or removal.
Section 3. Subordinate Officers.
--------------------
(a) Subordinate Corporate Officers. The Board may annually
appoint one or more Assistant Controllers, Executive Assistants,
Assistant Vice Presidents, a Secretary of the Board, one or more
Assistant Secretaries, Assistant Treasurers, Auditors or Assistant
Auditors, and such other subordinate corporate officers and agents as
the Board may determine, to hold office as subordinate corporate
officers for such period and with such authority and to perform such
duties as may be prescribed by these By-laws or as the Board may from
time to time determine. The Board may, by resolution, empower the
Chairman of the Board to appoint any such subordinate corporate
officers or agents to hold office for such period and to perform such
duties as may be prescribed in said resolution. In its discretion the
Board may leave unfilled, for any such period as it may fix by
resolution, any corporate office, except those of President, Secretary
and Treasurer.
-9-
<PAGE>
(b) Divisional Officers. The Board, the Chairman of the Board
-------------------
or the President may from time to time appoint employees of the Company
divisional officers who shall have such operating and divisional
responsibilities as may be designated by the President. Such divisional officers
shall not be corporate officers and shall serve at the discretion of, under the
direction of, and subject to removal by, the President.
Section 4. Resignations. Any officer may resign at any time by
------------
giving written notice to the Board or to the Chairman of the Board or Secretary
of the Corporation. Any such resignation shall take effect at the time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Removal. Any of the officers designated in Section 1 of
-------
this Article IV may be removed by the Board, whenever in its judgment the best
interests of the Corporation will be served thereby, by the vote of a majority
of the total number of directors then in office. Any subordinate corporate
officer appointed in accordance with Section 3 of this Article IV may be removed
by the Board for like reason by a majority vote of the directors present at any
meeting, a quorum being present, or by any superior officer upon whom such power
of removal has been conferred by resolution of the Board. Any divisional officer
appointed in accordance with Section 3 of this Article IV may be removed by the
Chairman of the Board at any time and at his sole discretion or by any superior
officer upon whom the power of removal has been conferred by the Chairman of the
Board. The removal of any officer, subordinate officer or agent shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 6. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise may be filled for the
unexpired portion of the term in the same manner in which an officer to fill
said office may be chosen pursuant to Section 2 or 3 of this Article IV, as the
case may be.
Section 7. Bonds. If the Board shall so require, any officer or
-----
agent of the Corporation shall give bond to the Corporation in such amount and
with such surety as the Board may deem sufficient, conditioned upon the faithful
performance of their respective duties and offices.
Section 8. The Chairman of the Board. The Board shall elect a
-------------------------
Chairman who shall be the Chief Executive Officer of the Corporation. He shall
preside at all meetings of the stockholders and of the Board. He shall have
general and active
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<PAGE>
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect, subject, however, to the right
of the Board to delegate any specific powers, except such as may be by law
exclusively conferred upon the President, to any officer or officers of the
Corporation. All papers, documents, deeds, and other instruments required to be
executed by the Corporation shall be signed and executed for the Corporation by
the Chairman or the President when directed by, and in the manner prescribed by,
the Board. He shall have the general powers and duties of supervision and
management which are usually vested in the Chief Executive Officer of a
Corporation.
Section 9. The President. The President shall have supervision over
-------------
all such matters as may be delegated to him by the Board or the Chairman. In the
absence of the Chairman or whenever the office of Chairman is vacant the
President shall have the general powers of and shall perform the duties
pertaining to the office of Chairman.
Section 10. The Vice Chairman of the Board. The Board shall elect a
------------------------------
Chairman who shall be the Chief Executive Officer of the Corporation. He shall
preside at all meetings of the stockholders and of the Board. He shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board are carried into effect, subject,
however, to the right of the Board to delegate any specific powers, except such
as may be by law exclusively conferred upon the President, to any officer or
officers of the Corporation. All papers, documents, deeds, and other instruments
required to be executed by the Corporation shall be signed and executed for the
Corporation by the Chairman or the President when directed by, and in the manner
prescribed by, the Board. He shall have the general powers and duties of
supervision and management which are usually vested in the Chief Executive
Officer of a Corporation.
Section 11. Executive Vice Presidents; Senior Vice Presidents and
------------------------------------------------------
Vice Presidents.
- ---------------
(a) Executive Vice Presidents and Senior Vice Presidents shall
have supervision over all such matters, other officers of the Company,
including Vice Presidents, and in the case of Executive Vice
Presidents, Senior Vice Presidents, and other employees as may be
designated or assigned to them by the President or Chairman of the
Board, and shall perform such duties as the Board of Directors may
designate or as may be assigned to them by the President or by the
Chairman of the Board in the event of absence or disability of the
President. Whenever the term "Vice President" is used in any other
Article
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<PAGE>
of these By-laws, it shall be deemed to include Executive Vice
Presidents and Senior Vice Presidents.
(b) The Vice Presidents shall perform such duties as the Board
may designate or may be assigned to them by the President, or the
Chairman of the Board in the event of absence or disability of the
President.
Section 12. Treasurer. The Treasurer shall:
---------
(a) Subject to the supervision and direction of the Vice
President - Finance, have the custody of all moneys, notes, bonds,
securities and other evidences of indebtedness belonging to the
Corporation, and shall keep full and accurate accounts of all moneys
and securities received and of all moneys paid by him on account of
the Corporation. He shall daily deposit all moneys, checks and drafts
received to the credit and in the name of the Corporation, in such
banks or other depositories as shall from time to time be authorized,
approved or directed by the President, the Vice President - Finance,
or the Board, and shall, on behalf of the corporation, endorse for
deposit or collection, checks, notes, drafts and other obligations,
provided, however, that checks of the United States Government or of
any state or municipal government, which may be received by any branch
house of the Corporation, may be endorsed for deposit by the local
manager of the house receiving the check, and provided further,
however, that checks, warrants, drafts, notes and other negotiable
instruments, which may be received by any branch house of the
Corporation, may be endorsed by the local manager in the name of the
Corporation for collection or deposit by or in the local bank
authorized to carry the local accounts.
(b) Furnish to the Board, to the President and to such other
officers as the Board may designate, at such times as may be required,
an account of all his transactions as Treasurer.
(c) Perform such other duties pertaining to the business of the
Corporation as shall be directed or required by the President, the
Vice President - Finance, or the Board and, subject to the control of
the Vice President - Finance, the Board and these By-laws, perform all
acts incident to the office of the Treasurer.
(d) Give such bond of the faithful discharge of
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<PAGE>
his duties as the Board may require.
The books and papers of the Treasurer shall at all times be open to
the inspection of the President and each member of the Board.
Section 13. Secretary. The Secretary shall:
---------
(a) Attend all meetings of the stockholders and also, in the
event that no Secretary of the Board is elected or appointed, he shall
attend meetings of the Board, and keep the minutes of such meetings in
one or more books provided for that purpose.
(b) See that all notices are duly given in accordance with the
provisions of these By-laws, or as required by law.
(c) Be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation or a facsimile
thereof is affixed to or impressed on all certificates for shares
prior to the issue thereof, and all documents, the execution of which
on behalf of the Corporation under its seal, is duly authorized.
(d) Sign with the President or a Vice President certificates for
shares of the Corporation, the issue of which shall have been
authorized by resolution of the Board.
(e) See that the reports, statements, certificates and all other
documents and records required by law are properly made, kept and
filed.
(f) In general, perform all other duties incident to the office
of Secretary and such other duties as from time to time may be
assigned to him by the President or the Board.
Section 14. Controller. The Controller shall:
----------
(a) Maintain adequate records of all assets, liabilities, and
transactions of this Corporation; see that adequate audits thereof are
currently and regularly made; and in conjunction with other officers
and department heads initiate and enforce measures and procedures
whereby the business of the Corporation shall be conducted with the
maximum safety, efficiency, and economy. His duties and powers shall
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<PAGE>
extend to all subsidiary corporations and to all affiliated
corporations.
(b) Prepare and furnish such reports and financial statements
covering results of operations of the Corporation as shall be required
of him by the President or the Board. Prepare and furnish such reports
and statements showing the financial condition of the Corporation as
shall be required of him by the President or the Board, and have the
primary responsibility for the preparation of financial reports to the
stockholders.
(c) Perform such other duties pertaining to the business of the
Corporation as shall be directed or required by the President or the
Board and, subject to the control of the President, the Board and
these By-laws, perform all acts incident to the office of the
Controller.
The books, records and papers of the Controller shall at all times be
open to the inspection of the President and each member of the Board.
Section 15. Assistant Treasurers. If one or more Assistant Treasurers
--------------------
shall be elected or appointed pursuant to the provisions of Section 3 of this
Article IV, then in the absence or disability of the Treasurer, the Assistant
Treasurers shall perform all the duties of the Treasurer, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
Treasurer, except that they shall have no power to sign in the name of the
Corporation contracts as described in Section 1 of Article VII, unless
specifically authorized by the Board. Any such Assistant Treasurer shall perform
such other duties as from time to time may be assigned to him by the Board or
any superior officer.
Section 16. Assistant Secretaries. If one or more Assistant
---------------------
Secretaries shall be elected or appointed pursuant to the provisions of Section
3 of this Article IV, then in the absence or disability of the Secretary, the
Assistant Secretaries shall perform the duties of the Secretary, and when so
acting shall have all the powers of, and be subject to all the restrictions
imposed upon, the Secretary. Any such Assistant Secretary shall perform such
other duties as from time to time may be assigned to him by the Board or any
superior officer.
Section 17. Secretary of the Board. The Secretary of the Board shall
----------------------
record the minutes of meetings of the Board, deposit them with the Secretary of
the Corporation, and perform such other duties as may be assigned to him by the
Board.
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<PAGE>
Section 18. Compensation. The compensation of the officers shall be
------------
fixed from time to time by the Board; provided that the Board may authorize any
officer or Committee to fix the compensation of officers and employees. No
officer shall be prevented from receiving such compensation by reason of the
fact that he is also a director of the Corporation.
ARTICLE V
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
---------------------
capital stock of the Corporation shall be in such form as shall be approved by
the Board. The certificates shall be signed by the Chairman or the Vice Chairman
of the Board, the President, an Executive Vice President, Senior Vice President
or Vice President and also by the Treasurer or the Secretary, and may be sealed
with the seal of the Corporation, or a facsimile thereof.
The signatures of the aforesaid officers may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation or its employee. The validity of any stock
certificate of the Corporation signed and executed by or in the name of duly
qualified officers of the Corporation shall not be affected by the subsequent
death, resignation, or the ceasing for any other reason of any such officer to
hold such office, whether before or after the date borne by or the actual
delivery of such certificate.
The name of the person owning the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the
Corporation's capital stock records.
All certificates surrendered to the Corporation shall be cancelled,
and no new certificates shall be issued until the former certificate for the
same number of shares shall have been surrendered and cancelled except in case
of a lost or destroyed certificate.
The Corporation may treat the holder of record of any share or shares
of stock as the holder in fact thereof, and shall not be bound to recognize any
equitable or other claim to interest in any such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
save as expressly provided by law.
Section 2. Lost, Stolen or Destroyed Certificates. The Corporation
--------------------------------------
may issue a new certificate for shares in place
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<PAGE>
of a certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Board may require the owner of the lost or destroyed
certificate, or his legal representative, to give the Corporation a bond in form
satisfactory to the Corporation sufficient to indemnify the Corporation, its
transfer agents and registrars against any claim that may be made against them
on account of the alleged lost or destroyed certificate or the issuance of such
a new certificate.
Section 3. Transfer of Shares. Shares of the capital stock of the
------------------
Corporation shall be transferable by the owner thereof in person or by duly
authorized attorney, upon surrender of the certificates therefor properly
endorsed. The Board, at its option, may appoint a transfer agent and registrar,
or one or more transfer agents and one or more registrars, or either, for the
stock of the Corporation.
Section 4. Regulations. The Board shall have power and authority to
-----------
make all such rules and regulations as they may deem expedient concerning the
issue, transfer and registration of certificates for shares of the capital stock
of the Corporation.
ARTICLE VII
Execution of Instruments on Behalf of the Corporation
Section 1. Contracts. Except as herein provided, all contracts of
---------
the Corporation shall be signed in the name of the Corporation by the Chairman,
the President, a Vice President or the Treasurer, sealed with the Corporate Seal
and attested by the Secretary or an Assistant Secretary.
Bids and contracts for the purchase or sale of merchandise in the
ordinary course of business of branch houses or divisions of the Corporation,
together with bonds given to secure the performance thereof, shall be executed
in the name of the Corporation or in an authorized divisional name by an officer
authorized to sign contracts as above specified in this section, or, if relating
to business of branch houses, by a District Manager, or by the Manager or
Assistant Manager of the branch houses, respectively, and if relating to the
business of a division, by an Officer, Manager or Assistant Manager of such
division.
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<PAGE>
Section 2. Bills of Exchange, Promissory Notes, Bonds or Other
---------------------------------------------------
Evidence of Indebtedness of the Corporation, Bonds of Indemnity, and Securities
- -------------------------------------------------------------------------------
Received. All bills of exchange, promissory notes, bonds, or other evidences of
- --------
indebtedness of the Corporation shall be signed in the name of the Corporation
by the Chairman, the President, or a Vice President, and shall be countersigned
by the Treasurer or by an Assistant Treasurer.
All forms of bonds of indemnity, the execution of which is required of
the Corporation, shall be signed in the name of the Corporation by the Chairman,
the President, a Vice President, the Treasurer or an Assistant Treasurer, and
shall be countersigned by the Secretary or an Assistant Secretary.
Any securities received by the Corporation in settlement or for
security for the payment of any indebtedness due the Corporation may be sold,
assigned, transferred and delivered by the Chairman, the President, a Vice
President or the Treasurer, and all instruments of conveyance, assignment or
transfer thereof shall be executed in the name of the Corporation by such
officers, attested by the Secretary or an Assistant Secretary, and the corporate
seal attached.
Section 3. Checks and Accounts. All checks shall be signed by either
-------------------
the Chairman, the President, a Vice President, the Treasurer or an Assistant
Treasurer, the Controller or Assistant Controller and also signed by either the
Controller or an Assistant Controller, an Auditor or an Assistant Auditor, the
Secretary or an Assistant Secretary of the Corporation, and no other person or
persons shall be authorized to sign checks upon or against the funds of the
Corporation except as hereinafter provided.
The Chairman, the President, a Vice President, or the Treasurer is
authorized to establish and maintain Managers' funds for branch house's or
manufacturing division's general use including the meeting of payrolls, at the
various locations of the branch houses, or manufacturing divisions of the
Corporation, and special payroll funds at any location where the corporation
carries on business. Such funds shall be subject to withdrawal on the signature
or signatures of one or more persons, as determined and designated in writing by
either the chairman, the President, a Vice President, or the Treasurer.
Checks drawn for the payment of dividends on shares of the
Corporation's stock, and such other checks as may be designated in writing by
the Chairman or the President, together with a Vice President or the Treasurer,
may bear facsimile signatures, provided, however, that for the purpose of
transfer ring funds between banks in which the Corporation has monies on
deposit, the Treasurer or an Assistant Treasurer may direct or authorize the use
of checks payable to a depository hank for
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<PAGE>
credit of the Corporation, which checks shall have plainly printed upon their
face "Depository Transfer Check" and shall require no signature other than the
printed name of the Corporation.
The respective Managers or Assistant Managers of the Corporation's
branch houses, Managers, Credit Managers or Credit Supervisors of Regional
Offices, and Officers, Managers or Assistant Managers of the Corporation's
Divisions, are authorized to file claims for and to collect on behalf of the
Corporation any amounts due for merchandise sold or invoiced from such branch
houses, regional offices or divisions, and in the name of the corporation, or in
an authorized divisional name, to give proper receipts, releases and waivers of
mechanics' and materialmen's liens in connection therewith.
Section 4. Conveyances, Leases, Releases and Satisfaction of Judgment
----------------------------------------------------------
and Mortgages. All conveyances, leases and releases and satisfactions of
- -------------
judgment and mortgages shall be signed in the name of the Corporation by the
Chairman, the President, a Vice President or the Treasurer, sealed with the
corporate seal and attested by the Secretary or an Assistant Secretary.
Section 5. Other Instruments. All other instruments not hereinabove
-----------------
specifically designated shall be signed in the name of the Corporation by the
Chairman, the President, a Vice President, or Treasurer, sealed with the
corporate seal and attested by the Secretary or an Assistant Secretary,
provided, however, that notwithstanding the provisions contained in these By-
laws, the Board may at any time direct the manner in which and the person by
whom any particular instrument, contract or obligation, or any class of
instruments, contracts or obligations of the Corporation may and shall be
executed.
Shares of stock in any other Corporation which shares are owned by the
Corporation need not stand in its name, but may be held for its benefit in the
individual name of the Chairman or of any other nominee designated for the
purpose by the Board. Certificates for shares so held for the benefit of the
Corporation shall be endorsed in blank, or have proper stock powers attached so
that said certificates are at all times in due form for transfer, and shall be
held for safekeeping in such manner as shall be determined from time to time by
the Board.
Section 4. Election of Auditors. The directors shall select
--------------------
independent auditors to audit the books and records of the Corporation for the
current fiscal year, subject to the approval of the stockholders at the annual
meeting. Should the auditors so elected resign, be removed for good cause shown,
or otherwise fail to serve during or with respect to said year, a majority of
the directors shall select a substitute firm of
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<PAGE>
auditors to serve with respect to said year.
ARTICLE X
Indemnification
Section 1. Actions, Suits or Proceedings other than by or in the
-----------------------------------------------------
Right of the Corporation. The Corporation shall indemnify any person who was or
- ------------------------
is a party or is threatened to be made a party to any threatened pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director or officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity against
costs, charges, expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding or any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Actions or Suits by or in the Right of the Corporation.
------------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director or officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection with the defense or settlement of
such action or suit and any appeal therefrom, if he acted in good
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<PAGE>
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the court of Chancery
of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such costs, charges and expenses which the
Court of Chancery or such other court shall deem proper.
Section 3. Indemnification for Costs, Charges and Expenses of
--------------------------------------------------
Successful Party. Notwithstanding the other provisions of this Article, to the
- ----------------
extent that a director or officer of the Corporation has been successful on the
merits or otherwise, including, without limitation, the dismissal of an action
without prejudice, in defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article, or in defense of any claim issue or matter
therein, he shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith.
Section 4. Determination of Right to Indemnification. Any
-----------------------------------------
indemnification under Sections 1 and 2 of this Article (unless ordered by a
court) shall be paid by the corporation unless a determination is made (1) by
the Board of Directors by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or (2) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (3) by the stockholders, that
indemnification of the director or officer is not proper in the circumstances
because he has not met the applicable standard of conduct set forth in Sections
1 and 2 of this Article.
Section 5. Advance of Costs, Charges and Expenses. Costs, charges and
--------------------------------------
expenses (including attorneys' fees) incurred by a person referred to in
Sections 1 and 2 of this Article in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding; provided, however, that the payment of such costs, charges and
expenses incurred by a director or officer in his capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer) in advance of the final disposition of
such action, suit or proceeding shall be made only upon receipt of an
undertaking by or on behalf of the director or officer to repay
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<PAGE>
all amounts so advanced in the event that it shall ultimately be determined that
such director or officer is not entitled to be indemnified by the corporation as
authorized in this Article. The Board of Directors may, in the manner set forth
above, and upon approval of such director or officer of the Corporation,
authorize the Corporation's counsel to represent such person, in any action,
suit or proceeding, whether or not the Corporation is a party to such action,
suit or proceeding.
Section 6. Procedure for Indemnification. Any indemnification under
-----------------------------
Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5
of this Article, shall be made promptly, and in any event within 60 days, upon
the written request of the director or officer. The right to indemnification or
advances as granted by this Article shall be enforceable by the director or
officer in any court of competent jurisdiction, if the Corporation denies such
request, in whole or in part, or if no disposition thereof is made within 60
days. Such persons' costs and expenses incurred in connection with successfully
establishing right to indemnification, in whole or in part, in any such action
shall also be indemnified by the Corporation. It shall be a defense to any such
action (other than an action brought to enforce a claim for the advance of
costs, charges and expenses under Section 5 of this Article where the required
undertaking, if any, has been received by the Corporation) that the claimant has
not met the standard of conduct set forth in Sections 1 or 2 of this Article,
but the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, its independent
legal counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Sections 1 or 2 of this Article, nor the fact that there has been an
actual determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 7. Other Rights; Continuation of Right to Indemnification.
------------------------------------------------------
The indemnification provided by this Article shall not be deemed exclusive of
any other rights to which a person seeking indemnification may be entitled under
any law (common or statutory), agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, and shall continue as to a person who has ceased
to be a director or officer, and shall inure to the benefit of the estate,
heirs, executors and administrators of such person. All
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<PAGE>
rights to indemnification under this Article shall be deemed to be a contract
between the Corporation and each director or officer of the Corporation who
serves or served in such capacity at any time while this Article is in effect.
Any repeal or modification of this Article or any repeal or modification of
relevant provisions of the Delaware General Corporation Law or any other
applicable laws shall not in any way diminish any rights to indemnification of
such director or officer or the obligations of the Corporation arising
hereunder.
Section 8. Insurance. The Corporation shall purchase and maintain
---------
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
- --------
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 9. Savings Clause. If this Article or any portion hereof
--------------
shall be invalidated on any ground by any court of competent jurisdiction, any
portion of this Article so invalidated shall be severable and such invalidity
shall not by itself render any other portion of this Article invalid, and the
Corporation shall nevertheless indemnify each director or officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
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<PAGE>
ARTICLE XI
Amendments
Except as otherwise required by law or the Certificate of
Incorporation, these By-laws may be amended or repealed, and new By-laws may be
adopted, either by the affirmative vote of two-thirds of the shares of stock
outstanding and entitled to vote thereon, voting together as a single class, or
by the affirmative vote of a majority of the Board then in office.
Schedule of Amendments
- ----------------------
4/24/86 Article X
2/23/93 Change New York and New York City
to Connecticut and Stamford
12/5/94 Article X-Sections 1,2,4,5 amended
BYLAWS
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<PAGE>
EXHIBIT B
EVA INCENTIVE COMPENSATION
PLAN FOR EXECUTIVE OFFICERS
1. Purpose.
- -----------
The Company has adopted an annual incentive compensation program based on
the principles of Economic Value Added ("EVA") throughout the Company. The
purpose of the EVA approach is to maximize shareholder value by aligning
management's interests with those of shareholders and rewarding management for
sustainable and continuous improvement in the business being managed.
Recent changes in the Internal Revenue Code have placed limits on the
deductibility of the compensation paid to the executive officers who may be
named in the compensation table of the Company's proxy statement ("Named
Executive Officers") to the extent such compensation exceeds $1 million dollars
for an individual unless it meets requirements set forth in Section 162(m) of
the Internal Revenue Code and the regulations issued thereunder. This limit on
deductibility does not apply to compensation paid to any other executive
officer, business unit president, key business unit executive or other
participant in the Company's incentive compensation programs.
In order to preserve the deductibility of incentive compensation paid to
Named Executive Officers in the future, the Company has created this EVA
Incentive Compensation Plan for Executive Officers and for any other employees
who may become Named Executive Officers by reason of the executive compensation
disclosure rules under the Securities Act of 1934. The Plan is intended to
satisfy the specific requirements of Section 162(m) of the Code, as outlined by
the Internal Revenue Services in recently issued proposed regulations.
2. Administration.
- -------------------
The Plan will be administered by the Organization and Compensation
Committee of the Board of Directors (the "Committee"). The Committee's
decisions in the administration of the Plan shall be final and binding on all
parties.
3. Definition of EVA and Description of Formulae.
- --------------------------------------------------
EVA is defined as the difference between the return on total capital
invested in the business and the cost of capital, multiplied by total capital
employed ("EVA Calculation"). The Plan will be formula driven. Particular EVA
formulas will be tailored to the size and unique characteristics of the business
unit or units for which a specific executive is responsible. The key elements of
the EVA formula applicable to any executive
<PAGE>
officer will be the Cost of Capital (generally the cost of capital to the
corporation), the Return on Capital, the Amount of Capital employed in the
business unit, the net operating profit of the unit after tax, and the prior
year's EVA. Awards will be calculated on the basis of year-end results.
Formulas for individual business units may utilize both a percentage of the
change in the EVA of a business unit from the prior year, whether positive or
negative, plus a percentage of the positive EVA, if any, in the current year;
the EVA award may be calculated for an entire business unit and an executive
officer may receive a percentage of a unit's EVA award. When executive officers
or business units are responsible for more than one business unit, a formula may
be based on a percentage of the aggregate EVA, positive or negative, of the
units reporting to the executive or unit. The Committee has the discretion and
authority to develop other EVA based formulae or goals for utilization pursuant
to this Plan in future years. In any instance in which an executive officer
participates in a unit EVA award in which a group of employees participates, the
executive officer's percentage of the unit's EVA award will be specified.
4. Procedure.
- --------------
Before the beginning of each fiscal year, the Committee will establish and
set forth in writing the EVA formula applicable to each executive officer and
each potential Named Executive Officer of the Company for that year (including
the percentage of any business unit EVA award in which he may participate). The
Committee will retain discretion to revise formulas or an executive's percentage
participation in any unit EVA award if the Committee deems it appropriate as
circumstances develop during the year; provided, however, in the case of a Named
Executive Officer, such revision may only have a negative effect on the amount
of the Named Executive Officer's award for the year. As soon as is reasonably
practicable after the year ends the Committee will review the EVA Calculation,
calculate the EVA award for each executive officer pursuant to the formula
established at the beginning of the year (revised downward if the Committee so
determines), and certify the EVA incentive compensation award for each executive
officer to the Board of Directors.
5. Bank Account and Payout.
- ----------------------------
After the EVA award for a particular executive has been determined, it will
be credited whether positive or negative to the executive's account. The
executive will then be paid, if the account remains positive, a specified
percentage of the account balance in cash. The remainder of the account balance
will represent that individual's "equity" in the account for future
2
<PAGE>
years. If EVA awards are or have been negative, an account balance may be
negative. In such case, the executive officer will receive no incentive
compensation until the aggregate of subsequent EVA awards results in a positive
account balance. Each year, the Company will add interest to a positive balance
or charge interest on a negative balance at an appropriate money market rate.
The account will be subject to forfeiture in the event an executive officer
leaves the Company by reason of termination or resignation.
The entire account balance will become payable upon normal retirement (age
65), death, or disability, or a change-in-control. (The Committee will retain
the discretion to pay the entire account balance upon early retirement.) For
purposes of the Plan, the term "change in control" means (i) the first purchase
of shares pursuant to a tender offer or exchange offer (other than a tender
offer or exchange offer by the Company) for all or part of the Company's Common
Stock or any securities convertible into such Common Stock, (ii) the receipt by
the Company of a Schedule 13D or other advice indicating that a person is the
"beneficial owner" (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act") of 20% or more of the Company's Common
Stock calculated as provided in paragraph (d) of said Rule 13d-3, (iii) the date
of approval by stockholders of the Company of an agreement providing for any
consolidation or merger of the Company in which the Company will not be the
continuing or surviving corporation or pursuant to which shares of Common Stock
of the Company would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of Common Stock of the Company
immediately prior to the merger would have the same proportion of ownership of
Common Stock of the surviving corporation immediately after the merger, (iv) the
date of the approval by stockholders of the Company of any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all or substantially all the assets of the Company or (v) the adoption of any
plan or proposal for the liquidation (but not a partial liquidation) or
dissolution of the Company or (vi) individuals who, as of March 28, 1994,
constituted the Board of Directors of the Company (the "Board") generally and as
of the date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of the Directors
of Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Plan, considered as
though such person were a
3
<PAGE>
member of the Incumbent Board. If it is determined that any payment of an
account by the Company to an executive officer or Named Executive Officer by
reason of a change-in-control is subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), the Company shall make
additional cash payments to the employee such that after payment of all taxes
including any excise tax imposed on such payments, the employee will retain an
amount equal to the excise tax on all the payments.
6. Plan Termination.
- ----------------------
The Board of Directors may modify, suspend or terminate the Plan at any
time.
4
<PAGE>
EXHIBIT C - Form I
CRANE CO.
EMPLOYMENT/SEVERANCE AGREEMENT
(Revised 3/95)
AGREEMENT by and between CRANE CO., a Delaware corporation (the
"Company"), and 1~ (the "Employee"), dated as of the day of , 1995.
The Board of Directors of the Company (the "Board"), on the advice of
its Organization and Compensation Committee, has determined that it is in the
best interests of the Company and its shareholders to assure that the Company
will have the continued dedication of the Employee, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with compensation arrangements upon a Change of Control which provide
the Employee with individual financial security and which are competitive with
those of other corporations and, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
l. Certain Definitions.
-------------------
(a) The "Effective Date" shall be the first date during the
"Change of Control Period" (as defined in Section l(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Employee's employment with the Company is terminated prior to the date on
which a Change of Control occurs, and it is reasonably demonstrated that such
termination (l) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (2) otherwise arose in
connection with or anticipation of a Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(b) The "Change of Control Period" is the period commencing on
the date hereof and ending on the earlier to occur of (i) the third anniversary
of such date or (ii) the first day of the month next following the Employee's
normal retirement date ("Normal Retirement Date") under Crane Co.'s Pension Plan
for Non Bargaining Employees effective January 1, 1985 or under that retirement
plan of a subsidiary of the Company in which the Employee is a participant, or
any successor retirement plan (the "Retirement Plan");
<PAGE>
provided, however, that commencing on the date one year after the date hereof,
- -------- -------
and on each annual anniversary of such date (such date and each annual
anniversary thereof is hereinafter referred to as the "Renewal Date"), the
Change of Control Period shall be automatically extended so as to terminate on
the earlier of (x) three years from such Renewal Date or (y) the first day of
the month coinciding with or next following the Employee's Normal Retirement
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change
-----------------
of Control" shall mean:
(i) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either the then outstanding shares of common
stock of the Company or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors, but excluding, for this purpose, any such acquisition by the Company
or any of its subsidiaries, or any employee benefit plan (or related trust) of
the Company or its subsidiaries, or the Crane Fund, a charitable trust under the
laws of the State of Illinois, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by substantially the same individuals and entities who were the
beneficial owners, respectively, of the common stock and voting securities of
the Company immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
then outstanding shares of common stock of the Company or the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office
2
<PAGE>
is in connection with an actual or threatened election contest relating to the
election of the Directors of the Company (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
substantially the same individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of the Company or of
the sale or other disposition of all or substantially all of the assets of the
Company.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Employee in its employ, and the Employee hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the earlier to occur of (a) the third anniversary of such date or (b) the
first day of the month coinciding with or next following the Employee's Normal
Retirement Date (the "Employment Period").
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Employee's
position (including status, offices, titles and reporting requirements)
authority duties and responsibilities shall be at least commensurate in all
material respects with those held, exercised and assigned at any time during the
90-day period immediately preceding the Effective Date and (B) the Employee's
services shall be performed at the location where the Employee was employed
immediately preceding the Effective Date or any office or location less than
thirty-five (35) miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Employee hereunder, to use the
Employee's reasonable best efforts to
3
<PAGE>
perform faithfully and efficiently such responsibilities. It is expressly
understood and agreed that to the extent that any outside activities have been
conducted by the Employee prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Employee's responsibilities to the
Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the
-----------
Employee shall receive an annual base salary ("Base Salary") at a rate at least
equal to twelve times the highest monthly base salary paid or payable to the
Employee by the Company during the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the Base
Salary shall be reviewed at least annually and shall be increased at any time
and from time to time as shall be substantially consistent with increases in
base salary awarded in the ordinary course of business to other key employees of
the Company and its subsidiaries. Any increase in Base Salary shall not serve to
limit or reduce any other obligation to the Employee under this Agreement. Base
Salary shall not be reduced after any such increase.
(ii) Annual Bonus. In addition to Base Salary, the
------------
Employee shall be eligible (but not entitled) to receive, for each fiscal year
during the Employment Period, an annual bonus (an "Annual Bonus") (either
pursuant to any incentive compensation plan maintained by the Company or
otherwise) in cash on the same basis as in the fiscal year immediately preceding
the fiscal year in which the Effective Date occurs or, if more favorable to the
Employee, on the same basis as awarded at any time thereafter to other key
employees of the Company and its subsidiaries.
(iii) Incentive, Savings and Retirement
---------------------------------
Plans. In addition to Base Salary and Annual Bonus payable as hereinabove
- -----
provided, the Employee shall be entitled to participate during the Employment
Period in all incentive, savings and retirement plans, practices, policies and
programs applicable to other key employees of the Company and its subsidiaries.
Such plans, practices, policies and programs, in the aggregate, shall
provide the Employee with compensation, benefits and reward opportunities at
least as favorable in the aggregate as the most favorable of such compensation,
benefits and reward opportunities provided by the Company for the Employee under
such plans, practices, policies and programs as in effect at any time during the
90-day period immediately
4
<PAGE>
preceding the Effective Date or, if more favorable to the Employee, as provided
at any time thereafter with respect to other key employees of the Company and
its subsidiaries.
(iv) Welfare Benefit Plans. During the Employment Period,
---------------------
the Employee and/or the Employee's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries.
(v) Expenses. During the Employment Period, the Employee
--------
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Employee in accordance with the most favorable policies,
practices and procedures of the Company and its subsidiaries in effect at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Employee, as in effect at any time thereafter with respect
to other key employees of the Company and its subsidiaries.
(vi) Fringe Benefits. During the Employment Period, the
---------------
Employee shall be entitled to fringe benefits, including use of an automobile
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its subsidiaries in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Employee, as in effect at any time thereafter with
respect to other key employees of the Company and its subsidiaries.
(vii) Office and Support Staff. During the Employment
------------------------
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Employee by the Company and its subsidiaries at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter with respect to other key employees
of the Company and its subsidiaries.
5
<PAGE>
(viii) Vacation. During the Employment Period, the
--------
Employee shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
subsidiaries as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as in effect
at any time thereafter with respect to other key employees of the Company and
its subsidiaries.
5. Termination.
-----------
(a) Death or Disability. This Agreement shall terminate
-------------------
automatically upon the Employee's death. If the Company determines in good
faith that the Disability of the Employee has occurred (pursuant to the
definition of "Disability" set forth below), it may give to the Employee written
notice (given in accordance with Section 12(b) hereof) of its intention to
terminate the Employee's employment. In such event, the Employee's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Employee (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Employee shall not have returned to full-
time performance of the Employee's duties. For purposes of this Agreement,
"Disability" means disability which, at least 26 weeks after its commencement,
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employee's employment
-----
for "Cause." For purposes of this Agreement, "Cause" shall constitute either (i)
personal dishonesty or breach of fiduciary duty involving personal profit at the
expense of the Company (ii) repeated violations by the Employee of the
Employee's obligations under Section 4(a) of this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or (iii) the commission of a criminal act related to the performance of
duties, or the furnishing of proprietary confidential information about the
Company to a competitor, or potential competitor, or third party whose interests
are adverse to those of the Company; (iv) habitual intoxication by alcohol or
drugs during work hours; or (v) conviction of a felony.
(c) Good Reason. The Employee's employment may be terminated by
-----------
the Employee for Good Reason. For purposes of this Agreement, "Good Reason"
means:
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position
6
<PAGE>
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 4(a)(i)(B) hereof,
except for travel reasonably required in the performance of the Employee's
responsibilities;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this Agreement;
or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Employee shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Employee for any
reason during the 30-day period immediately following the first anniversary of
the Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
---------------------
Cause or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice). The failure by the Employee to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or
7
<PAGE>
circumstance in enforcing his rights hereunder.
(e) Date of Termination. "Date of Termination" means the date
-------------------
of receipt of the Notice of Termination or any later date specified therein, as
the case may be; provided, however,that (i) if the Employee's employment is
-------- -------
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Employee of such
termination and (ii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Death. If the Employee's employment is terminated by reason
-----
of the Employee's death, this Agreement shall terminate without further
obligations to the Employee's legal representatives under this Agreement, other
than those obligations accrued or earned and vested (if applicable) by the
Employee as of the Date of Termination, including, for this purpose (i) the
Employee's full Base Salary through the Date of Termination at the rate in
effect on the Date of Termination or, if higher, at the highest rate in effect
at any time from the 90-day period preceding the Effective Date through the Date
of Termination (the "Highest Base Salary"), (ii) the product of the Annual Bonus
paid to the Employee for the last full fiscal year and a fraction, the numerator
of which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (iii) any compensation
previously deferred by the Employee (together with accrued interest thereon, if
any) and not yet paid by the Company and any accrued vacation pay not yet paid
by the Company (such amounts specified in clauses (i), (ii) and (iii) are
hereinafter referred to as "Accrued Obligations"). All such Accrued Obligations
shall be paid to the Employee's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of the Date of Termination. Anything in this
Agreement to the contrary notwithstanding, the Employee's family shall be
entitled to receive benefits at least equal to the most favorable benefits
provided by the Company and any of its subsidiaries to surviving families of
employees of the Company and such subsidiaries under such plans, programs,
practices and policies relating to family death benefits, if any, in accordance
with the most favorable plans, programs, practices and policies of the Company
and its subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect on the date of the Employee's death with respect
to other key employees of the Company and its subsidiaries and their families.
8
<PAGE>
(b) Disability. If the Employee's employment is terminated by
----------
reason of the Employee's Disability, this Agreement shall terminate without
further obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of Termination,
including for this purpose, all Accrued Obligations. All such Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee shall be entitled after the Disability Effective
Date to receive disability and other benefits at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies of the Company and its subsidiaries in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries and their families.
(c) Cause; Other than for Good Reason. If the Employee's
---------------------------------
employment shall be terminated for Cause, this Agreement shall terminate without
further obligations to the Employee other than the obligation to pay to the
Employee the Highest Base Salary through the Date of Termination plus the amount
of any compensation previously deferred by the Employee (together with accrued
interest thereon, if any). If the Employee terminates employment other than for
Good Reason, this Agreement shall terminate without further obligations to the
Employee, other than those obligations accrued or earned and vested (if
applicable) by the Employee through the Date of Termination, including for this
purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to
the Employee in a lump sum in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability. If, during
-----------------------------------------------
the Employment Period, the Company shall terminate the Employee's employment
other than for Cause, Disability, or death or if the Employee shall terminate
his employment for Good Reason:
(i) the Company shall pay to the Employee in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:
A. to the extent not theretofore paid, the Employee's Highest
Base Salary through the Date of Termination; and
B. the product of (x) the greater of the Annual
9
<PAGE>
Bonus paid or payable (annualized for any fiscal year consisting of less than
twelve full months or for which the Executive has been employed for less than
twelve full months) to the Executive for the most recently completed fiscal year
during the Employment Period, if any, or the average bonus (annualized for any
fiscal year consisting of less than twelve full months or with respect to which
the Executive has been employed by the Company for less than twelve full months)
paid or payable to the Executive by the Company and its affiliated companies in
respect of the three fiscal years immediately preceding the fiscal year in which
the Effective Date occurs (the "Average Annual Bonus"), such greater amount
being hereafter referred to as the "Highest Annual Bonus," and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365;
C. the product of (x) three and (y) the sum of (i) the Highest Base
Salary and (ii) the Average Annual Bonus; and
D. in the case of compensation previously deferred by the Employee,
all amounts previously deferred (together with accrued interest thereon, if any)
and not yet paid by the Company, and any accrued vacation pay not yet paid by
the Company; and
(ii) for the remainder of the Employment Period, or such
longer period as any plan, program, practice or policy may provide, the Company
shall continue benefits to the Employee and/or the Employee's family at least
equal to those which would have been provided to them as if the Employee's
employment had not been terminated, in accordance with the most favorable
employee welfare benefit plans (as such term is defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended) of the Company and
its subsidiaries (including health insurance and life insurance) during the 90-
day period immediately preceding the Effective Date or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees and their families, and for purposes of eligibility for retiree
benefits pursuant to such employee welfare benefit plans, the Employee shall be
considered to have remained employed until the end of the Employment Period and
to have retired on the last day of such period.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Employee's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices,
provided by the Company or any of its subsidiaries and for which the Employee
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Employee may have under any stock option, restricted stock, stock
appreciation right, or other agreements
10
<PAGE>
with the Company or any of its subsidiaries. Amounts which are vested benefits
or which the Employee is otherwise entitled to receive under any plan, policy,
practice or program of the Company or any of its subsidiaries at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program provided, however, that in the event the terms of
any such plan, policy, practice or program concerning the payment of benefits
thereunder shall conflict with any provision of this Agreement, the terms of
this Agreement shall take precedence but only if and to the extent the payment
would not adversely affect the tax exempt status (if applicable) of any such
plan, policy, practice or program and only if the employee agrees in writing
that such payment shall be in lieu of any corresponding payment from such plan,
policy, practice or program.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Employee or others. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 9 of this
Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended (the
"Code").
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any economic benefit or payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (including, but not limited to, any economic benefit
received by the Employee by reason of the acceleration of rights under the
various option, restricted stock and stock appreciation right plans of the
Company, but excluding any other economic benefit, which by the terms of the
agreement or other document providing for such economic benefit, is expressly
excluded from inclusion in the economic benefits covered by this Section 9(a))
(a "Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties with respect to such excise tax (such
11
<PAGE>
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall be
entitled to receive an additional payment (a "Gross-Up-Payment") in an amount
such that after payment by the Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed
upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the Company's regular outside independent public accounting firm (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Employee within 15 business days of the Date of Termination,
if applicable, or such earlier time as is requested by the Company . The initial
Gross-Up Payment, if any, as determined pursuant to this Section 9(b), shall be
paid to the Employee within 5 days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Employee, it shall furnish the Employee with an opinion that he has
substantial authority not to report any Excise Tax on his federal income tax
return. Any determination by the Accounting Firm shall be binding upon the
Company and the Employee. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 9(c) and the Employee
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee.
(c) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the later of
either (i) the date the Employee has actual knowledge of such claim, or (ii) ten
days after the Internal Revenue Service issues to the Employee either a written
report proposing imposition of the Excise Tax or a statutory notice of
Deficiency with respect thereto, and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the thirty-day
period following the
12
<PAGE>
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim,
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to request or accede to a request for an extension of the
statute of limitations with respect only to the tax claimed, or pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Employee agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Employee, on an interest-free
basis and shall indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations requested or acceded to by the Employee
at the Company's request and relating to payment of taxes for the taxable year
of the Employee with respect to which such
13
<PAGE>
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Employee of an amount advanced
by the Company pursuant to Section 9(c), the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
(e) In the event that any state or municipality or subdivision
thereof shall subject any Payment to any special tax which shall be in addition
to the generally applicable income tax imposed by such state , municipality, or
subdivision with respect to receipt of such Payment, the foregoing provisions of
this Section 9 shall apply, mutatis mutandis, with respect to such special tax.
------- --------
10. Confidential Information. The Employee shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
subsidiaries, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
subsidiaries and which shall not be or become public knowledge (other than by
acts by the Employee or his representatives in violation of this Agreement).
After termination of the Employee's employment with the Company, the Employee
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Employee under this Agreement.
14
<PAGE>
11. Successors.
----------
(a) This Agreement is personal to the Employee and without the
prior written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Employee's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous.
--------------
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force and effect.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
------------------
FIELD (2)
If to the Company:
-----------------
Crane Co.
100 First Stamford Place
Stamford, CT 06902
Attention: Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and
15
<PAGE>
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Employee's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Employee with respect to the subject matter hereof. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives. This Agreement is intended to revise the relationships, rights
and obligations between the Company and the Employee defined by, and to replace,
the Employment/Severance Agreement between the Company and the Employee
dated_______, and amended ________ , ("Former Agreement") in all respects. Upon
the execution of this Agreement by both parties, the Former Agreement to the
extent its provisions are inconsistent with this Agreement shall be of no force
and effect.
(g) The Employee and the Company acknowledge that the employment
of the Employee by the Company is "at will," and, prior to the Effective Date,
may be terminated by either the Employee or the Company at any time. Upon a
termination of the Employee's employment or prior to the Effective Date, there
shall be no further rights under this Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the Employee has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
______________________________________
CRANE CO.
By____________________________________
Attest:_____________________________
Secretary
17
<PAGE>
EXHIBIT C - Form II
CRANE CO.
EMPLOYMENT/SEVERANCE AGREEMENT
(Revised 3/95)
AGREEMENT by and between CRANE CO., a Delaware corporation (the
"Company"), and 1~ (the "Employee"), dated as of the day of , 1995.
The Board of Directors of the Company (the "Board"), on the advice of
its Organization and Compensation Committee, has determined that it is in the
best interests of the Company and its shareholders to assure that the Company
will have the continued dedication of the Employee, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with compensation arrangements upon a Change of Control which provide
the Employee with individual financial security and which are competitive with
those of other corporations and, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
l. Certain Definitions.
-------------------
(a) The "Effective Date" shall be the first date during the
"Change of Control Period" (as defined in Section l(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Employee's employment with the Company is terminated prior to the date on
which a Change of Control occurs, and it is reasonably demonstrated that such
termination (l) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (2) otherwise arose in
connection with or anticipation of a Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(b) The "Change of Control Period" is the period commencing on
the date hereof and ending on the earlier to occur of (i) the third anniversary
of such date or (ii) the first day of the month next following the Employee's
normal retirement date ("Normal Retirement Date") under Crane Co.'s Pension Plan
for Non Bargaining Employees effective January 1, 1985 or under that retirement
plan of a subsidiary of the Company in which the Employee is a participant, or
any successor retirement plan (the "Retirement Plan"); provided, however, that
-------- -------
commencing on the date one year after the date hereof, and on each annual
<PAGE>
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate on the earlier of (x) three
years from such Renewal Date or (y) the first day of the month coinciding with
or next following the Employee's Normal Retirement Date, unless at least 60 days
prior to the Renewal Date the Company shall give notice that the Change of
Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change
-----------------
of Control" shall mean:
(i) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either the then outstanding shares of common
stock of the Company or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors, but excluding, for this purpose, any such acquisition by the Company
or any of its subsidiaries, or any employee benefit plan (or related trust) of
the Company or its subsidiaries, or the Crane Fund, a charitable trust under the
laws of the State of Illinois, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by substantially the same individuals and entities who were the
beneficial owners, respectively, of the common stock and voting securities of
the Company immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
then outstanding shares of common stock of the Company or the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the Directors of the Company (as such
2
<PAGE>
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act); or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
substantially the same individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of the Company or of
the sale or other disposition of all or substantially all of the assets of the
Company.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Employee in its employ, and the Employee hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the earlier to occur of (a) the third anniversary of such date or (b) the first
day of the month coinciding with or next following the Employee's Normal
Retirement Date (the "Employment Period").
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Employee's
position (including status, offices, titles and reporting requirements)
authority duties and responsibilities shall be at least commensurate in all
material respects with those held, exercised and assigned at any time during the
90-day period immediately preceding the Effective Date and (B) the Employee's
services shall be performed at the location where the Employee was employed
immediately preceding the Effective Date or any office or location less than
thirty-five (35) miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Employee hereunder, to use the
Employee's reasonable best efforts to perform faithfully and efficiently such
responsibilities. It is expressly understood and agreed that to the extent that
any
3
<PAGE>
outside activities have been conducted by the Employee prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Employee's
responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the
-----------
Employee shall receive an annual base salary ("Base Salary") at a rate at least
equal to twelve times the highest monthly base salary paid or payable to the
Employee by the Company during the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the Base
Salary shall be reviewed at least annually and shall be increased at any time
and from time to time as shall be substantially consistent with increases in
base salary awarded in the ordinary course of business to other key employees of
the Company and its subsidiaries. Any increase in Base Salary shall not serve to
limit or reduce any other obligation to the Employee under this Agreement. Base
Salary shall not be reduced after any such increase.
(ii) Annual Bonus. In addition to Base Salary, the
------------
Employee shall be eligible (but not entitled) to receive, for each fiscal year
during the Employment Period, an annual bonus (an "Annual Bonus") (either
pursuant to any incentive compensation plan maintained by the Company or
otherwise) in cash on the same basis as in the fiscal year immediately preceding
the fiscal year in which the Effective Date occurs or, if more favorable to the
Employee, on the same basis as awarded at any time thereafter to other key
employees of the Company and its subsidiaries.
(iii) Incentive, Savings and Retirement
---------------------------------
Plans. In addition to Base Salary and Annual Bonus payable as hereinabove
- -----
provided, the Employee shall be entitled to participate during the Employment
Period in all incentive, savings and retirement plans, practices, policies and
programs applicable to other key employees of the Company and its subsidiaries.
Such plans, practices, policies and programs, in the aggregate, shall
provide the Employee with compensation, benefits and reward opportunities at
least as favorable in the aggregate as the most favorable of such compensation,
benefits and reward opportunities provided by the Company for the Employee under
such plans, practices, policies and programs as in effect at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Employee, as provided at any time thereafter with respect to other key
employees of the Company and
4
<PAGE>
its subsidiaries.
(iv) Welfare Benefit Plans. During the Employment Period,
---------------------
the Employee and/or the Employee's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries.
(v) Expenses. During the Employment Period, the Employee
--------
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Employee in accordance with the most favorable policies,
practices and procedures of the Company and its subsidiaries in effect at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Employee, as in effect at any time thereafter with respect
to other key employees of the Company and its subsidiaries.
(vi) Fringe Benefits. During the Employment Period, the
---------------
Employee shall be entitled to fringe benefits, including use of an automobile
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its subsidiaries in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Employee, as in effect at any time thereafter with
respect to other key employees of the Company and its subsidiaries.
(vii) Office and Support Staff. During the Employment
------------------------
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Employee by the Company and its subsidiaries at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter with respect to other key employees
of the Company and its subsidiaries.
(viii) Vacation. During the Employment Period, the
--------
Employee shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
subsidiaries as in effect at any time during the 90-day period immediately
preceding the Effective
5
<PAGE>
Date or, if more favorable to the Employee, as in effect at any time thereafter
with respect to other key employees of the Company and its subsidiaries.
5. Termination.
-----------
(a) Death or Disability. This Agreement shall terminate
-------------------
automatically upon the Employee's death. If the Company determines in good faith
that the Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice (given
in accordance with Section 12(b) hereof) of its intention to terminate the
Employee's employment. In such event, the Employee's employment with the Company
shall terminate effective on the 30th day after receipt of such notice by the
Employee (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Employee shall not have returned to full-time
performance of the Employee's duties. For purposes of this Agreement,
"Disability" means disability which, at least 26 weeks after its commencement,
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employee's employment
-----
for "Cause." For purposes of this Agreement, "Cause" shall constitute either (i)
personal dishonesty or breach of fiduciary duty involving personal profit at the
expense of the Company (ii) repeated violations by the Employee of the
Employee's obligations under Section 4(a) of this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or (iii) the commission of a criminal act related to the performance of
duties, or the furnishing of proprietary confidential information about the
Company to a competitor, or potential competitor, or third party whose interests
are adverse to those of the Company; (iv) habitual intoxication by alcohol or
drugs during work hours; or (v) conviction of a felony.
(c) Good Reason. The Employee's employment may be terminated
-----------
by the Employee for Good Reason. For purposes of this Agreement, "Good Reason"
means:
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
6
<PAGE>
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 4(a)(i)(B) hereof,
except for travel reasonably required in the performance of the Employee's
responsibilities;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this Agreement;
or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Employee shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
---------------------
Cause or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice). The failure by the Employee to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
(e) Date of Termination. "Date of Termination" means the date
-------------------
of receipt of the Notice of Termination or any later date specified therein, as
the case may be; provided, however, that (i) if the Employee's employment is
-------- -------
terminated by the Company other than for Cause or Disability, the Date of
7
<PAGE>
Termination shall be the date on which the Company notifies the Employee of such
termination and (ii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Death. If the Employee's employment is terminated by
-----
reason of the Employee's death, this Agreement shall terminate without further
obligations to the Employee's legal representatives under this Agreement, other
than those obligations accrued or earned and vested (if applicable) by the
Employee as of the Date of Termination, including, for this purpose (i) the
Employee's full Base Salary through the Date of Termination at the rate in
effect on the Date of Termination or, if higher, at the highest rate in effect
at any time from the 90-day period preceding the Effective Date through the Date
of Termination (the "Highest Base Salary"), (ii) the product of the Annual Bonus
paid to the Employee for the last full fiscal year and a fraction, the numerator
of which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (iii) any compensation
previously deferred by the Employee (together with accrued interest thereon, if
any) and not yet paid by the Company and any accrued vacation pay not yet paid
by the Company (such amounts specified in clauses (i), (ii) and (iii) are
hereinafter referred to as "Accrued Obligations"). All such Accrued Obligations
shall be paid to the Employee's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days of the Date of Termination. Anything in this
Agreement to the contrary notwithstanding, the Employee's family shall be
entitled to receive benefits at least equal to the most favorable benefits
provided by the Company and any of its subsidiaries to surviving families of
employees of the Company and such subsidiaries under such plans, programs,
practices and policies relating to family death benefits, if any, in accordance
with the most favorable plans, programs, practices and policies of the Company
and its subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect on the date of the Employee's death with respect
to other key employees of the Company and its subsidiaries and their families.
(b) Disability. If the Employee's employment is terminated by
----------
reason of the Employee's Disability, this Agreement shall terminate without
further obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of Termination,
including for this purpose, all Accrued Obligations. All such
8
<PAGE>
Accrued Obligations shall be paid to the Employee in a lump sum in cash within
30 days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee shall be entitled after the Disability Effective
Date to receive disability and other
benefits at least equal to the most favorable of those provided by the Company
and its subsidiaries to disabled employees and/or their families in accordance
with such plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries and their families.
(c) Cause; Other than for Good Reason. If the Employee's
----------------------------------
employment shall be terminated for Cause, this Agreement shall terminate without
further obligations to the Employee other than the obligation to pay to the
Employee the Highest Base Salary through the Date of Termination plus the amount
of any compensation previously deferred by the Employee (together with accrued
interest thereon, if any). If the Employee terminates employment other than for
Good Reason, this Agreement shall terminate without further obligations to the
Employee, other than those obligations accrued or earned and vested (if
applicable) by the Employee through the Date of Termination, including for this
purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to
the Employee in a lump sum in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability. If,
------------------------------------------------
during the Employment Period, the Company shall terminate the Employee's
employment other than for Cause, Disability, or death or if the Employee shall
terminate his employment for Good Reason:
(i) the Company shall pay to the Employee in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:
A. to the extent not theretofore paid, the Employee's Highest
Base Salary through the Date of Termination; and
B. the product of (x) the greater of the Annual Bonus paid or
payable (annualized for any fiscal year consisting of less than twelve full
months or for which the Executive has been employed for less than twelve full
months) to the Executive for the most recently completed fiscal year during the
Employment
9
<PAGE>
Period, if any, or the average bonus (annualized for any fiscal year consisting
of less than twelve full months or with respect to which the Executive has been
employed by the Company for less than twelve full months) paid or payable to the
Executive by the Company and its affiliated companies in respect of the three
fiscal years immediately preceding the fiscal year in which the Effective Date
occurs (the "Average Annual Bonus"), such greater amount being hereafter
referred to as the "Highest Annual Bonus," and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365;
C. the product of (x) two and (y) the sum of (i) the Highest Base
Salary and (ii) the Average Annual Bonus; and
D. in the case of compensation previously deferred by the Employee,
all amounts previously deferred (together with accrued interest thereon, if any)
and not yet paid by the Company, and any accrued vacation pay not yet paid by
the Company; and
(ii) for the remainder of the Employment Period, or such
longer period as any plan, program, practice or policy may provide, the Company
shall continue benefits to the Employee and/or the Employee's family at least
equal to those which would have been provided to them as if the Employee's
employment had not been terminated, in accordance with the most favorable
employee welfare benefit plans (as such term is defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended) of the Company and
its subsidiaries (including health insurance and life insurance) during the 90-
day period immediately preceding the Effective Date or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees and their families, and for purposes of eligibility for retiree
benefits pursuant to such employee welfare benefit plans, the Employee shall be
considered to have remained employed until the end of the Employment Period and
to have retired on the last day of such period.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Employee's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices,
provided by the Company or any of its subsidiaries and for which the Employee
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Employee may have under any stock option, restricted stock, stock
appreciation right, or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries at or subsequent to the Date of Termination
shall be payable in accordance with such plan,
10
<PAGE>
policy, practice or program provided, however, that in the event the terms of
any such plan, policy, practice or program concerning the payment of benefits
thereunder shall conflict with any provision of this Agreement, the terms of
this Agreement shall take precedence but only if and to the extent the payment
would not adversely affect the tax exempt status (if applicable) of any such
plan, policy, practice or program and only if the employee agrees in writing
that such payment shall be in lieu of any corresponding payment from such plan,
policy, practice or program.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Employee or others. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 9 of this
Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended (the
"Code").
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any economic benefit or payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (including, but not limited to, any economic benefit
received by the Employee by reason of the acceleration of rights under the
various option, restricted stock and stock appreciation right plans of the
Company, but excluding any other economic benefit which by the terms of the
agreement or other document providing for such economic benefit, is expressly
excluded from inclusion in the economic benefits covered by this Section 9(a))
(a "Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up-Payment") in an amount such that after
payment by the Employee of all taxes
11
<PAGE>
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the Employee retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the Company's regular outside independent public accounting firm (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Employee within 15 business days of the Date of Termination,
if applicable, or such earlier time as is requested by the Company . The initial
Gross-Up Payment, if any, as determined pursuant to this Section 9(b), shall be
paid to the Employee within 5 days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Employee, it shall furnish the Employee with an opinion that he has
substantial authority not to report any Excise Tax on his federal income tax
return. Any determination by the Accounting Firm shall be binding upon the
Company and the Employee. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 9(c) and the Employee
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee.
(c) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the later of
either (i) the date the Employee has actual knowledge of such claim, or (ii) ten
days after the Internal Revenue Service issues to the Employee either a written
report proposing imposition of the Excise Tax or a statutory notice of
Deficiency with respect thereto, and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the thirty-day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the Employee
shall:
12
<PAGE>
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim,
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to request or accede to a request for an extension of the
statute of limitations with respect only to the tax claimed, or pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Employee agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Employee, on an interest-free
basis and shall indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations requested or acceded to by the Employee
at the Company's request and relating to payment of taxes for the taxable year
of the Employee with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Employee shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
13
<PAGE>
(d) If, after the receipt by the Employee of an amount advanced
by the Company pursuant to Section 9(c), the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
(e) In the event that any state or municipality or subdivision
thereof shall subject any Payment to any special tax which shall be in addition
to the generally applicable income tax imposed by such state , municipality, or
subdivision with respect to receipt of such Payment, the foregoing provisions of
this Section 9 shall apply, mutatis mutandis, with respect to such special tax.
------- --------
10. Confidential Information. The Employee shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
subsidiaries, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
subsidiaries and which shall not be or become public knowledge (other than by
acts by the Employee or his representatives in violation of this Agreement).
After termination of the Employee's employment with the Company, the Employee
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Employee under this Agreement.
11. Successors.
----------
(a) This Agreement is personal to the Employee and without the
prior written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Employee's legal
14
<PAGE>
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous.
--------------
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force and effect.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
------------------
2~
If to the Company:
-----------------
Crane Co.
100 First Stamford Place
Stamford, CT 06902
Attention: Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable
15
<PAGE>
law or regulation.
(e) The Employee's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Employee with respect to the subject matter hereof. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives. This Agreement is intended to revise the relationships, rights
and obligations between the Company and the Employee defined by, and to replace,
the Employment/Severance Agreement between the Company and the Employee
dated_______, and amended ________ , ("Former Agreement") in all respects. Upon
the execution of this Agreement by both parties, the Former Agreement to the
extent its provisions are inconsistent with this Agreement shall be of no force
and effect.
(g) The Employee and the Company acknowledge that the employment
of the Employee by the Company is "at will," and, prior to the Effective Date,
may be terminated by either the Employee or the Company at any time. Upon a
termination of the Employee's employment or prior to the Effective Date, there
shall be no further rights under this Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the Employee has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
___________________________________
CRANE CO.
By_________________________________
Attest:___________________________
Secretary
17
<PAGE>
(Page 1 of 2)
CRANE CO. AND SUBSIDIARIES
EXHIBIT D TO FORM 10-K
ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1994
Computation of Net Income Per Share
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Primary 1994 1993 1992 1991 1990
- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income before a change in
accounting $ 55,933 $ 48,893 $ 24,286 $44,993 $ 62,735
Cumulative effect of a change
in accounting - - - (22,341)(a) -
-------- -------- -------- --------- --------
Net Income $ 55,933 $ 48,893 $ 24,286 $ 22,652 $ 62,735
======== ======== ======== ======== ========
Per common share before a change
in accounting $ 1.86 $ 1.62 $ .79 $ 1.42 $ 1.96
Cumulative effect of a change
in accounting - - - (.70)(a) -
-------- ------- -------- -------- --------
Net income per share $ 1.86 $ 1.62 $ .79 $ .72 $ 1.96
======== ======= ======== ========= ========
Average number of primary
shares 30,146 30,217 30,845 31,628 32,057
</TABLE>
(a) Postretirement benefits other than pensions
<PAGE>
(Page 2 of 2)
CRANE CO.
EXHIBIT D TO FORM 10-K (CONTINUED)
ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1994
Computation of Net Income Per Share
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Fully Diluted 1994 1993 1992 1991 1990
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income before a change in
accounting $ 55,933 $ 48,893 $ 24,286 $ 44,993 $ 62,735
Conversion of debentures:
Add back interest, net
of income tax - 25 30 32 32
-------- -------- -------- -------- --------
Income assuming conversion of
debentures before change in
accounting 55,933 48,918 24,316 45,025 62,767
Cumulative effect of a change
in accounting - - - (22,341) -
-------- -------- -------- -------- --------
Net income - assuming
conversion of debentures $ 55,933 $ 48,918 $ 24,316 $ 22,684 $ 62,767
======== ======== ======== ======== ========
Income per share before a change
in accounting $ 1.85 $ 1.61 $ .78 $ 1.41 $ 1.94
Cumulative effect of a change
in accounting - - - (.70)(a) -
-------- -------- -------- -------- --------
Net income $ 1.85 $ 1.61 $ .78 $ .71 $ 1.94
======== ======== ======== ======== ========
Average number of primary shares 30,146 30,217 30,845 31,628 32,057
Add:
Adjustment to primary shares
for dilutive stock options
(ending market price higher
than average market price) 14 - 18 55 -
Shares reserved for conversion
of debentures 90 187 217 231 242
-------- -------- -------- -------- --------
Total average number of
shares 30,250 30,404 31,080 31,914 32,299
======== ======== ======== ======== ========
</TABLE>
(a) Postretirement benefits other than pensions
<PAGE>
Crane Co.
Financial Highlights
(In thousands except per share data)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $1,653,466 $1,310,205 $1,306,977 $1,302,532 $1,438,248
Operating Profit 109,889 85,856 45,244 78,902 113,311
Income before Taxes 91,227 79,818 38,689 72,405 102,488
Provision for Income Taxes (35,294) (30,925) (14,403) (27,412) (39,753)
- -------------------------------------------------------------------------------------------------------------------
Income from Operations $ 55,933 $ 48,893 $ 24,286 $ 44,993/(a)/ $ 62,735
- -------------------------------------------------------------------------------------------------------------------
Per Primary Share:
Income from Operations $ 1.86 $ 1.62 $ .79 $ 1.42/(a)/ $ 1.96
Cash Dividends Per Common Share $ .75 $ .75 $ .75 $ .75 $ .75
Average Primary Shares Outstanding 30,146 30,217 30,845 31,628 32,057
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
/(a)/ Income before cumulative effect of a change in accounting for
postretirement benefits other than pensions of $22,341 ($.70 per share).
TABLE OF CONTENTS
1 Financial Highlights
2 Letter to Shareholders
4 Description of Business Units
8 Management's Discussion
and Analysis of Operations
15 Financial Statements
20 Financial Review
28 Segment Data
30 Management's Responsibility/
Independent Auditors' Report
32 Shareholder Information
Back Directors and Officers
Cover
1
<PAGE>
A Letter to Our Shareholders
- --------------------------------------------------------------------------------
OVERALL RESULTS
1994 was a successful and exciting year for Crane, characterized by improvements
in sales, profitability, productivity, and cash flow. Sales and operating profit
increased 26% and 28%, respectively. Net earnings increased 15% to $1.86 per
share. Cash flow per share, measured as net income plus depreciation and
amortization, increased 29% to $3.34 during the year. In 1994 three major
acquisitions were completed for $240 million, adding to the two acquisitions
made at the end of 1993. These acquisitions have added significantly to our
market positions. Our company enters the new year with a better mix of
businesses, better growth opportunities, and stronger cash flow and earnings
potential than ever.
The acquisitions led us to realign the company into six business segments:
Fluid Handling, Aerospace, Engineered Materials, Crane Controls, Merchandising
Systems, and Wholesale Distribution. Crane's new segment reporting has received
a favorable reaction from the investment community and I hope you will find it
helpful in understanding our company.
PHILOSOPHY
Crane's philosophy is to enhance long-term shareholder value through effective
use of its strong cash flow and financial position. We believe the role of
management is to carefully select among alternative uses of discretionary cash
flow: investments in core businesses for product development and productivity
improvement, acquisitions, share repurchases, dividends, and debt repayment.
Over the eleven year period I have been Chairman, Crane stock has had an average
annual compound rate of return of 20%, assuming reinvestment of dividends,
compared to the S&P 500 return of 14.5% calculated on the same basis.
Our incentive compensation system is designed to link management's
interests directly to shareholders' interests. It measures performance on true
economic earnings and value added based upon cash flow returns in excess of our
cost of capital. Our system uses the prior year as a benchmark with incentive
awards paid over several years. This focuses managers on continuous improvement
over the long term since awards are subject to adjustment based on subsequent
years' performance. This system is firmly established throughout Crane and
continues to promote individual excellence, team collaboration and enhanced
productivity.
STRATEGY
Crane's strategy is a simple one: grow the earnings of niche businesses with
high market share; build an aggressive and committed management team whose
interests are directly aligned to those of the shareholders; and maintain a
focused, efficient corporate structure. This will result in consistent excess
cash flow which will be used to further enhance shareholder value.
This strategy has produced tangible results. Crane enjoys strong niche
market positions with businesses serving the aerospace, automated merchandising,
truck/trailer and recreational vehicle, fluid handling and housing industries.
We have the strongest management team since I have been with Crane, and our
corporate expense has declined to only 0.7% of sales. In 1994, we continued to
benefit from this strategy as evidenced by the following highlights.
HIGHLIGHTS
ELDEC Corporation, a new addition to Crane in 1994, had an impressive debut.
Under the leadership of Arlan VanKoevering, ELDEC has produced increasingly
profitable results in every month since acquisition. Arlan was instrumental
in reorganizing ELDEC's management and right-sizing the
2
<PAGE>
- --------------------------------------------------------------------------------
organization, reducing its work force by 22% and selling off $14.3 million in
excess assets in the process. We welcome Arlan and ELDEC to Crane with high
expectations for future earnings growth.
National Vendors, under the effective leadership of Robert Muller,
continued to develop new product innovations and take global marketing
initiatives. National Vendors introduced the Cafe System "7" in 1994 to
penetrate the office coffee services market, and it became National Vendors'
most successful product introduction to date. A renewed focus on national
accounts resulted in a two-year exclusive agreement with the largest food
service organization in the United States.
Hydro-Aire's technical leadership continued in 1994, in spite of the
downturn in the aerospace industry, with a 100% win rate on all new anti-skid
braking programs awarded during the year. Hydro-Aire was selected as the system
supplier on Boeing's 737-700, Bombardier's Global Express, McDonnell F-18,
Gulfstream V, and Lockheed's new military transport. Raymond Boushie, who joined
the company in September as President, has already had a positive impact. Ray's
experience in this industry will help position the company to build value in the
future.
Kemlite's President, Richard Schueller, recognized the synergies to be
realized through the acquisition of Filon. The benefits of this acquisition were
most evident in 1994 as Kemlite capitalized upon its expertise in fiberglass-
reinforced plastic panel production and increased its operating leverage. New
market penetration and improved manufacturing efficiencies brought record
profits and a record backlog of orders.
Under the leadership of William Landholt, who joined Crane in February 1994
as president of Crane Valves worldwide, the Mark Controls Valve business was
integrated into Crane Valves, which was reorganized on a global basis. This has
allowed us to greatly expand our sales distribution channels, eliminate
overlapping coverage, and leverage our purchasing power through global sourcing.
Synergies from this acquisition will become increasingly evident in 1995.
Burks Pumps, purchased in December 1993, brought a talented operating team
led by Paul Baldetti who had guided Burks through a series of acquisitions
focusing on strong brand recognition and cost reductions. All pump businesses
are now managed by Paul under Crane Pumps & Systems, with worldwide
responsibility for the manufacturing and marketing of our Chempump, Deming,
Barnes, Burks, Weinman and Prosser/Enpo product lines.
L. Hill Clark was promoted to Executive Vice-President of Crane in early
1994. Hill has responsibility for our aerospace and pump businesses and was
instrumental in our acquisition and integration of ELDEC Corporation and
bringing new management to Hydro-Aire and ELDEC.
David Smith was elected to the position of Vice President-Finance and Chief
Financial Officer in April 1994. Prior to this promotion, David was responsible
for corporate development and played a key role in Crane's recent acquisitions.
David's charge is to assure that Crane's cash flow and financial resources are
focused on taking advantage of future opportunities to create shareholder value.
I would like to take this opportunity to thank Arthur A. Seeligson, Jr. for
his contributions to Crane Co. during his thirteen year tenure as a member of
our Board of Directors. He will retire at this year's Annual Meeting. His wise
counsel and insights will be missed.
I also want to thank all my Crane colleagues who, by listening to our
customers' needs, continue to provide increased value, quality, and service
which improve our economic prospects.
Sincerely,
/s/ R. S. Evans
Robert S. Evans
Chairman, Chief Executive
Officer and President
February 14, 1995
3
<PAGE>
Crane Co.
UNIT AND LOCATION
- -----------------
FLUID HANDLING
- --------------
Crane Valves
North America
Crane Ltd.
United Kingdom
Pacific Valves
Long Beach, CA
Flowseal/Centerline
Long Beach, CA
Empire Foundry
Tulsa, OK
Westad Industri A/S
Geithus, Norway
Crane Australia Pty., Ltd.
Sydney, Australia
PRODUCTS
- --------
Gate, Globe, Check, Butterfly and Ball valves in all size ranges made from
Bronze, Cast Iron, Steel, Stainless Steel, and other special corrosion resistant
alloys
Pressure seal design valves for high pressure and temperature service
High performance and resilient butterfly valves, HF Acid Valves; extensive
repair, contract maintenance and "in-line" service capabilities, pipe fittings
manufactured in United Kingdom
MARKETS SERVED
- --------------
Hydrocarbon Processing industries: Refining, Petrochemical, Oil and Gas
Production and Distribution; Chemical Processing; Pulp and Paper; Power
Generation including "co-gen" and Nuclear applications; Shipbuilding, Commercial
Construction, HVAC, Water and Sewage, Building and Engineering services
BUSINESS HIGHLIGHTS
- -------------------
The acquisition of Mark Controls and the integration of the Crane and Mark
Controls Valve businesses under one management. A global focus, greatly
expanding sales distribution channels worldwide.
The elimination of redundant product lines and expansion of low-cost
suppliers in China, South Korea, India and Romania.
BUSINESS OUTLOOK
- ----------------
Sales and profits expected to increase significantly with full year Mark
Controls results, expanded distribution in Europe, Middle East and Asia,
strong steel valve demand and benefits from cost reduction actions taken in
1994.
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
FLUID HANDLING
- --------------
Crane Pumps &
Systems, Inc.
Piqua, OH
Barnes Pumps
Burks Pumps
Deming Pump
Prosser/Enpo
Weinman
Chempump
Sellers
PRODUCTS
- --------
Submersible Wastewater Regenerative Turbine and End Suction Centrifugal,
Horizontal & Vertical Centrifugal, Standard Vertical Turbine and Air-Operated
Diaphragm, Submersible Dewatering, Split Case, End Suction, In-Line,
Leakproof Centrifugal, Metering, Rotary Tank Cleaners and Steam Injectors
MARKETS SERVED
- --------------
Municipal, Industrial and Commercial Wastewater, Specialty Industrial Markets,
Original Equipment Manufacturers, Power and Construction Industries; Government
Contracts, Commercial HVAC Industry, Chemical and Hydro-Carbon Processing
Industries
Engineered Cleaning Equipment for General Industry
BUSINESS HIGHLIGHTS
- -------------------
Acquired Burks Pumps in December 1993.
The integration of Burks Pumps, Deming and Chempump into Crane Pumps and
Systems tripled Crane's pump business to $93 million in 1994.
Reorganized production facilities to focus on manufacturing specific ranges
of products, reducing costs and sourcing of common components.
BUSINESS OUTLOOK
- ----------------
Profit expected to improve in 1995 based on cost reductions achieved in 1994 and
an integrated and focused marketing effort in 1995 for the Barnes, Burks,
Deming, Prosser, Weinman and Chempump product lines.
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
FLUID HANDLING
- --------------
Cochrane Environmental Systems
King of Prussia, PA
PRODUCTS
- --------
Deaerators, Steam Specialty, Ion Exchangers, Softening Filtration, Clarification
and Condensate Polishing
MARKETS SERVED
- --------------
Most Industries Requiring Water and Wastewater Treatment
BUSINESS HIGHLIGHTS
- -------------------
Management reorganization
BUSINESS OUTLOOK
- ----------------
Market for water treatment and deaerator equipment has become global.
Cochrane has redeployed its resources to take advantage of growing markets.
4
<PAGE>
UNIT AND LOCATION
- -----------------
AEROSPACE
- ---------
ELDEC Corporation
Lynnwood, WA
PRODUCTS
- --------
Position Indication and Control Systems, Proximity Switches and Components,
True Mass Fuel Flowmeters, Power Conversion Components and Systems
MARKETS SERVED
- --------------
Commercial, Business and Military Aerospace Industries
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
AEROSPACE
- ---------
Hydro-Aire
Burbank, CA
PRODUCTS
- --------
Anti-Skid and Automatic Braking Systems, Fuel and Hydraulic Pumps, Coolant
Pumps and Systems, Hydraulic and Pneumatic Valves and Regulators, Actuators
and Solid State Components
MARKETS SERVED
- --------------
Commercial, Business and Military Aerospace Industries
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
AEROSPACE
- ---------
Lear Romec
Elyria, OH
PRODUCTS
- --------
Lubrication Pumps and Fuel Pumps for Aircraft and Aircraft Engines
MARKETS SERVED
- --------------
Commercial and Military Aircraft, Ground Vehicles, Land and Marine Applications
and Missiles
BUSINESS HIGHLIGHTS
- -------------------
The March 1994 acquisition of ELDEC Corporation brought Crane a strong
technology base, high market share and established products on all major
commercial and business aircraft.
Hydro-Aire was selected for all anti-skid braking system programs awarded
in 1994, including: Boeing 737-700, Bombardier Global Express, McDonnell F-18,
Gulfstream V and Lockheed's new military transport.
Lear Romec received a sole source contract with Rolls Royce to produce lube
oil pumps for the Trent Engine production program.
BUSINESS OUTLOOK
- ----------------
Sales and profits are expected to rise with the addition of ELDEC for a full
year and as a result of the management actions in 1994.
The OEM business appears to be flat for 1995 therefore we expect the two
other units to remain flat.
Promising new products are in development including an infrared-based gate
to aircraft highspeed data link as well as new applications of our core power
conversion technology within the telecommunications and industrial markets.
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
ENGINEERED MATERIALS
- --------------------
Kemlite Company, Inc.
Joliet, IL
PRODUCTS
- --------
Fiberglass-Reinforced Plastic Panels used as Truck Interior Wall Liners and
Roofs; Recreational Vehicle Sidewall and Roofs; and Wall and Ceiling Systems
for the Building Market
MARKETS SERVED
- --------------
Truck, Trailer, Recreational Vehicle and Commercial Construction
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
ENGINEERED MATERIALS
- --------------------
Cor Tec
Washington Court
House, OH
PRODUCTS
- --------
Fiberglass-Reinforced Polyester Resin Laminated Panels for Transportation,
Construction, Marine, Signage and Sound Barrier Applications
MARKETS SERVED
- --------------
Truck and Trailer Manufacturers, Infrastructure Construction
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
ENGINEERED MATERIALS
- --------------------
Resistoflex
Marion, NC
PRODUCTS
- --------
Corrosion Resistant Plastic-Lined Pipe, Fittings, Valves, Bellows and Hose
Assemblies, High Performance Separable Fittings for Operating Pressures to 8,000
PSI and Flexible, Plastic-Lined Assemblies
MARKETS SERVED
- --------------
Pharmaceutical, Chemical Processing, Pulp and Paper, Petroleum Distribution,
Waste Management Industries, Military and Aerospace Contractors
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
ENGINEERED MATERIALS
- --------------------
Crane Plumbing
Montreal, Canada
PRODUCTS
- --------
Manufacturer of Plumbing Fixtures
MARKETS SERVED
- --------------
Residential, Industrial, Commercial and Institutional Construction in Canada
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
ENGINEERED MATERIALS
- --------------------
Polyflon
New Rochelle, NY
PRODUCTS
- --------
Radio Frequency and Microwave Components, Capacitors, Circuit Processing,
Substrates; Resonating Structures, Antennas
MARKETS SERVED
- --------------
Magnetic Resonance Imaging, Radar and Microwave Manufacturers
BUSINESS HIGHLIGHTS
- -------------------
The Filon acquisition in October 1993 established Kemlite as the leading
supplier of FRP panels to the recreational vehicle market.
Kemlite fully integrated the Filon panel product line in Jonesboro which
increased sales and reduced inventories.
Kemlite completed a new 20,000 square foot office facility next to the
Joliet, Illinois plant.
Resistoflex introduced IsoBend(TM), a specialty PTFE lined piping system
which reduces the number of flanges needed in a pipe run. IsoBend(TM) is a 1994
plant engineering "Product of the Year" finalist. Resistoflex was awarded the
largest US PTFE lined pipe contract in history by Hoffman-La-Rouche.
Crane Plumbing was able to increase market share by taking advantage of a
strike by a major competitor.
BUSINESS OUTLOOK
- ----------------
Solid results are expected to continue, primarily due to demand in end markets.
In 1995 a world-wide shortage of glass fiber reinforcement has caused this key
raw material to be allocated.
Kemlite's markets will remain strong in 1995 and the company will
concentrate on the key customer partnerships that will allow Kemlite to maintain
its leadership position.
New FRP trailer orders are up at CorTec increasing its order backlog to
record levels.
New product introductions will continue to increase sales at Resistoflex in
1995.
Crane Plumbing results will increase due to improved capacity utilization
at its potteries and favorable pricing due to currency exchange rates.
5
<PAGE>
Crane Co.
UNIT AND LOCATION
- -----------------
CRANE CONTROLS
- --------------
Barksdale, Inc.
Los Angeles, CA
PRODUCTS
- --------
Pressure Switches and Transducers, Temperature Switches and Directional Control
Valves
MARKETS SERVED
- --------------
Manufacturer of Compressors, Machine Tools, Trucks and Spa Heaters
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
CRANE CONTROLS
- --------------
Powers Process
Controls
Skokie, IL
PRODUCTS
- --------
Process Controllers and Instrumentation, Control Valves, Temperature Regulators,
Water Mixing and Thermal Shock Protection Shower Valves, Plumbing Brass
MARKETS SERVED
- --------------
Chemical Process Industry, Food Processing, Pharmaceuticals, Water Waste
Treatment, and Institutional Construction
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
CRANE CONTROLS
- --------------
Dynalco Controls
Ft. Lauderdale, FL
PRODUCTS
- --------
Rotational Speed Sensors, Instruments, Control Systems
MARKETS SERVED
- --------------
Stationary Engines, Pipelines, Construction and Agriculture Equipment
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
CRANE CONTROLS
- --------------
Azonix, Inc.
Billerica, MA
PRODUCTS
- --------
Data Acquisition Products, Control Systems and Operator Interfaces
MARKETS SERVED
- --------------
Chemical, Petrochemical Power and Automotive
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
CRANE CONTROLS
- --------------
Ferguson
St. Louis, MO
PRODUCTS
- --------
Index Drives and Tables, Mechanical Parts Handlers, In-Line Transfer
Machines, Rotary Tables, Press Feeds, Custom Cams, Special Intermittent Motion
Machines
MARKETS SERVED
- --------------
Industrial and Commercial Machinery
BUSINESS HIGHLIGHTS
- -------------------
The acquisition of Mark Controls in April 1994 created a new business by
adding four profitable niche control businesses with both excellent internal
growth and additional acquisition opportunities.
The consolidation of the Canadian Plumbing Brass business with Powers
Process Controls resulted in a strong institutional distribution network.
The decision was made to consolidate the European operation of Ferguson
Machine into one facility in Belgium.
Two new index drives were introduced at Ferguson Machine, making its inline
transfer product more competitive.
Barksdale added 30 new sales representatives.
BUSINESS OUTLOOK
- ----------------
Sales and profit expected to increase significantly as the result of:
Full year Mark Control results
New products and added distribution at Barksdale
The addition of Plumbing Brass product at Powers Process will allow us to
increase our market share in North America
New products introduced in 1994 at Dynalco Controls and Azonix
The consolidation of the Ferguson European facilities
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
MERCHANDISING SYSTEMS
- ---------------------
National Vendors
Bridgeton, MO
PRODUCTS
- --------
Electronic Vending Machines for Snack Foods and Confections, Cold Drinks, Hot
Beverages, Refrigerated Food and Frozen Food; Coin and Currency Changers
MARKETS SERVED
- --------------
Automated Merchandising
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
MERCHANDISING SYSTEMS
- ---------------------
National Rejectors, Inc.
GmbH
Buxtehude, Germany
PRODUCTS
- --------
Electronic Validators, Magnetic Card Cashless Payment Systems
MARKETS SERVED
- --------------
Automated Merchandising
BUSINESS HIGHLIGHTS
- -------------------
1994 was a record sales year for National Vendors.
The Cafe System "7" was introduced to service the office coffee service
market and became National Vendors most successful new product introduction.
A national accounts program was introduced and a two year exclusive sales
agreement was reached with the largest food service organization in the United
States.
National Vendors began production of its new Ice Cream Unit, an
electronically controlled dispenser of novelty ice cream.
BUSINESS OUTLOOK
- ----------------
The National Vendors plant expansion and integration program that began in
December 1992 will be completed during 1995.
This program will improve product quality, reduce production costs and
increase manufacturing flexibility.
Operating results should improve in 1995 on the strength of products
introduced in 1994 and expanded distribution to the Pacific Rim and Latin
America.
6
<PAGE>
UNIT AND LOCATION
- -----------------
WHOLESALE DISTRIBUTION
- ----------------------
Huttig Sash & Door Company
Chesterfield, MO
PRODUCTS
- --------
Distributor of Doors, Windows, Millwork, Specialty Construction Materials and
Related Products
MARKETS SERVED
- --------------
Building Products Retailers and Contractors
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
WHOLESALE DISTRIBUTION
- ----------------------
Crane Supply
Montreal, Canada
PRODUCTS
- --------
Distributor of Pipe, Valves, Fittings, Plumbing Fixtures
MARKETS SERVED
- --------------
Industrial, Municipal, Commercial and Institutional Construction
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
WHOLESALE DISTRIBUTION
- ----------------------
Valve Systems and
Controls
Houston, TX
PRODUCTS
- --------
Industrial Distributor of Automated Valves
and Integrated Control Systems
MARKETS SERVED
- --------------
Petroleum, Chemical, Power and General Processing Industries
BUSINESS HIGHLIGHTS
- -------------------
Huttig Sash & Door Co. acquired a wood moulding plant located in Prineville,
Oregon. This facility will allow Huttig to expand its market presence in the
high-end specialty millwork market.
Huttig sold its window manufacturing facility in South Carolina, which lost
$2.1 million in 1994.
Huttig consolidated operations in Iowa and Florida eliminating a total of
three operations while maintaining market share. It also reduced working
capital and facilities requirements.
BUSINESS OUTLOOK
- ----------------
1995 profit expected to improve due to:
Full year operating results of Huttig's new specialty wood moulding
facility
The elimination of losses at Huttig window manufacturing
New management organization at Valve Systems and Controls
Improved industrial economy in Canada and lower costs
- --------------------------------------------------------------------------------
UNIT AND LOCATION
- -----------------
OTHER
- -----
Crane Defense
Conroe, TX
PRODUCTS
- --------
Specialized Handling Systems, Elevators, Winches, Ground Support Equipment,
Cranes and Associated Electronics
MARKETS SERVED
- --------------
Shipbuilding, Aerospace and Commercial Construction
BUSINESS HIGHLIGHTS
- -------------------
Entered into Bioremediation market and vehicle component market.
BUSINESS OUTLOOK
- ----------------
Slow growth through diversification from core business to environmental and
vehicular components.
7
<PAGE>
Management's Discussion and Analysis of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
CONSOLIDATED
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,653.5 $1,310.2 $1,307.0
Operating Profit $109.9 $ 85.9 $ 45.2
Operating Margin 6.6% 6.6% 3.5%
- ------------------------------------------------------------------------------
</TABLE>
During 1994, our strategy of obtaining economic returns greater than our cost
of capital was evidenced by the acquisition of companies which complement
existing businesses and have leading positions in niche markets. This
contributed substantially to repositioning the company. Three significant
acquisitions were made during the first six months of 1994, ELDEC Corporation,
Mark Controls Corporation and a moulding and millwork operation in Prineville,
Oregon. In addition, Burks Pumps, Inc. and Filon were acquired in the fourth
quarter of 1993. These five acquisitions, for a total purchase price of $336
million, had sales of approximately $400 million in the year preceding their
acquisition and made a major contribution to the improved 1994 results.
As a result of these acquisitions, the company realigned its business
segments during 1994, to provide investors with a clearer view of Crane's
businesses. The newly aligned segments are Fluid Handling, Aerospace,
Engineered Materials, Crane Controls, Merchandising Systems, Wholesale
Distribution, and Other. Results of operations from the 1994 and 1993
acquisitions are included in the new segments as follows: ELDEC Corp.
(Aerospace), Mark Controls Corp. (Fluid Handling and Crane Controls),
Prineville operation (Wholesale Distribution), Burks Pumps, Inc. (Fluid
Handling), and Filon (Engineered Materials).
Sales increased $343 million in 1994 to a record of $1.65 billion. Of this
increase, $308 million is attributable to the recent acquisitions. Excluding
acquisitions, revenues increased 5 percent in Fluid Handling, 7 percent in
Engineered Materials, 1 percent in Merchandising Systems and 5 percent in
Wholesale Distribution which more than offset the 14 percent decline in
Aerospace. Sales in 1993 were slightly higher than the 1992 level as stronger
sales in Merchandising Systems and Wholesale Distribution offset a 26 percent
decline in Aerospace revenues and a 9 percent decline in Fluid Handling
shipments.
Operating profit improved significantly in 1994 to $109.9 million, an
increase of $24 million. As evidence of the effectiveness of Crane's strategy,
the acquisitions contributed $35.4 million to profit while Merchandising Systems
and Fluid Handling reported increases in profits of 29 percent and 13 percent,
respectively. However, these strong results were adversely impacted by the
continued weakness in the Aerospace industry.
Operating profit in 1993 was $85.9 million compared to 1992 results of
$45.2 million which included a $39.4 million charge for environmental expenses
and asset write-downs associated with Unidynamics/Phoenix, which was sold in
1993, product liability exposure and excess facility costs, and costs related to
the settlement of an anti-trust lawsuit involving a previously discontinued
operation. Engineered Materials, Wholesale Distribution, and Merchandising
Systems had improved operating results in 1993 which more than offset declines
at Fluid Handling, Crane Controls and Aerospace. 1992 profits for Aerospace were
impacted by a $20.1 million charge for environmental expenses and asset
write-downs, referred to above.
Net interest expense increased $13.6 million to $20.6 million in 1994
because the acquisitions were debt financed. Net interest costs totalled $6.9
million in 1993, down $2.6 million from the 1992 level as a result of lower
borrowing levels and lower interest rates.
Miscellaneous income totalled $1.9 million in 1994, compared to $.9 million
in 1993, resulting from the sale of facilities and an equity investment in
Germany. In 1992, $2.9 million of miscellaneous income consisted primarily of a
$3.7 million gain from the sale of an equity investment.
The company's effective tax rate was 38.7 percent in 1994 and 1993, and
37.2 percent in 1992. Net income totalled $55.9 million in 1994 compared to
$48.9 million in 1993 and $24.3 million in 1992.
Net income per share increased 15 percent to $1.86 compared to $1.62 in
1993 and $.79 in 1992.
<TABLE>
<CAPTION>
FLUID HANDLING
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $310.0 $197.7 $218.1
Operating Profit $ 19.1 $ 8.9 $ 11.9
Operating Margin 6.1% 4.5% 5.5%
- ------------------------------------------------------------------------------
</TABLE>
The Fluid Handling segment consists of a valve business that serves the global
valve market and a pump business which manufactures pumps used in the chemical,
general industrial, and commercial industries. The Crane
8
<PAGE>
- --------------------------------------------------------------------------------
Valve business with manufacturing facilities in North America, the United
Kingdom and Australia, sells a wide variety of valves and fluid control products
for the chemical and hydrocarbon processing, power, general industrial and
commercial construction industries. The North American unit also provides a full
range of valve aftermarket services including parts, repairs and modifications.
The company's subsidiary in the United Kingdom also maintains repair and service
facilities for valves, compressors, heat exchangers and similar equipment. In
1994, the company purchased Mark Controls, whose valve products are sold under
the Pacific Valves and Flowseal/Centerline brands. Crane Pumps & Systems, Inc.,
which includes Burks Pumps purchased in December 1993, manufactures pumps used
in the chemical, power, hydrocarbon processing, municipal, general industrial
and commercial industries. The company's Cochrane Environmental Systems division
designs and markets water and wastewater equipment for almost every major
industry.
The Fluid Handling segment's 1994 operating profit increased $10.2 million
on a 57 percent increase in sales. The improved sales and operating profit
performance was due to the Burks Pumps acquisition at the end of 1993, and the
valve business acquired with Mark Controls at the end of April 1994. These
acquisitions added $101.5 million to sales and $9.0 million to operating profit
for 1994. Operating profit of $8.9 million in 1993 was 26 percent lower than the
prior year level of $11.9 million with sales declining 9 percent from 1992.
The Mark Controls acquisition strengthened the Crane Valve business. This
acquisition brings to Crane the Flowseal and Centerline brand of quarter turn
valves and the Pacific pressure seal and HF Acid valves. Synergies from this
acquisition will become increasingly evident in 1995. To focus resources, the
Crane Valve business was reorganized on a global basis under one management
structure in 1994. This has allowed Crane to greatly expand sales distribution
channels world-wide and eliminate overlapping coverage. This is especially true
of the Mark Controls quarter turn line where distribution channels have been
expanded to Europe, the Middle East, Asia, and Australia through Crane's
established network.
The Burks Pumps acquisition in December 1993 tripled Crane's pump business
to $93 million in 1994. The pump business has been consolidated under a new
entity named Crane Pumps & Systems with world-wide responsibility for the
manufacturing and marketing of our Chempump, Deming, Barnes, Burks, Weinman and
Prosser/Enpo product lines.
During the year, steps were taken to streamline administrative and
operating facilities. We closed the Mark Controls corporate headquarters and
Centerline's Tulsa operation, saving over $3 million per year. Redundant product
lines for both pumps and valves were eliminated allowing Crane to offer its
best products to customers. In addition, Crane expanded its low-cost base of
foreign suppliers in China, South Korea, India, Mexico and Romania in 1994, and
joint ventures in Indonesia and China are planned for 1995.
<TABLE>
<CAPTION>
AEROSPACE
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $160.8 $99.6 $135.2
Operating Profit $ 31.3 $31.2 $ 22.0
Operating Margin 19.5% 31.3% 16.3%
- ------------------------------------------------------------------------------
</TABLE>
The Aerospace segment consists of: Hydro-Aire, the world leader in the design
and manufacture of electronically controlled anti-skid braking systems; Lear
Romec, a leading supplier of oil lubrication and fuel boost pumps; and ELDEC,
which designs and manufactures position indication and control systems,
proximity switches, true mass fuel flowmeters and power conversion systems.
Sales improved $61.2 million in 1994 due entirely to the ELDEC acquisition
in March 1994 which added $75.7 million to revenue. A difficult aerospace market
continued to adversely impact Hydro-Aire and Lear Romec where revenues were down
12 percent from 1993. Operating profit totalled $31.3 million in 1994, up $.1
million from the 1993 level as additional ELDEC earnings offset lower results at
the other Aerospace units.
Sales were down 26 percent in 1993 due to the downturn in the aerospace
industry and the sale of Unidynamics/Phoenix. 1993 profits improved 42 percent
due to the $20.1 million charge for environmental expenses and asset write-downs
in 1992.
The Aerospace market has continued to decline over the last three years. It
is expected that this trend will bottom out in 1995 as Crane units ship products
for new airframes, including the Boeing 777. Crane will also benefit
substantially from the inclusion of full year ELDEC results and improved cost
positions and aftermarket sales efforts at Hydro-Aire and Lear Romec.
The ELDEC acquisition brings a strong technology base and high market
share, with established products on all major commercial and business aircraft.
In 1994 the management team was reorganized and the organization right-sized
resulting in a 22% work force reduction. This produced profitable results in
every month since the acquisition compared to marginal profitability in the
prior three years. In addition, excess assets were sold for $14.3 million
lowering the effective purchase price. Continued improvement is expected in 1995
as ELDEC completes its consolidation and reorganization of manufacturing
facilities.
Although Hydro-Aire sales declined in 1994 it was selected for all new
anti-skid braking system programs awarded in 1994 including: Boeing's 737-700,
Bombardier Global Express, McDonnell F-18, Gulfstream V, and Lockheed's new
military transport.
9
<PAGE>
Management's Discussion and Analysis of Operations (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ENGINEERED MATERIALS
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $201.9 $161.8 $161.7
Operating Profit $ 23.0 $ 15.5 $ 6.1
Operating Margin 11.4% 9.6% 3.8%
- ------------------------------------------------------------------------------
</TABLE>
The Engineered Materials segment consists of five businesses: Kemlite, the
world's largest manufacturer of fiberglass-reinforced plastic panels, serving
the transportation, building products, and recreational vehicles markets; Cor
Tec, a manufacturer of fiberglass-reinforced laminated panels which are used
primarily by the truck and trailer industry; Resistoflex, a manufacturer of
corrosion-resistant, plastic-lined pipes, fittings and valves used in chemical
process and pharmaceutical plants, as well as separable high-performance, high
pressure fittings and hose for the aerospace industry; Polyflon, which
manufactures high-performance substrate and high voltage, high-frequency
capacitors; and Crane Plumbing, which offers a full array of plumbing products
for residential as well as commercial building markets in Canada.
The Engineered Materials segment operating profit increased $7.5 million or
48 percent in 1994 on a sales increase of 25 percent due to Kemlite's Filon
acquisition in October 1993, strength in Kemlite's transportation markets, and
improvement at Crane Plumbing in Canada. The Filon acquisition which established
Kemlite as the leading supplier of FRP panels to the recreational vehicle
industry, accounted for $29.3 million of the sales increase in 1994. In 1993
operating profit increased $9.4 million on a slight increase in sales due to
strong results at Kemlite and Cor Tec, and the $5.7 million charge in 1992 for
product liability exposure and environmental expenses. Operating margins have
increased steadily over the last three years from 3.8 percent in 1992 to 9.6 in
1993 to 11.4 percent in 1994.
Kemlite is the major contributor to operating profit for Engineered
Materials, and is the dominant manufacturer of FRP panels serving the
transportation and recreational vehicle markets. Operating profit doubled in
1994 after increases of 36 percent and 149 percent in 1993 and 1992,
respectively. Sales increased 68 percent in 1994 compared to increases of 18
percent in 1993 and 25 percent in 1992. Operating margins have improved from 13
percent of sales in 1992 to 18 percent in 1994 - the result of improved
manufacturing performance, operating leverage, and acquisition synergies.
Kemlite's translucent roof panel continued to gain market share, displacing
aluminum sheet roofs in dry van trailer applications due to safety and
productivity features. Kemlite ended 1994 with a record order backlog.
Cor Tec's sales totalled $18.6 million, down 9 percent from 1993. The
decline in 1994 sales was due to a trucker strike which forced the largest FRP
fleet operator to suspend trailer purchases in 1994. Although operating profit
was down slightly in 1994, gross margins improved. 1993 operating profit was
double the prior year level on lower sales due to margin improvement. Cor Tec
has essentially committed its production capacity for 1995, ending the year with
a record backlog.
Resistoflex Industrial and Resistoflex Defense were consolidated into one
operation in 1994, with combined sales totalling $28.7 million. Sales and
operating profit in 1994 were down $1.2 million and $1.1 million, respectively,
due to the decline in the defense and aerospace industries. Industrial sales and
operating profit were both slightly improved from the prior year level.
Operating profit in 1993 was $1.9 million below the prior year level on a $2.9
million sales decline, both the result of competitive pricing pressures in 1993.
Resistoflex expanded its rotational molding capabilities in 1994 which
expands the available market by allowing Resistoflex to line all shapes of metal
fittings with thermoplastic resins. Resistoflex also developed and introduced
Iso-Bend(TM), a specialty PTFE lined piping system which reduces the need for
flanges, helping their customers comply with stringent emissions regulations.
Polyflon sales totalled $1.6 million in 1994, down 32 percent from 1993.
Polyflon operated at a loss in 1994.
Crane Plumbing's shipments increased 7 percent in 1994, primarily due to
increased market penetration partly related to a strike at a competitor.
Operating profit increased $.7 million in 1994 following a small profit in 1993,
and an operating loss in 1992. Sales totalled $53.5 million in 1994.
Growth in the Engineered Materials segment is expected to continue,
primarily due to strong end markets.
<TABLE>
<CAPTION>
CRANE CONTROLS
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 88.0 $ 35.0 $ 40.1
Operating Profit $ 4.4 $ .9 $ 2.6
Operating Margin 5.0% 2.5% 6.5%
- ------------------------------------------------------------------------------
</TABLE>
This segment consists primarily of businesses acquired with Mark Controls
Corporation in April 1994. Barksdale produces pressure and temperature switches,
transducers and directional control valves. Powers Process Controls produces
electronic sensors, balancing valves, shower valves and systems. Azonix produces
data acquisition products and control systems. Dynalco produces rotational speed
sensors, instruments and control systems.
10
<PAGE>
- --------------------------------------------------------------------------------
Also included in this segment is Ferguson which has a complete line of products
for transferring and positioning components on assemblies in an automated
process.
Sales and operating profit in the Controls segment were up sharply in 1994
mainly due to the inclusion of the controls businesses of Mark Controls
Corporation, which increased sales and operating profit by $51.1 million and
$4.6 million respectively.
Ferguson's index and cams volume increased over 10 percent from 1993, but
the increase was primarily in the lower margin units. Operating profit at
Ferguson's domestic operation in 1994 improved 21 percent over the 1993 level.
However, this improvement was offset by continued losses in its European
operation. In 1994, the decision was made to consolidate the European operation
into one facility in Brussels, which resulted in a $1.2 million charge in 1994.
Ferguson's profit decreased $1.7 million in 1993 on an 11 percent drop in sales
due to weakness in the general industrial market in the U.S. and Europe. This
compared to a profit increase of $2.3 million in 1992 on 9 percent higher sales.
The Crane plumbing brass business was combined with Powers Process Controls
strong institutional distribution network on January 1, 1995. This should allow
an increase in North American market share for this product line.
<TABLE>
<CAPTION>
MERCHANDISING SYSTEMS
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $168.5 $166.7 $151.1
Operating Profit $ 23.2 $ 18.0 $ 16.6
Operating Margin 13.7% 10.8% 11.0%
- ------------------------------------------------------------------------------
</TABLE>
This segment consists of two businesses: National Vendors, which is the industry
leader in the design and manufacture of vending machines for the automated
merchandising industry in the United States; and National Rejectors, GmbH, which
designs and manufactures coin validation systems for the automatic vending
market throughout Europe.
Merchandising Systems profits increased 29 percent in 1994 to $23.2 million
on slightly higher sales. In 1993 profits increased 8 percent on 10 percent
higher sales. 1992 profits were off 18 percent on 5 percent higher sales, the
result of an operating loss at National Rejectors, GmbH in Europe, compared to a
$6 million profit in 1991.
National Vendors achieved record sales for the fourth consecutive year
reaching $132 million. The improvement in 1994 was the result of new product
introductions, expanded distribution channels, and a national accounts program.
National Vendors introduced the Cafe System "7" in 1994 designed as an
alternative to traditional batch brew coffee services. It has enabled National
Vendors to penetrate the office coffee service market. Cafe System "7" sales in
1994 exceeded expectations and became National Vendors most successful product
introduction to date. National Vendors also introduced its Ice Cream Center, a
single serve dispenser of novelty ice cream products.
National Vendors expanded its sales distribution channels to the Pacific
Rim and Latin American markets in 1994. Introduced in 1993, the Glasco product
line, which adds domestic distribution channels to National Vendors traditional
direct sales force, continued to be a success. National Vendors' renewed focus
on national accounts resulted in a two year exclusive agreement with the largest
food service organization in the United States. National Vendors' profits
increased 19 percent in 1994, 15 percent in 1993 and 37 percent in 1992.
Included in the 1994 results was the reversal of $1.5 million of the $3.5
million charge recorded in 1993 for an unfavorable jury verdict.
National Vendors' two year $25 million plant expansion and cost reduction
project will be completed in the first half of 1995. Full benefits should be
realized in 1996. This was the largest single capital project ever undertaken by
Crane.
The depressed European economy has resulted in operating losses for
National Rejectors, GmbH for the past three years. The 1994 and 1993 results
included severance costs of $1.7 million and $.6 million, respectively. National
Rejectors, GmbH has reduced its work force 40 percent since the end of 1991 and
when market conditions improve, these cost reductions should result in
substantially higher profits.
Merchandising Systems earnings are expected to improve in 1995 based on the
strong market position of National Vendors' existing products, gains in market
share for the Cafe System "7" product line, a new contract with the Post Office
for postal commodity vendors, and improved results at National Rejectors, GmbH.
11
<PAGE>
Management's Discussion and Analysis of Operations (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WHOLESALE DISTRIBUTION
(In millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $730.6 $655.2 $608.5
Operating Profit $ 20.0 $ 22.7 $ 13.6
Operating Margin 2.7% 3.5% 2.2%
- -----------------------------------------------------------------------------
</TABLE>
Wholesale Distribution consists of: Huttig Sash and Door Company, the largest
nationwide distributor of millwork, windows, doors, and related products in
the United States, serving building product retailers and building
contractors; Valve Systems and Controls, an industrial distributor of automated
valves and flow control systems to the petrochemical, oil refining, and pipeline
transmission industries; and Crane Supply, a distributor of pipes, valves,
fittings, plumbing fixtures and supplies, serving the industrial, municipal, and
institutional construction industries.
This segment's operating profit declined 12 percent in 1994 on a 12 percent
increase in sales. Sales were up due to acquisitions and improvement in the
markets served by Huttig Sash and Door. Operating profit was down in 1994 due to
losses at two of Huttig's manufacturing operations, lower results at Valve
Systems, and the inclusion in 1993 of a pension curtailment gain. 1993 results
were a significant improvement over 1992 due to a strong housing market in the
U.S. and the curtailment gain at Crane Supply.
Huttig Sash and Door Company's operating profit of $19.5 million was $.2
million above the prior year level, with shipments increasing $74.5 million.
Results for 1994 included the acquisition of a specialty millwork manufacturer
in Prineville, Oregon which contributed $41.9 million in sales and $1.2 million
in operating profit. Operating profit for 1993 of $19.3 million was $5.6 million
above 1992 on an 11 percent increase in sales due to a strong residential
construction market. In December 1994, Huttig sold its window manufacturing
business, which incurred a loss of $2.1 million in 1994.
Valve Systems and Controls sales in 1994 totalled $27.9 million, an
increase of 5 percent from 1993. Valve Systems has operated at a loss the last
two years after break-even results in 1992 due to a very competitive market
place. The unit closed its California branch in the fourth quarter of 1994 and
is focused on reducing costs to achieve profitable results.
Crane Supply operated at a profit of $1.6 million in 1994, down 59 percent
from last year due to the inclusion in 1993 of a pension curtailment gain. Sales
of $104 million were slightly below 1993. Operating profit in 1993 totalled $3.8
million on a small improvement in sales. During 1992 the unit operated at a loss
of $1.2 million on an 11 percent decline in sales in the industrial sector.
OTHER
The Other segment consists of Crane Defense Systems, which is the only Crane
business primarily focused on defense industry products. Sales of $12.5 million
were down $2.4 million in 1994 due to reduction of contracts. Operating profit
declined by $1.5 million as a result of the decrease in sales.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Cash provided from operations was $117 million in 1994 up significantly from
$71 million in 1993, aided by the cash contribution of the company's newly
acquired operations in 1994. The company made five major acquisitions during
the period October 1993 to May 1994 for an aggregate purchase price of $336
million, which resulted in net debt reaching a high of $438.4 million in June
1994. The company reduced its net debt by $87 million over the last six
months to $351.5 at year-end 1994.
Capital investments reflect spending primarily for cost reductions and
process improvements. These expenditures amounted to $28 million in 1994,
compared to $38.8 million in 1993. Capital expenditures are expected to increase
over the next several years to fund manufacturing efficiencies and joint
ventures in Asia and Eastern Europe.
Crane Co. will rely on cash generated from operations to fund future
working capital, capital expenditures and joint venture investments needed to
support continued growth and expansion. Funds available from unused bank credit
facilities will be used primarily to fund working capital during the year when
receivables and inventory rise to meet seasonal operating requirements.
At December 31, 1994, the net debt to capital ratio was 52 percent compared
to 41 and 28 percent in 1993 and 1992, respectively. The company's working
capital totalled $236 million compared to $122 million in 1993, with the current
ratio at 2:1 compared to 1.4:1 in 1993. Interest coverage was 4.8 times interest
expense for 1994 compared to 8.0 and 3.7 for 1993 and 1992, respectively.
12
<PAGE>
- --------------------------------------------------------------------------------
LONG-TERM DEBT
As of December 31, 1994, Crane Co. had $200 million in contractually committed
lines of credit, under a long-term bank credit facility which expires in April
1997. There were no borrowings outstanding under this facility at year-end 1994.
Commitments under the facility are for general corporate purposes and to provide
bridge financing for acquisitions. In addition, the company has other
international long-term credit arrangements with banks totaling $36 million of
which $13 million was available at December 31, 1994.
The effective interest rates at December 31, 1994 were 6.38 percent and 7.1
percent on the domestic and foreign bank loans, respectively.
The long-term credit facilities contain certain financial and restrictive
covenants, including limitations on indebtedness and liens.
In June 1994, the company issued $150 million 7 1/4% Senior Notes due 1999.
Incorporating the effects of underwriting fees, original issue discount and the
cost of a treasury lock agreement, the-all-in cost of this financing was 7.6
percent. This public debt was issued under the company's $300 million shelf
registration as filed with the Securities and Exchange Commission in May 1994.
In March 1992, the company issued $100 million 8 1/2% Senior Notes due
2004. Proceeds of this debt offering were used for the early redemption of two
public debentures in addition to general corporate purposes. Incorporating the
effects of fees and original issue discount, the-all-in cost of this financing
was 8.65 percent. The effect of the previous swap transactions lowered this
effective rate to 8.5% in 1994.
SHORT-TERM DEBT
As of December 31, 1994, the company also had $248 million in domestic and
foreign uncommitted, unsecured money market bid rate lines of credit of which
$175 million was unused. The weighted average interest rate for short-term
borrowings at December 31, 1994 and 1993 was 6.7% and 4.7%, respectively.
These lines of credit are typically available for borrowings up to 364 days
and are renewable at the option of the lender.
FINANCIAL STRATEGY
After fully funding investments in its core business and key strategic
initiatives, and maintaining the capital structure, in management's opinion,
necessary to sustain adequate access to capital markets, Crane Co. returned a
portion of its cash flow to shareholders by paying cash dividends of $22.5
million or $.75 per common share during 1994. This return amounted to 40
percent of income compared with 46 percent in 1993. Crane Co. expects to
continue paying cash dividends in the future. Excess cash may also be used to
repurchase shares of Crane Co.'s common stock depending upon prevailing
market conditions.
During 1994, the company did not repurchase any shares of its common stock
in open market transactions. The company did purchase 6,990 shares in connection
with the vesting of certain restricted stock awards and stock option exercises.
FINANCIAL INSTRUMENTS
The company uses financial instruments from time to time, including interest
rate swaps, to manage the effect of fluctuating interest rates on our
outstanding debt. Net interest paid or received on the interest rate swap
contracts is included in interest expense.
No new interest rate swap contracts were executed in 1994. At December 31,
1994, the company had no interest rate swap contracts outstanding. In 1993, five
separate interest rate swap agreements were entered into by the company. No
funds under the swap contracts were actually borrowed or were to be repaid. At
December 31, 1993, the company had interest rate swap contracts outstanding with
a total notional principal amount equivalent to $49.1 million.
Several major financial institutions have been counterparties to the
company's financial instruments; it is company practice to monitor the financial
standing of these counterparties on an on-going basis. The company has sought to
minimize counterparty exposure by including in each contract provisions for the
right of off-set and collateral requirements in the event of material credit
downgrades of its counterparties.
ACQUISITIONS AND DIVESTITURES
Acquisitions and business combinations have been, and are expected to be, an
important part of the company's strategy for growth and its ability to service
customer needs. In the future, the company will continue to review potential
acquisition candidates with market and technology positions that
13
<PAGE>
Management's Discussion and Analysis of Operations (continued)
- --------------------------------------------------------------------------------
provide meaningful opportunities in the markets in which it already has a
presence, or which afford significant financial reward, and may possibly dispose
of operations when consistent with its overall goals and strategies.
During 1994, the company completed three acquisitions at a cost of $240
million including debt. On May 17, the company, through its wholly-owned
subsidiary Huttig Sash & Door Company, acquired a moulding and millwork
manufacturing operation in Prineville, Oregon. On April 28, the company
purchased Mark Controls Corporation, a manufacturer of automatic and manually-
operated valves, specialized electronic and mechanical instruments and controls,
regulators, and pneumatic and electronic controllers. On March 18, the company
acquired ELDEC Corp. whose products are used worldwide on nearly every aircraft
model and include: proximity switches and sensing systems; power conversion
equipment; fuel flow measurement systems; data acquisition, monitoring and
control equipment; flat panel displays; and integrated modular systems. For the
year ended December 31, 1993, these three acquired entities had aggregate net
sales of approximately $300 million.
In 1993, the company completed five acquisitions at a total cost of
approximately $106 million. In December, the company acquired Burks Pumps, Inc.,
which provides engineered pumps for an array of specialized commercial,
industrial and municipal fluid handling applications. Their products are
marketed under the Barnes, Burks, Weinman and Prosser brand names. Also included
was a line of tank cleaning equipment sold under the Sellers brand name for the
industrial clean-in-place market. This acquisition substantially increased the
company's involvement in niche markets in the pump industry. For the year ended
December 31, 1993, Burks Pumps had net sales of approximately $55.5 million. In
October 1993, the company acquired Filon, a manufacturer of fiberglass-
reinforced plastic (FRP) panels. Filon was integrated with Kemlite which
produces FRP panels for the transportation, building products, and recreational
vehicle markets. For the year ended December 31, 1993, Filon had net sales of
approximately $34.7 million. The three remaining acquisitions included two
Huttig distribution businesses and the Perflow purchase by Crane U.K. Ltd.
In 1994, the company sold Modulinc, the fiber optic channel product line of
ELDEC and excess ELDEC facilities for $14.3 million. In December, 1994, Huttig
sold its window manufacturing business for $2.4 million. The transaction
excluded real estate and receivables.
In March 1993, the company sold the precision ordnance business of its
subsidiary, Unidynamics/Phoenix, Inc. for $6.0 million.
ENVIRONMENTAL
The company is involved in the environmental remediation of various sites
directed or supervised by the Environmental Protection Agency ("EPA"),
equivalent state agencies or as required by law. In most instances, the
involvement is either on a de minimis basis or the required remedial actions
being implemented or engineered are not individually or in the aggregate
expected to be material. Crane recovered $9 million in 1994 from its insurance
carriers after litigation to cover its environmental costs on certain sites.
Estimated future environmental remediation cost (principally for 6 sites) was
$21 million at December 31, 1994 which was fully accrued. Not included in the
above amount is the cost of cleaning one site for approximately $3.6 million for
which a full escrow was established when the property was acquired. However, all
environmental sites by their nature are subject to uncertainties including
uncertainties about the status of the law, regulations, technology, and
information related to the individual site.
The company spent $5 million on environmental costs in 1994 and expects to
pay approximately $7 million in 1995.
OTHER
The adoption of SFAS No. 112 "Employers Accounting for Postemployment Benefits"
in 1994 and of SFAS No. 109 "Accounting For Income Tax" in 1993 had an
immaterial impact on reported results.
14
<PAGE>
Crane Co.
Consolidated Statements of Income (In thousands except per share data)
<TABLE>
<CAPTION>
For Years Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,653,466 $1,310,205 $1,306,977
OPERATING COSTS AND EXPENSES:
Cost of sales 1,253,412 1,016,548 1,045,453
Selling, general and administrative 245,474 178,381 187,750
Depreciation and amortization 44,691 29,420 28,530
- --------------------------------------------------------------------------------------------
1,543,577 1,224,349 1,261,733
- --------------------------------------------------------------------------------------------
OPERATING PROFIT 109,889 85,856 45,244
OTHER INCOME (DEDUCTIONS):
Interest expense-net of interest income
of $3,616, $4,465 and
$4,979 in 1994, 1993 and 1992 (20,555) (6,931) (9,485)
Miscellaneous-net 1,893 893 2,930
- --------------------------------------------------------------------------------------------
(18,662) (6,038) (6,555)
- --------------------------------------------------------------------------------------------
INCOME BEFORE TAXES 91,227 79,818 38,689
PROVISION FOR INCOME TAXES 35,294 30,925 14,403
- --------------------------------------------------------------------------------------------
NET INCOME $ 55,933 $ 48,893 $ 24,286
- --------------------------------------------------------------------------------------------
PRIMARY NET INCOME PER SHARE $ 1.86 $ 1.62 $ .79
Average primary shares outstanding 30,146 30,217 30,845
FULLY DILUTED NET INCOME PER SHARE $ 1.85 $ 1.61 $ .78
Average fully diluted shares outstanding 30,250 30,404 31,080
CASH DIVIDENDS DECLARED PER COMMON SHARE $ .75 $ .75 $ .75
- --------------------------------------------------------------------------------------------
</TABLE>
See Financial Review
15
<PAGE>
Consolidated Balance Sheets (In thousands except share data)
<TABLE>
<CAPTION>
Balance December 31, 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,072 $ 12,592
Accounts receivable, less allowance of $3,693 ($3,054 in 1993) 234,695 178,767
Inventories, at lower of cost, principally LIFO, or market;
replacement cost would be higher by $52,739 ($54,470 in 1993):
Finished goods 116,625 119,014
Finished parts and subassemblies 30,556 24,261
Work in process 39,286 22,516
Raw materials and supplies 50,598 27,908
- --------------------------------------------------------------------------------------------------------------
Total inventories 237,065 193,699
Other current assets 6,407 8,488
- --------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 480,239 393,546
PROPERTY, PLANT AND EQUIPMENT AT COST:
Land 38,841 22,525
Buildings and improvements 157,513 137,640
Machinery and equipment 316,994 261,543
- --------------------------------------------------------------------------------------------------------------
Gross Property, Plant and Equipment 513,348 421,708
Less accumulated depreciation 250,350 222,314
- --------------------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 262,998 199,394
OTHER ASSETS 30,173 31,563
INTANGIBLES, less accumulated amortization of $7,716 ($4,822 in 1993) 63,434 6,579
COST IN EXCESS OF NET ASSETS ACQUIRED, less accumulated
amortization of $16,730 ($11,812 in 1993) 171,201 113,083
- --------------------------------------------------------------------------------------------------------------
$1,008,045 $744,165
==============================================================================================================
</TABLE>
16 See Financial Review
<PAGE>
Crane Co.
<TABLE>
<CAPTION>
Balance December 31, 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,272 $ 3,852
Loans payable 20,986 108,048
Accounts payable 95,211 73,385
Accrued liabilities 119,382 81,107
U.S. and foreign taxes on income 7,444 5,291
- --------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 244,295 271,683
LONG-TERM DEBT 331,289 105,557
OTHER LIABILITIES 20,159 20,631
ACCRUED POSTRETIREMENT BENEFITS 43,066 42,570
ACCRUED PENSION LIABILITIES 8,804 6,767
DEFERRED INCOME TAXES 32,440 6,138
PREFERRED SHARES, par value $.01 - 5,000,000 shares authorized _ _
COMMON SHAREHOLDERS' EQUITY:
Common shares, par value $1.00: Authorized -80,000,000 shares,
Outstanding -30,047,355 shares (29,863,044 in 1993) after
deducting 18,351,321 shares in treasury (18,540,813 in 1993) 30,047 29,863
Capital surplus 12,766 10,160
Retained earnings 296,268 263,666
Cumulative currency translation adjustment (11,089) (12,870)
- --------------------------------------------------------------------------------------------------------------
TOTAL COMMON SHAREHOLDERS' EQUITY 327,992 290,819
- --------------------------------------------------------------------------------------------------------------
$1,008,045 $744,165
==============================================================================================================
</TABLE>
17
<PAGE>
Consolidated Statements of Cash Flows (In thousands) Crane Co.
<TABLE>
<CAPTION>
For Years Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 55,933 $ 48,893 $ 24,286
Non-cash charge -- -- 29,284
Depreciation 35,453 24,144 23,719
Amortization 9,238 5,276 4,811
Deferred income taxes (3,283) 980 (8,157)
Cash provided from (used for) operating working capital 17,550 (3,400) (11,725)
Other 2,443 (4,874) 1,866
- --------------------------------------------------------------------------------------------------------------------
TOTAL FROM OPERATING ACTIVITIES 117,334 71,019 64,084
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (28,199) (38,838) (23,174)
Proceeds from disposition of capital assets 16,058 986 1,264
Purchase of equity investments -- -- (10,000)
Sale of equity investments 49 -- 3,733
Payments for acquisitions net of liabilities assumed of $138,797
and $18,802 in 1994 and 1993, respectively (161,424) (111,457) (4,002)
Proceeds from divestitures 2,580 6,029 --
- --------------------------------------------------------------------------------------------------------------------
TOTAL USED FOR INVESTING ACTIVITIES (170,936) (143,280) (32,179)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
EQUITY:
Dividends paid (22,518) (22,511) (22,999)
Reacquisition of shares (186) (10,405) (25,060)
Stock options exercised 1,267 3,322 3,592
- --------------------------------------------------------------------------------------------------------------------
(21,437) (29,594) (44,467)
- --------------------------------------------------------------------------------------------------------------------
DEBT:
Proceeds from issuance of long-term debt 230,105 -- 99,000
Repayments of long-term debt (76,911) (11,737) (70,462)
Net (decrease) increase in short-term debt (88,774) 77,123 10,705
64,420 65,386 39,243
- --------------------------------------------------------------------------------------------------------------------
TOTAL PROVIDED FROM (USED FOR) FINANCING ACTIVITIES 42,983 35,792 (5,224)
- --------------------------------------------------------------------------------------------------------------------
Effect of exchange rate on cash and cash equivalents 99 (43) (158)
- --------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (10,520) (36,512) 26,523
Cash and cash equivalents at beginning of year 12,592 49,104 22,581
- --------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,072 $ 12,592 $ 49,104
====================================================================================================================
DETAIL OF CASH PROVIDED FROM (USED FOR) OPERATING
WORKING CAPITAL (NET OF EFFECTS OF ACQUISITIONS):
Accounts receivable $ (11,004) $ (8,503) $ 4,909
Inventories 15,285 (10,581) 9,845
Other current assets 2,406 (454) (737)
Accounts payable 10,358 9,895 (2,264)
Accrued liabilities 1,743 2,055 (8,052)
U.S. and foreign taxes on income (1,238) 4,188 (15,426)
- --------------------------------------------------------------------------------------------------------------------
TOTAL $ 17,550 $ (3,400) $(11,725)
====================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 24,947 $ 17,418 $ 19,395
Income taxes paid $ 32,855 $ 34,721 $ 35,650
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
18 See Financial Review
<PAGE>
Consolidated Statements of Changes in Common Crane Co.
Shareholders' Equity (In thousands except share data)
<TABLE>
<CAPTION>
Currency Total Common
Common Capital Retained Translation Shareholders'
Shares Surplus Earnings Adjustment Equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1991 $30,743 $34,780 $233,975 $ 980 $300,478
Net income -- -- 24,286 -- 24,286
Cash dividends -- -- (22,999) -- (22,999)
Reacquisition of 1,062,413 shares (1,062) (23,748) -- -- (24,810)
Exercise of stock options, 237,597 shares 237 3,355 -- -- 3,592
Conversion of debentures, 11,971 shares 12 38 -- -- 50
Restricted stock awarded, 28,750 shares, net 28 827 1,213 -- 2,068
Currency translation adjustment -- -- -- (11,313) (11,313)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1992 29,958 15,252 236,475 (10,333) 271,352
Net income -- -- 48,893 -- 48,893
Cash dividends -- -- (22,511) -- (22,511)
Reacquisition of 394,220 shares (394) (10,011) -- -- (10,405)
Exercise of stock options, 216,792 shares 217 3,105 -- -- 3,322
Conversion of debentures, 25,962 shares 26 78 -- -- 104
Restricted stock awarded, 56,040 shares, net 56 1,736 809 -- 2,601
Currency translation adjustment -- -- -- (2,537) (2,537)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1993 29,863 10,160 263,666 (12,870) 290,819
Net income -- -- 55,933 -- 55,933
Cash dividends -- -- (22,518) -- (22,518)
Reacquisition of 6,990 shares (7) (179) -- -- (186)
Exercise of stock options, 82,942 shares 83 1,184 -- -- 1,267
Conversion of debentures, 71,569 shares 71 232 -- -- 303
Restricted stock awarded, 36,790 shares, net 37 1,369 (813) -- 593
Currency translation adjustment -- -- -- 1,781 1,781
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 $30,047 $ 12,766 $296,268 $(11,089) $327,992
================================================================================================================================
</TABLE>
See Financial Review 19
<PAGE>
Financial Review
- --------------------------------------------------------------------------------
ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements include
all subsidiaries. All significant intercompany items have been eliminated.
Certain prior year amounts have been reclassified to conform with the 1994
presentation.
Cash Equivalents--Highly liquid investments with original maturities of
three months or less are considered cash equivalents.
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 costs of sales by $3,300,000, $1,500,000, and $2,500,000 in
1994, 1993 and 1992, respectively.
Property, Plant and Equipment--Depreciation was 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--Cost in excess of net assets acquired is being amortized on a
straight-line basis ranging principally from fifteen to forty years.
Intangible assets are being amortized on a straight-line basis over their
estimated useful lives which range from five to twenty years.
The company periodically evaluates the recoverability of goodwill and other
intangible assets by assessing whether the unamortized intangible asset can be
recovered over its remaining life through cash flows.
Income Taxes--The company changed its method of accounting for income
taxes, effective January 1, 1993, to conform with SFAS No. 109, "Accounting for
Income Taxes." The Statement requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to differences between
the financial carrying amounts of existing assets and liabilities and their
respective tax bases. Prior to 1993, provisions were made for deferred income
taxes where differences existed between the time that transactions affected
taxable income and the time that these transactions entered into the
determination of income for financial statement purposes.
Interest Rate Swap Agreements--The company 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 new interest rate swap agreements were executed in 1994.
Net Income Per Share--Primary earnings per share calculations are based
upon the weighted average number of common shares outstanding after giving
effect to dilutive stock options. Fully diluted earnings per share gives effect
to the assumed conversion of convertible debentures and the effect of dilutive
stock options.
Revenues--Revenues are generally recorded when title passes to the
customer. Revenues on long-term contracts are recognized under the
percentage-of-completion method of accounting and are measured principally on
either a cost-to-cost or a unit of delivery basis. These contracts represent
approximately 1% of sales this year. Accounts receivable include unreimbursed
costs and accrued profits to be billed of $4,893,000, and $4,615,000 at December
31, 1994 and 1993, respectively.
CHARGE TO OPERATIONS IN 1992
The 1992 operating profit included a charge of $39.4 million, or 78 cents per
share, including $20.1 million of environmental expenses and asset
write-downs associated with Unidynamics/Phoenix, $12.1 million primarily
related to product liability exposure and excess facility costs, and $7.2
million of costs related to the settlement of an anti-trust lawsuit involving
a previously discontinued business.
RESEARCH AND DEVELOPMENT
Product development and engineering costs aggregated approximately $46,400,000,
$18,400,000 and $23,300,000 in 1994, 1993, and 1992, respectively. Included in
these amounts were approximately $9,500,000, and $4,100,000 received in 1994 and
1992 respectively, for customer-sponsored research and development. The increase
in 1994 was mainly due to the ELDEC acquisition.
MISCELLANEOUS--NET
<TABLE>
<CAPTION>
(In thousands) For Years Ended December 31, 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Gain (Loss) on disposal of capital assets $1,346 $425 $ (779)
Gain on investments 361 556 3,997
Other 186 (88) (288)
- -----------------------------------------------------------------------------
$1,893 $893 $2,930
=============================================================================
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY INCOME STATEMENT INFORMATION
The company's repair and maintenance costs for 1994 were $19.5 million as
compared to $15.6 million and $17.2 million in 1993 and 1992, respectively.
Amounts for amortization of intangible assets, taxes other than payroll and
income taxes, royalties and advertising cost were less than 1 percent of
sales.
INCOME TAXES
The company adopted the provisions of SFAS 109 effective January 1, 1993. The
effect of adopting this standard was not material to the company's financial
statements.
A reconciliation between income taxes based on the application of the
statutory federal income tax rate to income before taxes and income taxes as
set forth in the Consolidated Statements of Income is as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Income before taxes:
Domestic $90,765 $83,296 $49,980
Foreign 462 (3,478) (11,291)
- -----------------------------------------------------------------------
91,227 79,818 38,689
- -----------------------------------------------------------------------
Statutory federal
tax at 35% (34% in 1992) 31,929 27,936 13,154
Increase (reduction) from:
Foreign and local taxes 5,117 4,756 1,551
Non-deductible goodwill 1,552 686 659
Non-taxable FSC income (1,343) (737) (804)
Effect of tax rate increase -- (510) --
Other (1,961) (1,206) (157)
- -----------------------------------------------------------------------
Provision for income taxes $35,294 $30,925 $14,403
=======================================================================
Percentage of income
before taxes 38.7% 38.7% 37.2%
=======================================================================
</TABLE>
The foregoing provision includes (benefits)/charges for foreign taxes of
$1,926,000, $413,000 and ($4,235,000) and state taxes of $5,572,000, $5,140,000
and $3,352,000 in 1994, 1993 and 1992, respectively.
At December 31, 1994, the company had unremitted earnings of foreign
subsidiaries of $73 million for which a deferred tax liability has not been
recognized. It is the intention of the company to indefinitely reinvest these
earnings in foreign operations. The determination of the amount of the
unrecognized deferred tax liability for temporary differences related to
these foreign subsidiaries is not practicable.
Deferred income taxes at December 31:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
Assets Liabilities Assets Liabilities
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accelerated depreciation $ -- $15,620 $ -- $15,516
Difference between
book basis and the
tax basis of assets -- 19,041 -- 9,350
Intangibles -- 16,928 -- --
Postretirement benefits 16,815 -- 15,684 --
Inventory related 1,046 -- 1,388 --
Insurance related 8,132 -- 5,354 --
Environmental related 8,184 -- 5,414 --
Pension -- 3,396 -- 4,084
Deferred compensation 2,443 -- 1,790 --
Other 8,575 731 5,706 963
- -----------------------------------------------------------------------------
$45,195 $55,716 $35,336 $29,913
=============================================================================
</TABLE>
At December 31, 1994 current deferred tax assets of $21.9 million ($12.6
million in 1993) were included in other receivables and in 1993 $1.1 million
of current deferred liabilities were included in income tax payable. Net
non-current deferred tax liabilities of $32.4 million ($6.1 million in 1993)
were included in deferred income taxes.
The provision for income taxes is composed of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred income taxes $(3,283) $ 980 $(8,157)
Current income taxes 38,577 29,945 22,560
- ------------------------------------------------------------------------
$35,294 $30,925 $14,403
========================================================================
</TABLE>
The components of deferred income tax are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation $(2,960) $(1,829) $(3,109)
Reserves 295 2,271 (5,348)
Other (618) 538 300
- ------------------------------------------------------------------------
$(3,283) $ 980 $(8,157)
========================================================================
</TABLE>
21
<PAGE>
Financial Review (continued)
- --------------------------------------------------------------------------------
POSTRETIREMENT BENEFITS
Postretirement health care and life insurance benefits are provided for
certain domestic and foreign employees 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.
<TABLE>
<CAPTION>
(In thousands) December 31, 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $23,059 $24,807
Fully-eligible active plan participants 1,983 1,973
Other active plan participants 5,934 6,669
- --------------------------------------------------------------------------
Total 30,976 33,449
Unrecognized net gain 12,090 9,121
- --------------------------------------------------------------------------
Accrued postretirement benefit $43,066 $42,570
==========================================================================
Net periodic cost:
Service cost -benefits earned during the period $ 722 $ 850
Interest cost on accumulated benefit obligation 2,303 2,768
Amortization of gain (448) (182)
- --------------------------------------------------------------------------
Net cost 2,577 3,436
Benefits paid (2,411) (2,482)
Burks Pumps acquisition -- 2,218
Mark Controls acquisition 330 --
Accrued postretirement benefit - beginning of year 42,570 39,398
- --------------------------------------------------------------------------
Accrued postretirement benefit - end of year $43,066 $42,570
==========================================================================
</TABLE>
In 1992 net periodic cost included service cost, interest cost and
amortization of $943, $2,772 and ($100), respectively.
The cost of covered benefits was assumed to increase 12% for 1994, and then
to decrease gradually to 6% by 2007 and remain at that level thereafter. In
1993, the cost of covered benefits was assumed to increase 13% for 1993, and
then to decrease gradually to 5% by 2007 and remain at that level thereafter. An
increase in the assumed health care cost trend rate by one percentage point
would increase the accumulated postretirement benefit obligation by
approximately $3.1 million and the net periodic cost by approximately $.4
million for the year. The discount rate used in determining the accumulated
postretirement benefit obligation was 8.25% in 1994, 7.25% in 1993, and 8.5% in
prior years.
The company participates in several multi-employer insurance plans, which
provide benefits to certain employees under collective bargaining agreements.
Total contributions to these plans were approximately $2,320,000 in 1994,
$2,193,000 in 1993, and $1,853,000 in 1992.
PENSIONS
The company and its subsidiaries have pension plans which cover substantially
all of their employees and non-employee 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 regulations. The pension
plan for salaried employees in Canada was changed in 1993 from a defined
benefit to a defined contribution money purchase plan, resulting in a
curtailment gain of approximately $3.1 million. The following table sets forth
net periodic pension costs.
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the period $ 8,743 $ 7,305 $ 7,598
Interest cost on projected
benefit obligation 15,435 13,979 13,864
Actual loss (gain) on plan assets 6,678 (35,872) (14,368)
Net amortization and deferral (27,468) 13,443 (4,947)
- ---------------------------------------------------------------------------
Pension (income) expense
for company sponsored
pension plans $ 3,388 $ (1,145) $ 2,147
===========================================================================
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
The following table sets forth by funded status the amounts recognized in the
company's balance sheet at December 31, for company sponsored pension plans:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------
(In thousands) Overfunded Underfunded Overfunded Underfunded
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested $168,177 $ 6,772 $153,497 $6,500
Non-vested 4,988 229 5,052 99
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 173,165 7,001 158,549 6,599
Effect of future pay increases 28,043 354 28,829 282
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 201,208 7,355 187,378 6,881
- -----------------------------------------------------------------------------------------------------------------------------
Assets and book accruals relating to such benefits:
Funded assets at fair value 239,104 5,448 232,475 5,890
Book accruals, net (8,863) 1,604 (5,830) 709
- -----------------------------------------------------------------------------------------------------------------------------
230,241 7,052 226,645 6,599
- -----------------------------------------------------------------------------------------------------------------------------
Assets and book accruals greater (less) than projected benefit obligations $ 29,033 $ (303) $ 39,267 $ (282)
=============================================================================================================================
Consisting of:
Unrecognized net asset (liability) at date of adoption less amortization $ 12,072 $ (561) $ 13,195 $ (675)
Unrecognized net gains (losses) 18,420 (1,269) 25,138 (396)
Unrecognized prior service cost (1,459) -- 934 --
Adjustment required to recognize minimum liability -- 1,527 -- 789
- -----------------------------------------------------------------------------------------------------------------------------
$ 29,033 $ (303) $ 39,267 $ (282)
=============================================================================================================================
</TABLE>
The following rates were used to determine the projected benefit obligation:
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Plans:
Discount rate 8.25% 7.25% 8.50%
Expected rate of return
on assets 8.75% 8.25% 9.50%
Rate of compensation 5.00% 4.75% 6.25%
Foreign Plans:
Discount rate 8.25%-8.50% 7.50%-8.25% 8.50%-9.00%
Expected rate of return
on assets 8.25%-9.00% 8.25%-9.00% 9.00%
Rate of compensation 7.5% 7.5% 6.25%-7.5%
=========================================================================
</TABLE>
At December 31, 1994, substantially all plan assets are invested in listed
stocks and bonds. These investments include common stock of the company which
represents 4% 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 $1,533,000 in 1994,
$1,482,000 in 1993, and $1,301,000 in 1992.
ELDEC Corporation has a non-contributory target benefit (defined
contribution) plan to provide retirement benefits for all eligible employees.
The annual contribution is aimed at funding targeted retirement benefits for
each eligible employee. The contributions for 1994, 1993 and 1992 were
$2,073,000 ($1,343,000 since acquisition), $2,451,000, and $2,756,000,
respectively.
The company sponsors savings and investment plans [401(k) Plans] which are
available to eligible non-bargaining and salaried employees of the company
and certain of its subsidiaries and to certain bargaining employees of a
subsidiary. For the non-bargaining plan, the company contributes, on a
matching basis, an amount equal to 50% of deferred savings up to 6% of each
participant's compensation, all of which is invested in company stock. In
1994, the company made contributions of approximately $2.6 million to the
non-bargaining 401(k) Plan ($2.4 million and $2.2 million in 1993 and 1992,
respectively).
23
<PAGE>
Financial Review (continued)
- --------------------------------------------------------------------------------
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(In thousands) December 31, 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C>
Employee-related expenses $ 40,944 $27,209
Insurance 16,755 13,532
Environmental 10,876 5,295
Warranty 8,213 2,506
Sales allowances 5,458 4,693
Interest 4,087 4,004
Taxes other than income 3,055 2,532
Pensions 4,023 2,812
Other 25,971 18,524
- -------------------------------------------------------------------------
$119,382 $81,107
- -------------------------------------------------------------------------
</TABLE>
OTHER LIABILITIES
<TABLE>
<CAPTION>
(In thousands) December 31, 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C>
Environmental $10,192 $ 8,669
Insurance 4,346 4,707
Warranty 2,533 4,494
Relocation 74 640
Employee benefits 665 602
Other 2,349 1,519
- -------------------------------------------------------------------------
$20,159 $20,631
- -------------------------------------------------------------------------
</TABLE>
SHORT-TERM FINANCING
As of December 31, 1994, the company had $248 million in domestic and foreign
uncommitted, unsecured money market bid rate lines of credit of which $175
million was unused. The weighted average interest rate for short-term
borrowings at December 31, 1994 and 1993 was 6.7% and 4.7%, respectively.
These lines of credit are typically available for borrowings up to 364 days
and are renewable at the option of the lender.
LONG-TERM FINANCING
<TABLE>
<CAPTION>
(In thousands) December 31, 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C>
CRANE CO.:
Senior debt:
8 1/2% notes due 2004 $100,000 $100,000
Original issue discount (769) (852)
Deferred financing costs (630) --
- -------------------------------------------------------------------------
98,601 99,148
- -------------------------------------------------------------------------
7 1/4% notes due 1999 150,000 --
Original issue discount (308) --
Deferred financing costs (2,039) --
- -------------------------------------------------------------------------
147,653 --
- -------------------------------------------------------------------------
Subordinated debt:
5% Convertible debentures due 1994,
convertible at $4.26 -- 738
Various bank loans--6.38% 54,400 --
- -------------------------------------------------------------------------
TOTAL CRANE CO. 300,654 99,886
- -------------------------------------------------------------------------
SUBSIDIARIES:
Industrial revenue bonds 3,444 4,757
Capital lease obligations 2,831 3,284
Various bank loans--7.1% 24,372 --
Other 1,260 1,482
- -------------------------------------------------------------------------
TOTAL SUBSIDIARIES 31,907 9,523
- -------------------------------------------------------------------------
Total long-term debt 332,561 109,409
Less current portion 1,272 3,852
- -------------------------------------------------------------------------
Long-term debt net of current portion $331,289 $105,557
=========================================================================
</TABLE>
At December 31, 1994, the principal amounts of long-term debt repayments
required for the next five years are $1,272,000 in 1995, $3,369,000 in 1996,
$55,441,000 in 1997, $926,000 in 1998, and $172,993,000 in 1999.
Short-term obligations of $58.8 million at December 31, 1994 were
classified as long-term debt. The company has entered into finance agreements
that permits it to refinance short-term obligations on a long-term basis. The
majority of these agreements terminate in 1997.
As of December 31, 1994, Crane Co. had $200 million in contractually
committed lines of credit, under a long-term bank credit facility which expires
in April 1997. There were no borrowings outstanding under this facility at year
end 1994. Commitments under the facility are for general corporate purposes and
to provide bridge financing for acquisitions. In addition, the company has other
international long-term credit arrangements with banks totaling $36 million of
which $13 million was available at December 31, 1994. Several of the company's
subsidiaries have the ability to borrow from long-term bank credit facilities
and other international credit arrangements.
24
<PAGE>
- --------------------------------------------------------------------------------
The effective interest rates at December 31, 1994 were 6.38% and 7.1% on
the domestic and foreign bank loans, respectively. The long-term credit
facilities contain certain financial and restrictive covenants, including
limitations on indebtedness and liens.
In June 1994, the company issued $150 million 7 1/4% Senior Notes due 1999.
Incorporating the effects of underwriting fees, original issue discount and the
cost of a treasury lock agreement, the-all-in cost of this financing was 7.6%.
This public debt was issued under the company's $300 million shelf registration
as filed with the Securities and Exchange Commission in May 1994.
In March 1992, the company issued $100 million 8 1/2% Senior Notes due
2004. Proceeds of this debt offering were used for the early optional redemption
of two public debentures in addition to general corporate purposes.
Incorporating the effects of fees and original issue discount the-all-in cost of
this financing was 8.65%. The effect of the previous swap transactions lowered
this effective rate to 8.5% in 1994.
Financial Instruments--The company periodically enters into interest rate
swap agreements to manage its exposure to interest rate changes and to lower
the overall cost of borrowings. All interest rate swaps are subject to market
risk as interest rates fluctuate. No new interest rate swap agreements were
executed in 1994. At December 31, 1994, the company had no interest rate swap
contracts outstanding. Two outstanding agreements with notional amounts of
$20 million each which converted the company's interest rate exposure from
fixed to floating were terminated and recognized in 1994 at a loss of
$487,000.
During 1993, the company entered into five agreements. Two swap positions
which changed the company's interest rate exposure from fixed to floating were
terminated in August 1993 with realized gains. Two agreements with notional
amounts of $20 million each that convert the company's interest rate exposure
from fixed to floating were terminated in 1994. The company also entered into an
off-market swap to lock in the gain on an exposed swap position executed in
1992. The gain on this transaction is being amortized over the life of the
original agreement.
At December 31, 1993, the company had interest rate swap contracts
outstanding with a total notional principal amount of $49.1 million.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
was made in accordance with the requirements of SFAS No.107. The estimated
fair value amounts have been determined by the company using available market
information and appropriate valuation methodologies.
<TABLE>
<CAPTION>
(In thousands) December 31, 1994 1993
- ----------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments $ 10,000 $ 10,000 $ 10,000 $ 10,000
Liabilities:
Short-term debt 22,258 22,258 111,900 115,450
Long-term debt 331,289 322,059 105,557 118,707
Deferred gain on
interest rate swap
agreements-net -- -- 1,153 1,153
- ----------------------------------------------------------------------------
</TABLE>
Investments-the company purchased the equivalent of 600,000 restricted
shares of Mid Ocean Reinsurance Company, Ltd. in 1992 for $10 million.This
investment is included in other assets on the balance sheet. At December 31,
1994 unrestricted shares of Mid Ocean Reinsurance traded for $27.25 per share.
Short-term and 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.
Interest Rate Swap Agreements -the fair value of interest rate swaps is the
a mount at which they could be settled, based on estimates obtained from
dealers.
COMMITMENTS AND CONTINGENCIES
The company leases certain facilities, vehicles and equipment under capital and
operating leases with various terms. Certain leases contain renewal or purchase
options. Future minimum payments, by year, and in the aggregate, under these
leases with initial or remaining terms of one year or more consisted of the
following at December 31, 1994:
<TABLE>
<CAPTION>
Minimum
Capital Operating Sublease
(In thousands) Leases Leases Income Net
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 $ 661 $10,734 $ 968 $10,427
1996 554 9,054 513 9,095
1997 448 6,949 240 7,157
1998 365 5,374 106 5,633
1999 215 3,723 50 3,888
Thereafter 1,281 11,658 233 12,706
- -----------------------------------------------------------------------------
Total minimum
lease payments 3,524 $47,492 $2,110 $48,906
==================================
Interest (693)
- ------------------------------------
Present value $2,831*
====================================
</TABLE>
*Includes $488 due within one year.
25
<PAGE>
The weighted average interest rate for capital leases is 7.54%.
Rental expense for all operating leases was $16,164,000, $15,865,000 and
$17,081,000 for 1994, 1993 and 1992, respectively.
The cost of assets capitalized under leases is as follows at December 31:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C>
Buildings and improvements $ 7,671 $11,223
Machinery and equipment 8,286 8,344
- ----------------------------------------------------------------------
15,957 19,567
Less accumulated depreciation 13,181 15,808
- ----------------------------------------------------------------------
$ 2,776 $ 3,759
======================================================================
</TABLE>
The company has established insurance programs to cover product and general
liability losses. These programs have deductible amounts of $5 million before
coverage begins, with the exception of aircraft products which has first dollar
coverage. The company does not deem its deductible exposure to be material.
At December 31, 1994, the company had received certain proposed notices of
adjustment to federal income tax and was 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
adverse effect on the company's financial condition.
The company is involved in the environmental remediation of various sites
directed or supervised by the Environmental Protection Agency ("EPA"),
equivalent state agencies or as required by law. In most instances, the
involvement is either on a de minimis basis or the required remedial actions
being implemented or engineered are not individually or in the aggregate
expected to be material. Crane recovered $9 million in 1994 from its insurance
carriers after litigation to cover its environmental costs on certain sites.
Estimated future environmental remediation cost (principally for 6 sites) was
$21 million at December 31, 1994 which was fully accrued. Not included in the
above amount is the cost of cleaning one site for approximately $3.6 million for
which a full escrow was established when the property was acquired. However, all
environmental sites by their nature are subject to uncertainties including
uncertainties about the status of the law, regulations, technology, and
information related to the individual sites.
The company has also been advised by the EPA that it is a potentially
responsible party (PRP) with respect to the closed plant in Roebling, New
Jersey of a former subsidiary, CF&I Steel Corporation. The company has
advised the EPA that it was not an operator of the site and has rejected all
assertions of PRP status.
The company is a defendant in a law suit under the False Claims Act seeking
treble damages and attorneys' fees in connection with the assumption by the
Pension Benefit Guarantee Corporation of the unfunded pension liabilities of
CF&I Steel Corporation. The company believes the allegations are without merit
and will not have a material effect on the company's consolidated financial
statements.
ACQUISITIONS, DIVESTITURES AND INVESTMENTS
During 1994, the company completed three acquisitions at a cost of
approximately $240 million including debt. On May 17, the company, through
its wholly-owned subsidiary Huttig Sash & Door Company, acquired a moulding
and millwork manufacturing operation in Prineville, Oregon. On April 28, the
company purchased Mark Controls Corporation, a manufacturer of automatic and
manually-operated valves, specialized electronic and mechanical instruments
and controls, regulators, and pneumatic and electronic controllers. On March
18, the company acquired ELDEC Corp. whose products are used worldwide on
nearly every aircraft model and include: proximity switches and sensing
systems; power conversion equipment; fuel flow measurement systems; data
acquisition, monitoring and control equipment; flat panel displays; and
integrated modular systems. The net assets of these three acquisitions have
been included in the financial statements at values representing a
preliminary allocation of the purchase price. Although final valuations may
affect this allocation, they are not expected to have a material effect on the
financial statements. The purchase price exceeded the preliminary fair values
assigned by $61 million.
The acquisitions added $61 million to intangible assets in 1994. Included
in the additions for 1994 were $19.5 million for intellectual properties, $28.1
million for tradenames, $9.5 million for drawings and $1.6 million for patents.
In 1993, the company completed five acquisitions at a total cost of
approximately $106 million. In December, the company acquired Burks Pumps,
Inc., which provides engineered pumps for an array of specialized commercial,
industrial and municipal fluid handling applications. Their products are
marketed under the Barnes, Burks, Weinman and Prosser brand names. Also
included was a line of tank cleaning equipment sold under the Sellers brand
name for the industrial clean-in-place market. This acquisition substantially
increased the company's involvement in niche markets in the pump industry. In
October, the company acquired Filon, a manufacturer of fiberglass-reinforced
plastic (FRP) panels. Filon was integrated with Kemlite which produces FRP
panels for the transportation, building products, and recreational vehicle
markets. The three remaining acquisitions included two Huttig distribution
businesses and the Perflow purchase by Crane U.K. Ltd..
In 1992, certain assets of Jenkins Canada, Inc., a manufacturer of bronze
and iron valves, were acquired by the company for approximately $4 million.
All acquisitions were accounted for by the purchase method. Since Burks
Pumps was acquired at the end of December 1993, no operating results were
included in the company's 1993 income. The results of operations for all
26
<PAGE>
- --------------------------------------------------------------------------------
other acquisitions have been included in the financial statements from their
respective dates of purchase.
Pro forma financial information assuming the acquisition of Mark Controls
Corporation and ELDEC Corporation had taken place as of the beginning of 1993
is provided below.
<TABLE>
<CAPTION>
(In thousands except per share data--unaudited) 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C>
Net Sales $1,722,128 $1,538,351
- --------------------------------------------------------------------------
Operating Profit 111,519 96,177
Net Income 55,016 44,598
- --------------------------------------------------------------------------
Income Per Share $ 1.83 $ 1.48
- --------------------------------------------------------------------------
</TABLE>
In 1994, the company sold Modulinc, the fiber optic channel product line of
ELDEC and excess ELDEC facilities for $14.3 million. In December 1994, Huttig
sold its window manufacturing business for $2.4 million. The transaction did not
include real estate and receivables.
During March, 1993 the company sold the precision ordnance business of its
subsidiary, Unidynamics/Phoenix, Inc. for $6 million.
During 1992 the company purchased the equivalent of 600,000 restricted
shares of Mid Ocean Reinsurance Company, Ltd. for $10 million.
STOCK OPTIONS AND STOCK AWARD PLANS
A summary of stock option transactions follows:
<TABLE>
<CAPTION>
Number of Shares 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding January 1 1,273,674 1,215,966 1,230,438
Options granted 349,500 283,000 264,000
Options cancelled (38,563) (8,500) (40,875)
Options exercised (82,942) (216,792) (237,597)
- ------------------------------------------------------------------------
Outstanding December 31 1,501,669 1,273,674 1,215,966
========================================================================
</TABLE>
At December 31, 1994, options for 959,044 shares were exercisable and
147,447 shares were available for grant. Per share option prices ranged from
$10.13 to $27.25.
The company's restricted stock award plan provides for awards of common
stock to key officers and employees, subject to resale restrictions. The current
restrictions on outstanding awards are scheduled to lapse upon the achievement
of certain performance objectives.
In 1993 the shareholders approved a proposal of the board of directors to
amend the company's restricted stock award plan, extending the expiration
date from April 30, 1993 to May 30, 1998 and increasing as of May 10, 1993 the
common shares available for grant to 500,000 shares. The company awarded
110,500 shares in 1994, and as of December 31, 1994, 316,500 shares are
available for future awards. Compensation expense is determined based on the
market value at the time of the award and is normally amortized over the five
year restriction period.
Pursuant to the Non-Employee Director Restricted Stock Plan, non-employee
directors received 3,040 shares of company stock in 1994 as a group. All
directors who are not full-time employees of the company are eligible to
participate in the plan. 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.
PREFERRED SHARES PURCHASE RIGHTS
In July 1988, 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,
preferential exchange rate. The rights will remain in existence until June 27,
1998, unless they are earlier terminated, exercised or redeemed. The company has
authorized five million shares of $.01 par value preferred stock.
ANALYSIS BY SEGMENT OF BUSINESS
Since October 1993, Crane Co. has acquired five companies for an aggregate
purchase price of approximately $336 million including debt. In the full year
preceding each of their acquisition dates, these businesses had combined
sales totalling approximately $400 million. Because of this major change, the
operating units of the former Engineered Industrial Products segment have
been realigned into six new segments: Fluid Handling, Aerospace, Engineered
Materials, Crane Controls, Merchandising Systems, and Other. The Wholesale
Distribution segment remains unchanged. The segment reporting realignment
will provide investors with a clearer view of Crane's manufacturing business.
An analysis of sales, operating profit, assets, capital expenditures and
depreciation and amortization appears on page 28 and 29.
27
<PAGE>
Analysis by Segment (In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------
Amount % Amount % Amount %
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
Industry Segments:
Fluid Handling $ 309,969 18 $ 197,656 15 $ 218,062 17
Aerospace 160,843 10 99,587 7 135,218 10
Engineered Materials 201,868 12 161,759 12 161,658 12
Crane Controls 87,973 5 35,009 3 40,128 3
Merchandising Systems 168,543 10 166,668 13 151,125 11
Wholesale Distribution 730,646 44 655,218 49 608,519 46
Other 12,501 1 14,945 1 13,728 1
- ----------------------------------------------------------------------- --- ---------- --- ---------- ---
1,672,343 100 1,330,842 100 1,328,438 100
Intersegment Sales (18,877) (20,637) (21,461)
- ----------------------------------------------------------------------- ---------- ----------
$1,653,466 $1,310,205 $1,306,977
======================================================================= ========== ==========
Geographic Region:
United States $1,348,285 80 $1,031,724 77 $ 999,543 75
Canada 161,492 10 171,576 13 172,345 13
Other International 164,224 10 135,752 10 157,733 12
- ----------------------------------------------------------------------- --- ---------- --- ---------- ---
1,674,001 100 1,339,052 100 1,329,621 100
Interregional Sales (20,535) (28,847) (22,644)
- ----------------------------------------------------------------------- ---------- ----------
$1,653,466 $1,310,205 $1,306,977
======================================================================= ========== ==========
OPERATING PROFIT:
Industry Segments:
Fluid Handling $ 19,062 16 $ 8,855 9 $ 11,932 19
Aerospace 31,316 26 31,159 32 22,010 35
Engineered Materials 22,987 19 15,493 16 6,080 10
Crane Controls 4,438 4 865 1 2,609 4
Merchandising Systems 23,167 19 17,998 18 16,609 26
Wholesale Distribution 20,007 17 22,679 23 13,582 22
Other (749) (1) 789 1 (10,074) (16)
- ----------------------------------------------------------------------- --- ---------- --- ---------- ---
120,228 100 97,838 100 62,748 100
Corporate (10,347) (12,279) (17,732)
Intersegment Elimination 8 297 228
- ----------------------------------------------------------------------- ---------- ----------
$ 109,889 $ 85,856 $ 45,244
======================================================================= ========== ==========
Geographic Region:
United States $ 114,091 95 $ 94,751 97 $ 67,276 107
Canada 2,623 2 3,930 4 (7,091) (11)
Other International 3,522 3 (546) (1) 2,791 4
- ----------------------------------------------------------------------- --- ---------- --- ---------- ---
120,236 100 98,135 100 62,976 100
Corporate (10,347) (12,279) (17,732)
- ----------------------------------------------------------------------- ---------- ----------
$ 109,889 $ 85,856 $ 45,244
======================================================================= ========== ==========
</TABLE>
28 See Financial Review
<PAGE>
Crane Co.
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------
Amount % Amount % Amount %
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Industry Segments:
Fluid Handling $ 240,789 25 $174,789 25 $ 72,162 13
Aerospace 177,582 18 68,413 10 84,116 15
Engineered Materials 103,151 11 113,326 17 98,818 18
Crane Controls 122,353 13 21,321 3 24,956 5
Merchandising Systems 91,678 9 82,396 12 70,073 13
Wholesale Distribution 222,876 23 207,716 31 180,737 33
Other 13,444 1 12,638 2 17,919 3
- -------------------------------------- --- -------- --- -------- ---
971,873 100 680,599 100 548,781 100
Corporate 36,172 63,566 81,430
- -------------------------------------- -------- --------
$1,008,045 $744,165 $630,211
====================================== ======== ========
Geographic Region:
United States $ 796,165 82 $522,772 77 $394,276 72
Canada 83,653 9 84,194 12 83,354 15
Other International 92,055 9 73,633 11 71,151 13
- -------------------------------------- --- -------- --- -------- ---
971,873 100 680,599 100 548,781 100
Corporate 36,172 63,566 81,430
- -------------------------------------- -------- --------
$1,008,045 $744,165 $630,211
====================================== ======== ========
CAPITAL EXPENDITURES:
Industry Segments:
Fluid Handling $ 7,825 $ 5,935 $ 5,911
Aerospace 2,671 2,001 2,159
Engineered Materials 6,384 4,227 4,330
Crane Controls 2,043 880 1,488
Merchandising Systems 6,484 10,663 5,190
Wholesale Distribution 2,580 8,615 3,767
Other 112 169 132
Corporate 100 6,348 197
- -------------------------------------- -------- --------
$ 28,199 $ 38,838 $ 23,174
====================================== ======== ========
Geographic Region:
United States $ 19,176 $ 31,999 $ 13,616
Canada 2,726 3,182 4,263
Other International 6,297 3,657 5,295
- -------------------------------------- -------- --------
$ 28,199 $ 38,838 $ 23,174
====================================== ======== ========
DEPRECIATION AND AMORTIZATION:
Industry Segments:
Fluid Handling $ 10,029 $ 5,107 $ 4,775
Aerospace 9,260 3,452 3,952
Engineered Materials 6,558 5,896 6,320
Crane Controls 5,199 2,325 2,332
Merchandising Systems 4,736 3,605 3,438
Wholesale Distribution 6,493 5,279 4,406
Other 655 694 681
Corporate 1,761 3,062 2,626
- -------------------------------------- -------- --------
$ 44,691 $ 29,420 $ 28,530
====================================== ======== ========
Geographic Region:
United States $ 37,632 $ 22,372 $ 21,078
Canada 3,202 3,264 3,396
Other International 3,857 3,784 4,056
- -------------------------------------- -------- --------
$ 44,691 $ 29,420 $ 28,530
====================================== ======== ========
</TABLE>
29
<PAGE>
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, Chief Executive Officer and President
/s/ David S. Smith
D. S. Smith
Vice President--Finance and Chief Financial Officer
Independent Auditors' Report
- --------------------------------------------------------------------------------
[LOGO OF DELOITTE & TOUCHE LLP APPEARS HERE]
TO THE SHAREHOLDERS OF CRANE CO.
We have audited the accompanying consolidated balance sheets of Crane Co. and
its subsidiaries as of December 31, 1994 and 1993, 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, 1994. 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, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
January 23, 1995
30
<PAGE>
Five-year Summary of
Selected Financial Data (In thousands except per share data) Crane Co.
<TABLE>
<CAPTION>
Years Ended December 31, 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $1,653,466 $1,310,205 $1,306,977 $1,302,532 $1,438,248
Depreciation and Amortization 44,691 29,420 28,530 28,411 30,102
OPERATING PROFIT 109,889 85,856 45,244 78,902 113,311
Interest Expense 24,171 11,396 14,464 11,540 16,746
INCOME BEFORE TAXES 91,227 79,818 38,689 72,405 102,488
PROVISION FOR INCOME TAXES (35,294) (30,925) (14,403) (27,412) (39,753)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS $ 55,933 $ 48,893 $ 24,286 $ 44,993/(a)/ $ 62,735
==============================================================================================================================
INCOME PER COMMON SHARE
Primary $ 1.86 $ 1.62 $ .79 $ 1.42/(a)/ $ 1.96
Fully Diluted 1.85 1.61 .78 1.41/(a)/ 1.94
CASH DIVIDENDS PER COMMON SHARE $ .75 $ .75 $ .75 $ .75 $ .75
ASSETS $1,008,045 $ 744,165 $ 630,211 $ 630,237 $ 664,811
LONG-TERM DEBT $ 331,289 $ 105,557 $ 111,048 $ 83,847 $ 104,143
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(a)/Income before cumulative effect of a change in accounting for
postretirement benefits other than pensions of $22,341 ($.70 per share).
Quarterly Results for the Year (In thousands except per share data)
<TABLE>
<CAPTION>
Quarter Year
----------------------------------------------------------------
First Second Third Fourth
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Net Sales $331,705 $428,729 $451,108 $441,924 $1,653,466
Cost of Sales 259,754 324,769 339,806 329,083 1,253,412
Depreciation and Amortization 6,523 9,573 10,881 10,182 37,159
- --------------------------------------------------------------------------------------------------------------------
Gross Profit $ 65,428 $ 94,387 $100,421 $102,659 $ 362,895
- --------------------------------------------------------------------------------------------------------------------
Net Income $ 7,409 $ 15,666 $ 16,002 $ 16,856 $ 55,933
Primary Net Income Per Share $ .25 $ .52 $ .53 $ .56 $ 1.86
- --------------------------------------------------------------------------------------------------------------------
1993
Net Sales $312,313 $337,693 $337,924 $322,275 $1,310,205
Cost of Sales 241,804 259,455 263,867 251,422 1,016,548
Depreciation and Amortization 5,593 5,353 5,476 5,034 21,456
- --------------------------------------------------------------------------------------------------------------------
Gross Profit $ 64,916 $ 72,885 $ 68,581 $ 65,819 $ 272,201
- --------------------------------------------------------------------------------------------------------------------
Net Income $ 10,766 $ 15,726 $ 12,762 $ 9,639 $ 48,893
Primary Net Income Per Share $ .36 $ .52 $ .42 $ .32 $ 1.62
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Market and Dividend Information--Crane Co. Common Shares
<TABLE>
<CAPTION>
New York Stock Exchange Composite Price Per Share Dividends Per Share
- --------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------------------------
Quarter High Low High Low
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $29 1/2 $24 3/4 $27 7/8 $22 5/8 $.1875 $.1875
Second 27 1/4 24 1/8 30 5/8 24 7/8 .1875 .1875
Third 27 1/4 24 1/4 30 7/8 26 5/8 .1875 .1875
Fourth 27 7/8 24 7/8 29 24 1/8 .1875 .1875
- --------------------------------------------------------------------------------------------------------------------
$.75 $.75
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994 there were approximately 6,500 holders of record of
Crane Co. common stock.
See Financial Review 31
<PAGE>
Shareholder Information
- --------------------------------------------------------------------------------
FORM 10-K
Copies of Crane Co.'s report on Form 10-K for 1994 as filed with the
Securities and Exchange Commission are available upon written request from
the Secretary's Office at Crane Co., 100 First Stamford Place, Stamford, CT
06902
ANNUAL MEETING
The Crane Co. annual meeting of shareholders will be held at 10:00 a.m. on
Monday, May 8, 1995 at the Sheraton Stamford Hotel, One First Stamford Place,
Stamford, CT 06902 in the Freedom II meeting room.
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.
Crane Co. will strive to minimize environmental, health and safety risks to
all its employees, and to public health in the communities in which it operates
by utilizing safe technologies, training programs, and emergency preparedness.
Crane Co. will seek to continually improve the development, design and
operation of its facilities through the efficient use of energy and the
sustainable use of renewable resources, minimizing adverse environmental impact
through waste reduction, recycling and responsible waste disposal.
Crane Co. will manufacture and produce products or services that minimize
environmental impact and that are safe when properly used and maintained, and
will promote the adoption of these principles by its contractors and
suppliers.
Crane Co. will promptly communicate to all affected persons the known
hazards and safeguards associated with its manufacturing processes and
activities while utilizing good science and research to define and efficiently
manage all significant risks.
Crane Co. has committed management resources to these goals by adopting the
above policies, and by establishing 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
First Chicago Trust Company of New York
Customer Service: 1-201-324-0498
Non-Postal Deliveries
14 Wall Street; Ste. 4680
New York, NY 10005
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
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, First Chicago Trust Company of New York 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:
First Chicago Trust Company of New York
Dividend Reinvestment Plan
Crane Co.
Post Office Box 2598
Jersey City, NJ 07303-2598
32
<PAGE>
CRANE CO.
EXHIBIT F TO FORM 10-K
ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1994
SUBSIDIARIES OF REGISTRANT
--------------------------
The following is a list of active subsidiaries of the registrant and their
jurisdictions of incorporation. All of these subsidiaries are wholly-owned,
directly or indirectly, and all are included in the consolidated financial
statements. The names of several other subsidiaries have been omitted as they
would not, if considered in the aggregate as a single subsidiary, constitute a
significant subsidiary. Subsidiaries of subsidiaries are indicated by
indentation.
UniDynamics Corporation Delaware
Crane, GmbH Germany
National Rejectors, Inc. GmbH Germany
Ferguson Machine Company, S.A. Belgium
Unidynamics/St. Louis, Inc. Delaware
Unidynamics/Phoenix, Inc. Delaware
Huttig Sash & Door Company Delaware
Crane Australia Pty., Limited Australia
Crane Canada Inc. Canada
Crane Limited Great Britain
Dyrotech Industries, Inc. Delaware
Kemlite Company, Inc. Delaware
Crane Pumps & Systems, Inc. Delaware
ELDEC Corporation Delaware
Mark Controls Corporation Delaware
Westad Industri A.S. Norway
Barksdale GmbH Germany
Powers Process Controls Limited Canada
<PAGE>
EXHIBIT G
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in Registration Statement No. 33-
44688 on Form S-8, Post-Effective Amendment No. 2 to Registration Statement No.
33-18251 on Form S-8, Registration Statement No. 33-22700 on Form S-8 and Post-
Effective Amendment No. 7 to Registration Statement No. 33-22904 on Form S-8 of
our reports dated January 23, 1995, appearing in and incorporated by reference
in this Annual Report on Form 10-K of Crane Co. for the year ended December 31,
1994.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
March 16, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,072
<SECURITIES> 0
<RECEIVABLES> 234,695
<ALLOWANCES> 0
<INVENTORY> 237,065
<CURRENT-ASSETS> 480,239
<PP&E> 513,348
<DEPRECIATION> 250,350
<TOTAL-ASSETS> 1,008,045
<CURRENT-LIABILITIES> 244,295
<BONDS> 0
<COMMON> 30,047
0
0
<OTHER-SE> 297,945
<TOTAL-LIABILITY-AND-EQUITY> 1,008,045
<SALES> 1,653,466
<TOTAL-REVENUES> 1,653,466
<CGS> 1,253,412
<TOTAL-COSTS> 1,543,577
<OTHER-EXPENSES> (1,893)
<LOSS-PROVISION> 1,308
<INTEREST-EXPENSE> 20,555
<INCOME-PRETAX> 91,227
<INCOME-TAX> 35,294
<INCOME-CONTINUING> 55,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,933
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.85
</TABLE>
