FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission File Number 1-1657
CRANE CO.
(Exact name of registrant as specified in its charter)
Delaware 13-1952290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 First Stamford Place, Stamford, CT. 06902
(Address of principal executive office) (Zip Code)
(203) 363-7300
(Registrant's telephone number, including area code)
(Not Applicable)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's classes of common stock,
as of April 30, 2000:
Common stock, $1.00 Par Value - 60,553,240 shares
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
Crane Co. and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Net Sales $383,807 $400,046
Operating Costs and Expenses:
Cost of sales 252,777 261,256
Selling, general and
Administrative 69,707 71,302
Depreciation and amortization 13,279 14,634
------- -------
335,763 347,192
Operating Profit 48,044 52,854
Other Income (Expense):
Interest income 378 3,267
Interest expense (6,025) (7,888)
Miscellaneous - net 154 1,934
------ ------
(5,493) (2,687)
Income Before Taxes 42,551 50,167
Provision for Income Taxes 14,889 17,732
------ ------
Income from Continuing Operations 27,662 32,435
Income from Discontinued Operations - 1,231
-------- --------
Net Income $ 27,662 $ 33,666
======== ========
Basic Net Income Per Share:
Income from Continuing Operations $.45 $.48
Income from Discontinued Operations - .02
---- ----
Net Income $.45 $.50
==== ====
Average Basic Shares Outstanding 61,656 68,218
Diluted Net Income Per Share:
Income from Continuing Operations $.45 $.47
Income from Discontinued Operations - . 02
---- ----
Net Income $.45 $.49
==== ====
Average Diluted Shares Outstanding 61,936 68,781
Dividends Per Share $.10 $.10
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
<TABLE>
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
<CAPTION>
March 31, December 31,
2000 1999 1999
Assets
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 2,023 $ 24,652 $ 3,245
Accounts receivable 218,109 237,709 206,468
Inventories:
Finished goods 98,906 115,086 107,006
Finished parts and subassemblies 54,746 60,007 57,667
Work in process 29,367 36,002 23,471
Raw materials 71,703 73,334 71,330
------- ------- -------
254,722 284,429 259,474
Net Assets of Discontinued Operations - 132,679 -
Other Current Assets 38,820 45,071 35,973
------- ------- -------
Total Current Assets 513,674 724,540 505,160
Property, Plant and Equipment:
Cost 581,534 567,768 579,263
Less accumulated depreciation 329,457 304,446 322,614
------- ------- -------
252,077 263,322 256,649
Other Assets 45,400 35,799 40,521
Intangibles 42,301 46,447 43,796
Cost in excess of net assets acquired 333,853 319,123 329,321
---------- ---------- ----------
$1,187,305 $1,389,231 $1,175,447
========== ========== ==========
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
<TABLE>
Part I - Financial Information
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
<CAPTION>
March 31, December 31,
2000 1999 1999
Liabilities and Shareholders Equity
<S> <C> <C> <C>
Current Liabilities
Current maturities of long-term debt $ 351 $ 474 $ 385
Loans payable 10,079 45,409 13,271
Accounts payable 95,111 101,571 87,611
Accrued liabilities 98,430 119,060 116,098
U.S. and foreign taxes on income 24,984 32,118 16,150
------- ------- -------
Total Current Liabilities 228,955 298,632 233,515
Long-Term Debt 322,097 352,492 286,772
Deferred Income Taxes 26,186 26,831 25,866
Other Liabilities 25,742 23,333 25,927
Accrued Postretirement Benefits 31,299 33,277 31,709
Accrued Pension Liability 8,341 5,965 3,548
Preferred Shares, par value $.01 - - -
5,000,000 shares authorized
Common Shareholders Equity:
Common stock, par value $1.00 72,426 72,426 72,426
200,000,000 shares authorized,
72,426,139 shares issued
Capital surplus 98,289 96,262 98,289
Retained earnings 647,123 602,565 623,421
Accumulated other comprehensive loss (25,186) (21,173) (22,481)
Common stock held in treasury (247,967) (101,379) (203,545)
-------- -------- --------
Total Common Shareholders Equity 544,685 648,701 568,110
---------- ---------- ----------
$1,187,305 $1,389,231 $1,175,447
========== ========== ==========
Common Stock Issued 72,426 72,426 72,426
Less Common Stock held in Treasury (11,824) (4,621) (9,624)
------- ------ ------
Common Stock Outstanding 60,602 67,805 62,802
====== ====== ======
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
<TABLE>
Part I - Financial Information (Cont'd.)
Item 1. Financial Statements
Crane Co. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Operating activities:
Income from Continuing Operations $27,662 $32,435
Depreciation 9,419 9,219
Amortization 3,860 5,415
Deferred income taxes 260 1,838
Cash provided by (used for) operating working capital (12,066) 17,508
Other (2,549) (8,155)
------ ------
Total provided by Operating activities 26,586 58,260
Investing activities:
Capital expenditures (5,866) (6,053)
Purchase of equity investment - (2,008)
Payments for acquisitions (8,500) -
Proceeds from disposition of capital assets 284 4,735
------- ------
Total used for Investing activities (14,082) (3,326)
Financing activities:
Equity:
Dividends paid (6,111) (6,810)
Reacquisition of shares-open market (41,027) (20,313)
Reacquisition of shares-stock incentive programs (192) (656)
Stock options exercised 1,616 2,801
------- -------
Net equity (45,714) (24,978)
Debt
Proceeds from issuance of long-term debt 38,400 -
Repayments of long-term debt (2,193) (231)
Net decrease in short-term debt (3,960) (9,120)
------ ------
Net debt 32,247 (9,351)
------- -------
Total used for Financing activities (13,467) (34,329)
Cash Used in Discontinued Operations - (10,787)
Effect of exchange rate on cash and cash equivalents (258) (1,361)
------ ------
Increase (decrease) in cash and cash equivalents (1,222) 8,457
Cash and cash equivalents at beginning of period 3,245 16,195
------ -------
Cash and cash equivalents at end of period $2,023 $24,652
====== =======
Detail of Cash Provided by (Used for) Operating Activities
Working capital:
Accounts receivable $(12,363) $(1,876)
Inventories 3,800 2,770
Other current assets (1,104) (261)
Accounts payable 6,716 13,983
Accrued liabilities (16,124) (10,499)
U.S. and foreign taxes on income 7,009 13,391
-------- -------
Total $(12,066) $17,508
======== =======
Supplemental disclosure of cash flow information:
Interest paid $6,610 $5,770
Income taxes paid 7,548 4,265
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements (Unaudited)
<TABLE>
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial reporting and the instructions to Form 10-Q and,
therefore reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the
interim period presented. Certain prior period amounts have been
reclassified to conform to the 2000 presentation.
The company began reporting its former Huttig Building
Products subsidiary, which was spun-off in December of 1999, as a
discontinued operation in the third quarter of 1999. In this
accounting treatment, the total net assets of Huttig are shown on the
balance sheet as "net assets of discontinued operations", and on the
statement of operations only the net income of Huttig is shown, as
"income from discontinued operations". Prior period amounts have been
reclassified to conform to this treatment.
These interim consolidated financial statements should be
read in conjunction with the Consolidated Financial Statements and
Notes to Consolidated Financial Statements in the company's Annual
Report on Form 10-K for the year ended December 31, 1999.
2. Sales and operating profit by segment are as follows:
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
(In Thousands)
Net Sales:
Engineered Materials $ 97,218 $ 91,061
Merchandising 56,377 50,285
Aerospace 81,900 97,080
Fluid Handling 117,558 129,317
Crane Controls 31,623 30,160
Other - 3,395
Intersegment Elimination (869) (1,252)
-------- --------
Total $383,807 $400,046
======== ========
Operating Profit (Loss):
Engineered Materials $16,977 $14,658
Merchandising 9,652 9,506
Aerospace 16,720 27,243
Fluid Handling 8,022 5,568
Crane Controls 175 584
Other - (145)
Corporate (3,446) (4,553)
Intersegment Elimination (56) (7)
------- -------
Total $48,044 $52,854
======= =======
</TABLE>
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<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements (Unaudited)
3. Inventories
Inventories are stated at the lower of cost or market, principally on
the last-in, first-out (LIFO) method of inventory valuation.
Replacement cost would be higher by $22.3 million at March 31,
2000, $26.7 million at March 31, 1999, and $23.1 million at
December 31, 1999.
4. Intangibles
Intangible assets are amortized on a straight-line basis over their
estimated useful lives, which range from five to twenty years.
Accumulated amortization was $23.0 million at March 31, 2000,
$19.5 million at March 31, 1999 and $22.0 million at December 31,
1999.
5. Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is amortized on a straight-line
basis principally over 15 to 40 years. Accumulated amortization
was $64.3 million at March 31, 2000, $48.6 million at March 31,
1999 and $60.1 million at December 31, 1999.
6. Total comprehensive income for the three-month period ended March 31,
2000 and 1999 was as follows:
<TABLE>
<CAPTION>
(In thousands) Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Net Income $27,662 $33,666
Foreign currency translation adjustments (2,705) (3,137)
------- -------
Comprehensive Income $24,957 $30,529
======= =======
</TABLE>
7. Special Charges
The pre-tax special charges of $35.0 million taken in 1999 were
principally for a series of actions to reduce the fixed cost base
in Engineered Materials, Aerospace, Fluid Handling and Controls
by closing or consolidating facilities, reducing staff,
rationalizing product lines and for other unusual items. In
total, five manufacturing facilities have been or are in the
process of being closed, along with eight peripheral facilities.
Of the 170 employees remaining to be involuntarily terminated at
December 31, 1999, 121 were terminated during the quarter. A
summary of the liability balance included in accrued liabilities
relating to these special charges at March 31, 2000 is as
follows:
<TABLE>
<CAPTION>
Liability Liability
Balance at Balance at
December 31, March 31,
(In thousands) 1999 Deductions 2000
<S> <C> <C> <C>
Severance costs $1,327 $613 $714
Facility closure costs 1,695 1,460 235
Product liability costs 6,878 15 6,863
Other items 58 58 -
------ ------ ------
Total $9,958 $2,146 $7,812
====== ====== ======
</TABLE>
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<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
This 10Q may contain forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. These statements present managements
expectations, beliefs, plans and objectives regarding future financial
performance, and assumptions or judgments concerning such performance. Any
discussions contained in this 10Q, except to the extent that they contain
historical facts, are forward-looking and accordingly involve estimates,
assumptions, judgments and uncertainties. There are a number of factors that
could cause actual results or outcomes to differ materially from those addressed
in the forward-looking statements. Such factors are detailed in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 filed
with the Securities and Exchange Commission.
Results from Operations
First Quarter of 2000 Compared to First Quarter of 1999
Income from continuing operations for the quarter was $27.7 million, or $.45 per
diluted share outstanding, compared with $32.4 million, or $.47 per diluted
share outstanding, for the first quarter of 1999. Operating profit for the first
quarter was $48.0 million on sales of $383.8 million compared with $52.9 million
on sales of $400.0 million in 1999. Cash flow (net income plus depreciation and
amortization) per diluted share was $.66 for the quarter compared with $.68 for
1999. Order backlog was up 7% to $410.3 million at March 31, 2000 compared with
year-end December 31,1999. During the quarter, orders were up $24 million over
the comparable period a year ago.
Engineered Materials sales increased by 7%, or $6.2 million to $97.2 million for
the first quarter of 2000 compared with the first quarter of 1999. Operating
profit increased 16%, or $2.3 million, to $17.0 million. Operating margins for
the segment improved to 17.5% of sales compared to 16.1% in 1999 with
improvements at all business units resulting from improved operating
efficiencies. Continued strength in the recreational vehicle and building
products markets, where Kemlite continues to gain market share, resulted in
Kemlite's sales increasing 6%, or $3.6 million, and operating profit increasing
10%, or $1.2 million, over 1999. Resistoflex's operating profit increased 20%,
or $.5 million, on a $1.1 million, or 7%, increase in sales. Cost and operating
efficiency improvements at Resistoflex's Bay City facility and improved
international markets contributed to these increases. Order backlog increased
12% to $27.7 million from December 31, 1999.
Merchandising Systems sales increased 12%, or $6.1 million to $56.4 million for
the first quarter of 2000 compared with the first quarter of 1999. Operating
profit increased 2%, or $.1 million, to $9.7 million. Operating profit margins
were 17.1% in 2000 compared with 18.9% in 1999, primarily due to a brief strike
at National Vendors' St. Louis facility and lower results in England. National
Vendors sales increased $7.5 million, with the 1999 Stentorfield acquisition
contributing $5.9 million of the sales increase. NRI (Germany) sales decreased
11%, or $1.4 million, due to an unfavorable U.S. dollar to Euro exchange rate,
but operating profit increased 18%, or $.4 million, due to continued shipments
of higher-margin changer units and material cost-saving initiatives. In late
March, National Vendors acquired Streamware Corporation, a leading provider of
business management software and market analysis tools and research for the
vending and
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<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
food service industry. Order backlog increased $1.8 million to $20.1 million
from December 31,1999.
Aerospace sales decreased by 16%, or $15.2 million to $81.9 million for the
first quarter of 2000 compared with the first quarter of 1999. Operating profit
decreased 39%, or $10.5 million, to $16.7 million. Operating profit margins were
20.4% compared to 28.1% in 1999. Sales declined due to a general slowdown in the
commercial transport aerospace market and lower shipments at Interpoint. In
addition, last year's first quarter was exceptionally strong in aftermarket
spares sales and non-recurring engineering sales. Operating profit at ELDEC and
Hydro-Aire were negatively impacted by lower commercial OEM and aftermarket
spares revenues. Interpoint's operating profit declined compared with 1999 due
to lower revenues. Order backlog increased $11.8 million to $244.5 million from
December 31,1999.
Fluid Handling sales declined 9%, or $11.8 million, to $117.6 million for the
first quarter of 2000 compared with the first quarter of 1999. Operating profit
increased 44%, or $2.5 million, to $8.0 million in 2000. Operating margins for
the segment improved to 6.8% of sales compared to 4.3% in 1999. The sales
decline resulted principally from the exercise of more discipline in pricing and
order acceptance. The restructuring strategy initiated in 1999 started to show
benefits with four of the five business units reporting higher profits and
operating margins. Commercial Valves operating profit improved by $3.0 million
on a 7%, or $2.1 million, sales reduction as this business returned to
profitability and operating margins improved to 4.2%. Engineered Valves
operating profit decreased $1.7 million on a $8.0 million decrease in sales as
the result of lower Quarter Turn valve shipments to the marine, oil and gas
markets, and the closure of the Triangle Steel facility in the U.K. This was
partially offset by higher shipments of Pacific Pressure Seal Valves to the
power generation market. However, orders received in the first quarter of 2000
for Engineered Valves have increased backlog by 47%, or $12.8 million, from
December 31,1999 levels, which is expected to result in increased shipments in
the second half of the year. Crane Supply's operating profit increased by 38%,
or $.7 million, on a 7% increase in sales due to improved shipping margins.
Overall Fluid Handling order backlog increased by $8.9 million to $88.4 million
from December 31,1999, led by continued strong demand from the power generation
industry and the improving marine, oil and gas markets.
Crane Controls sales increased 5%, or $1.5 million, to $31.6 million for the
first quarter of 2000 compared with the first quarter of 1999. Operating profit
decreased $.4 million to $.2 million. Barksdale, Powers Process, Dynalco and
Azonix all achieved higher operating profit, which was more than offset by a
decline at Ferguson resulting from production problems caused by the integration
of its Greenwood, Mississippi production into its St. Louis facility. Operating
profit margins for all units except Ferguson were higher than a year ago. Order
backlog increased by $2.6 million to $30.9 million from December 31,1999.
As previously announced on April 3rd, Crane Co. signed a definitive agreement
with Power-One, Inc. to sell the Company's interest in Powec AS, a Norwegian
manufacturer of power supplies for the telecommunications industry, as well as
the Company's related telecommunications power supply product line.
Consideration for the transaction will be approximately $45 million. The
transaction is expected to close in mid-May.
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<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
Liquidity and Capital Resources
During the quarter, the company generated $26.6 million of cash from operating
activities, compared with $58.3 million in 1999. Net debt totaled 37.8% of
capital at March 31, 2000 compared to 36.6% in 1999. The current ratio was 2.2
with working capital totaling $284.7 million at March 31, 2000 compared to 2.4
and $425.9 million at March 31, 1999. The company had unused credit lines of
$397.4 million at March 31, 2000.
The company's cash flows and earnings are subject to fluctuations from changes
in interest rates and foreign currency exchange rates. The company manages its
exposures to these market risks through internally established policies and
procedures and, when deemed appropriate, through the use of interest rate swap
agreements and forward exchange contracts. Long-term debt outstanding of $322
million at March 31, 2000 was generally at fixed rates of interest ranging from
5.89% to 8.50%. At March 31, 2000, no interest rate swap agreements were
outstanding and the amounts outstanding for forward exchange contracts were not
material. The company does not enter into derivatives or other financial
instruments for trading or speculative purposes.
Part II - Other Information
Item 1. Legal Proceedings
There have been no material developments in any of the legal proceedings
described in the company's Annual Report on Form 10-K for the year ended
December 31, 1999.
Item 4. Submission of Matters to a vote of Security Holders
A) The Annual Meeting of shareholders was held on April 10, 2000.
B) The following four Directors were re-elected to serve for
three years until the Annual Meeting of 2003.
Mr. R. S. Evans
Vote for - 54,621,177
Vote withheld - 1,221,291
Mr. Eric C. Fast
Vote for - 54,714,200
Vote withheld - 1,128,268
Mr. Dorsey R. Gardner
Vote for - 54,712,219
Vote withheld - 1,130,249
Mr. Dwight C. Minton
Vote for - 54,702,739
Vote withheld - 1,139,729
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<PAGE>
Part II - Other Information (cont'd)
Item 4. Submission of Matters to a vote of Security Holders (Cont'd)
C) The shareholders approved the selection of Deloitte & Touche
LLP as independent auditors for the company for 2000.
Vote for - 55,320,730
Vote against - 197,332
Abstained - 324,406
D) The shareholders approved the Crane 2000 Non-Employee
Director Stock Compensation Plan.
Vote for - 51,308,606
Vote against - 3,761,692
Abstained - 772,170
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10. Material Contracts
(iii) Compensatory Plans
(h) The Crane Co. 2000 Non-Employee Director Stock Compensation Plan (filed
herewith as Exhibit 10(a).
(i) Employment Agreement with Eric C. Fast (filed herewith as Exhibit
10(b).
27. Article 5 of Regulation S-X Financial Data Schedule for the
first quarter.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CRANE CO.
REGISTRANT
Date May 15, 2000 By /s/ M. L. Raithel
M. L. Raithel
Vice President and Chief
Financial Officer
Date May 15, 2000 By /s/ T. M. Noonan
T. M. Noonan
Vice President, Controller
and Chief Tax Officer
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<PAGE>
Exhibit 10(a)
The Crane Co. 2000 Non-Employee Director Stock Compensation Plan
1. Purpose.
The purposes of The Crane Co. 2000 Non-Employee Director Stock Compensation Plan
(the "Plan") are to attract and retain well-qualified persons for service as
directors of Crane Co. (the "Company"), to provide directors through the payment
of a portion of directors fees in shares of the Company's Common Stock, par
value $1.00 per share ("Common Stock"), and the annual grant of options to
purchase shares of Common Stock ("Options") with the opportunity to increase
their proprietary interest in the Company and thereby to increase their personal
interest in the Company's continued success.
2. Administration.
Responsibility and authority to administer and interpret the provisions of this
Plan shall be conferred upon a committee of at least three persons (all of whom
shall be persons not eligible to participate in this Plan) having full authority
to act (the "Committee"). The members of the Committee shall be the Chairman of
the Board (provided that he is not eligible to be a participant under this
Plan), the President of the Company, and at least one additional disinterested
person to be elected by the Chairman. The Committee shall record its proceedings
under this Plan. The Committee may employ attorneys, consultants, accountants or
other persons, and the Committee, the Company and its officers and directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All usual and reasonable expenses of the Committee shall be paid by the
Company. No member shall receive compensation with respect to his services for
the Committee except as may be authorized by the Board of Directors. All actions
taken and all interpretations and determinations made by the Committee in good
faith shall be final and binding upon all directors who have received awards,
the Company and other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretations taken or made
in good faith with respect to this Plan or awards made hereunder, and all
members of the Committee shall be fully indemnified and protected by the Company
in respect of any such action, determination or interpretation.
3. Eligibility; Stock Subject to Plan.
(a) All directors of the Company who are not full-time employees of the Company
shall be participants in this Plan, provided that any director who is age 65 or
older on the date this Plan is approved by stockholders and who elects to
continue his participation in the Crane Co. Retirement Plan for Non-Employee
Directors shall not be eligible to receive any stock option grants under this
Plan.
(b) The total number of shares initially authorized to be issued under this Plan
shall be 400,000 shares of Common Stock. The number of shares available for
issuance under the Plan shall be subject to adjustment in accordance with
Section 8 hereof. Such shares shall be made available, at the discretion of the
Board of Directors, either from the authorized but unissued shares of Common
Stock or from shares of Common Stock reacquired by the Company, including shares
purchased in the open market. Except as provided in Section 6(d) hereof, any
shares of restricted Common Stock awarded under this Plan that are forfeited for
any reason, or any shares subject to an Option granted under this Plan that
expires or is terminated for any reason without having been exercised in full,
shall continue to be available for future grants under this Plan. If any shares
of Common Stock are withheld from those otherwise issuable or are tendered to
the Company, by attestation or otherwise, in connection with the exercise of an
Option, only the net number of
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<PAGE>
Exhibit 10(a)
The Crane Co. 2000 Non-Employee Director Stock Compensation Plan (Cont'd)
shares of Common Stock issued as a result of such exercise shall be deemed
delivered for purposes of determining the maximum number of shares available for
delivery under the Plan.
4. Annual Fee; Restricted Stock
(a) Each non-employee director shall be paid an annual director's fee, in an
amount fixed from time to time by the Board of Directors, which is not dependent
upon attendance at meetings (the "Base Fee"). The Base Fee shall be payable 50%
in stock and 50% in cash as provided hereunder. The stock portion of the Base
Fee shall be determined pursuant to this Section.
(b) At the Company's Annual Meeting each calendar year, each eligible director
shall be awarded the number of full shares of Common Stock of the Company
(rounded to the nearest ten shares) determined by dividing (i) the dollar amount
equal to the 50% of the Base Fee payable to such director in shares of Common
Stock by (ii) the Fair Market Value of a share of Common Stock on the award
date. For all purposes of this Plan, the term "Fair Market Value" as of any date
shall mean the average of the high and low prices of a share of Common Stock on
the New York Stock Exchange-Composite Transactions Tape on the 10 consecutive
trading days ending on such date, or, if no sale of Common Stock has been
recorded on such date, then on the next preceding date on which a sale was so
made. Each such award shall be evidenced by a written agreement, executed by the
director and the Company, containing such restrictions, terms and conditions as
the Committee may require. A non-employee director who becomes a member of the
Board of Directors after the Annual Meeting in any year shall be awarded a
prorated number of full shares of Common Stock based on an allocation of such
director's Base Fee based on the number of full months of service for that year.
The price of Common Stock to be used in determining the number of shares of
Common Stock to which such director shall be entitled for such year shall be the
Fair Market Value of a share of Common Stock on the date of the director's
election to the Board of Directors.
(c) An award of Common Stock is forfeitable if the director ceases to remain a
member of the Board of Directors until the Annual Meeting of the year following
the year of the award, except in the case of death or disability (as determined
by the Committee), which disability renders the director unable to continue to
serve the Company or upon a Change in Control of the Company as set forth in
Section 4(d) hereof. In the event of death or disability, an allocated portion
of the award for the year of death or disability, based on the number of full
months of service, shall become vested and distributable as of the date of such
death or disability. Shares which are forfeited may be regranted.
(d) Notwithstanding anything else herein, all restrictions on any Common Stock
that may have been awarded to a director hereunder shall lapse in the event of a
"Change in Control." For purposes of this Plan, the term "Change in Control"
shall mean (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 outstanding shares 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, as amended (the "Exchange Act"), of 20% or more of the outstanding
shares 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
-14-
<PAGE>
Exhibit 10(a)
The Crane Co. 2000 Non-Employee Director Stock Compensation Plan (Cont'd)
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, (v) the adoption of any plan or
proposal for the liquidation (but not a partial liquidation) or dissolution of
the Company or (vi) the date upon which individuals who constitute the Board of
Directors of the Company (the "Board") as of April 10, 2000 (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 such date whose
election, or nomination for election by the Company's stockholders, 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 directors of the 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 member of
the Incumbent Board.
5. Terms and Conditions of Restricted Stock.
(a) The difference between the Base Fee and the portion of such Base Fee awarded
under this Plan in Common Stock (valued at Fair Market Value) shall be paid to
directors in cash on a monthly basis.
(b) Until such time as the risk of forfeiture lapses or the shares awarded are
forfeited, a director has the right to vote and to receive dividends on and
other distributions with respect to the shares awarded.
(c) At such time as the risk of forfeiture lapses, a director's Common Stock
will have all the rights of any other Common Stock. No payment will be required
from the director upon the issuance or delivery of any restricted stock, except
that any amount necessary to satisfy applicable federal, state or local tax
requirements shall be withheld or paid promptly upon notification of the amount
due and prior to or concurrently with the issuance or delivery of a certificate
representing such stock, provided that anything contained herein to the contrary
notwithstanding, the Committee may accept stock received in connection with the
award being taxed or otherwise previously acquired in satisfaction of
withholding requirements.
(d) No shares may be sold or transferred (including, without limitation,
transfer by gift or donation) prior to the fifth anniversary of the date of the
award or the departure or resignation of the director from the Board, whichever
is earlier; except with regard to shares which vest as a result of death or
disability or upon a Change in Control of the Company (as defined in Section
4(d) hereof), at which time all restrictions on transfer shall lapse.
(e) Certificates for shares of restricted stock issued under this Plan shall be
registered in the name of the director, and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such award
substantially in the following form:
"The transferability of this certificate and the shares of stock
represented
-15-
<PAGE>
Exhibit 10(a)
The Crane Co. 2000 Non-Employee Director Stock Compensation Plan (Cont'd)
hereby are subject to the terms and conditions (including forfeiture) of The
Crane Co. 2000 Non-Employee Director Stock Compensation Plan. A copy of such
Plan is on file in the offices of Crane Co., 100 First Stamford Place, Stamford,
CT 06902."
(f) Prior to termination of the restrictions on sale and transfer provided
herein, the certificates for the shares awarded pursuant to this Plan will be
held by the Company's Treasurer in custody for the director.
6. Stock Options.
(a) Upon approval of this Plan by the stockholders of the Company, the persons
then serving as non-employee directors shall be granted options to purchase the
number of shares set forth opposite his name on Annex I hereto. At the
conclusion of each Annual Meeting of the Company commencing with the Annual
Meeting in 2000, an Option to purchase 2,000 shares of Common Stock will be
granted automatically to each non-employee director of the Company. A
non-employee director who becomes a member of the Board of Directors after the
Annual Meeting in any year shall be granted an Option to purchase a prorated
number of shares of Common Stock based on the number of full months of service
until the next succeeding Annual Meeting.
(b) Each Option granted under this Plan shall be exercisable in whole or in part
from time to time beginning from the date the Option is granted, subject to the
provision that an Option may not be exercised by the optionee (i) more than 10
years from the date the Option is granted, or (ii) prior to the expiration of
one year from the date the Option is granted; and provided further that, unless
otherwise determined by the Committee, the Option may not be exercised in excess
of 50% of the total shares subject to such Option during the second year after
the date of grant, 75% during the third year, and 100% thereafter.
(c) The purchase price of each share of Common Stock upon exercise of any Option
granted hereunder shall not be less than 100% of the Fair Market Value of the
Common Stock on the date the Option is granted. The purchase price of the shares
purchased upon the exercise of an Option shall be paid in full at the time of
exercise in cash or in whole or in part by tendering (either actually or by
attestation) shares of Common Stock. The value of each share of Common Stock
delivered in payment of all or part of the purchase price upon the exercise of
an Option shall be the Fair Market Value of the Common Stock on the date the
Option is exercised. Exercise of Options shall also be permitted, if approved by
the Committee, in accordance with a cashless exercise program under which, if so
instructed by an optionee, shares of Common Stock may be issued directly to the
optionee's broker or dealer upon receipt of an irrevocable written notice of
exercise from the optionee.
(d) The Committee, upon such terms and conditions as it shall deem appropriate,
may (but shall not be obligated to) authorize on behalf of the Company the
acceptance of the surrender of the right to exercise an Option or a portion
thereof (but only to the extent and in the amounts that such Option shall then
be exercisable) and the payment by the Company therefor of an amount equal to
the excess of the Fair Market Value on the date of surrender of the shares of
Common Stock covered by such Option or portion thereof over the aggregate option
price of such shares. Such payment shall be made in shares of Common Stock
(valued at such Fair Market Value) or in cash, or partly in cash and partly in
shares of Common Stock, as the Committee shall determine. The shares of Common
Stock covered by any
-16-
<PAGE>
Exhibit 10(a)
The Crane Co. 2000 Non-Employee Director Stock Compensation Plan (Cont'd)
Option or portion thereof, as to which the right to exercise shall have been so
surrendered, shall not again be available for the purposes of this Plan.
(e) Each Option granted under this Plan shall not be transferable by the
optionee otherwise than by will or the laws of descent and distribution, and
shall be exercisable, during the optionee's lifetime, only by the optionee.
Notwithstanding the foregoing, Options may be transferable, without payment of
consideration, to immediate family members of the optionee or to trusts or
partnerships for the benefit of such family members.
(f) The Company shall have the right to require an optionee to pay to the
Company the cash amount of any taxes which the Company is required to withhold
upon the exercise of an Option granted hereunder, provided that anything
contained herein to the contrary notwithstanding, the Committee may, in
accordance with such rules as it may adopt, accept shares of Common Stock
received in connection with the exercise of the Option being taxed or otherwise
previously acquired in satisfaction of any withholding requirements or up to the
entire tax liability arising from the exercise of such Option.
(g) The Committee, in its sole discretion, shall have the right (but shall not
in any case be obligated), exercisable at any time after the date of grant, to
permit the exercise of any Option prior to the time such Option would otherwise
become exercisable under the terms of the option agreement.
7. Exercise of Options upon Termination of Service.
(a) If an optionee shall retire or shall cease to serve as a director of the
Company by reason of permanent disability or after a Change in Control, all
Options theretofore granted to such optionee, whether or not previously
exercisable, may be exercised in whole or in part, and/or the Committee may
authorize the acceptance of the surrender of the right to exercise such Options
or any portion thereof as provided in Section 6(d) hereof, at any time prior to
the expiration of the term of the Option.
(b) If an optionee shall die while serving as a director of the Company or after
cessation or termination of such service, all Options theretofore granted to
such optionee, whether or not previously exercisable, may be exercised in whole
or in part, and/or the Committee may authorize the acceptance of the surrender
of the right to exercise such Options or any portion thereof as provided in
Section 6(d) hereof, by the estate of such optionee (or by a person who shall
have acquired the right to exercise such Option by bequest or inheritance), at
any time prior to the expiration of the term of the Option.
(c) If an optionee is removed from service as a director by action of the Board
of Directors (other than in connection with a Change in Control), such optionee
may exercise any Option in whole or in part, at any time within 90 days after
such removal from service, but only to the extent such Option is exercisable at
the date of termination in accordance with Section 6(b) hereof. In no event may
any Option be exercised after the expiration of the term of the Option.
8. Adjustments to Reflect Capital Changes.
In the event that there is an increase in the number of issued shares of the
Common Stock by reason of any stock dividend, stock split, recapitalization or
other similar event, the total number of shares available for issuance hereunder
and the
-17-
<PAGE>
Exhibit 10(a)
The Crane Co. 2000 Non-Employee Director Stock Compensation Plan (Cont'd)
number of shares remaining subject to purchase under each outstanding Option
shall be increased and the price per share of such outstanding Options shall be
decreased, in proportion to such increase in issued shares. Conversely, in case
the issued shares of Common Stock shall be combined into a smaller number of
shares, the total number of shares available for issuance hereunder and the
number of shares remaining subject to purchase under each outstanding Option
shall be decreased and the price per share of such outstanding Options shall be
increased, in proportion to such decrease in issued shares. In the event of any
merger, consolidation, reorganization or liquidation in part or in whole, the
Committee may make such adjustment in the shares available for issuance
hereunder and the shares subject to outstanding Options and the price thereof as
the Committee, in its sole discretion, deems appropriate. In the event of an
exchange of Common Stock, or other securities of the Company convertible into
Common Stock, for the stock or securities of another corporation, the Committee
may, in its sole discretion, equitably substitute such new stock or securities
for a portion or all of the shares of Common Stock subject to outstanding
Options.
9. Term, Amendment and Termination.
(a) This Plan shall be submitted to the stockholders of the Company at the
Annual Meeting in 2000 and, if approved by the stockholders, shall become
effective April 10, 2000. No shares shall be awarded nor Options granted under
this Plan after May 31, 2010.
(b) The Board of Directors of the Company may at any time amend, rescind or
terminate this Plan, as it shall deem advisable; provided, however, that (i) no
change may be made in awards theretofore granted under this Plan which would
impair participants' rights without their consent, and (ii) no amendment to this
Plan shall be made without approval of the Company's stockholders if the effect
of such amendment would be to (a) increase the number of shares reserved for
issuance hereunder; (b) materially increase the benefits accruing to
participants under this Plan; (c) materially change the requirements for
eligibility under Section 3 hereof; (d) materially modify the method for
determining the number of shares awarded under Section 4 hereof; or (e) increase
the number of Options to be granted under Section 6 hereof or the minimum
purchase price thereof; except that any such increase or modification that
results from adjustments authorized by Section 8 hereof shall not require such
approval.
10. General Provisions.
(a) Each Option granted under this Plan shall be evidenced by a written
agreement containing such terms and conditions as the Committee may require, and
no person shall have any rights under any Option granted under this Plan unless
and until such agreement has been executed and delivered by the optionee and the
Company.
(b) In the event of any conflict between the terms of this Plan and any
provision of any Option agreement, the terms of this Plan shall be controlling.
(c) Neither this Plan nor any action taken hereunder shall be construed as
giving any director any right to serve as a director or in any other capacity
for the Company or any of its subsidiaries.
(d) The obligation of the Company to sell and deliver shares of Common Stock
upon exercise of Options granted hereunder shall be subject to, as deemed
necessary or appropriate by counsel for the Company, (i) all applicable laws,
rules and
-18-
<PAGE>
Exhibit 10(a)
The Crane Co. 2000 Non-Employee Director Stock Compensation Plan (Cont'd)
regulations and such approvals by any governmental agencies as may be required,
including, without limitation, the effectiveness of a registration statement
under the Securities Act of 1933, and (ii) the condition that such shares shall
have been duly listed on such stock exchanges as the Common Stock is then
listed.
(e) Anything in this Plan to the contrary notwithstanding, it is expressly
agreed and understood that if any one or more provisions of this Plan shall be
illegal or invalid such illegality or invalidity shall not invalidate this Plan
or any other provisions thereof, but this Plan shall be effective in all
respects as though the illegal or invalid provisions had not been included.
(f) All determinations made and actions taken pursuant to this Plan shall be
governed by the laws of the State of Delaware, other than the conflict of laws
provisions thereof.
<TABLE>
<CAPTION>
NAME OF NON-EMPLOYEE NUMBER OF SHARES FOR
DIRECTOR INITIAL OPTION GRANT
<S> <C>
E. T. Bigelow, Jr. 21,900
R. S. Forte 18,200
D. R. Gardner 20,400
J. J. Lee 3,200
W. E. Lipner 1,500
D. C. Minton 37,500
C. J. Queenan, Jr. 41,900
J. L. L. Tullis 2,800
</TABLE>
Exhibit 10(b)
Employment Agreement with Eric C. Fast
September 7, 1999
Mr. Eric Fast
[address}
Dear Mr. Fast:
I am pleased to extend this offer of employment with Crane Co. ("Crane") to
you on the terms and conditions described below.
Subject to your election by the Board of Directors, you will serve as
President and Chief Operating Officer for Crane on a full-time basis and will be
reporting to me. Your employment with Crane will commence on or about September
8, 1999.
Your initial base salary will be $450,000 per year, subject to annual
review and possible adjustment based upon Crane's financial position as well as
your individual performance. In addition, you will participate in Crane's
-19-
<PAGE>
Exhibit 10(b)
Employment Agreement with Eric C. Fast (Cont'd)
executive bonus plan (EVA plan) for 1999 and subsequent fiscal years at an
appropriate level as determined by the Board of Directors; provided, however,
that for the 1999 fiscal year your bonus will be no less than $100,000 and for
the 2000 fiscal year your bonus will be no less than $200,000. You also will be
eligible to participate in Crane employee benefit plans and programs on the same
basis as other senior executives of Crane but subject to the terms and
conditions of such plans or programs.
You will be granted non-qualified stock options (the "Options") under the
Crane Co. Stock Option Plan (the "Option Plan") as of September 27, 1999 to
purchase 150,000 shares of Crane Common Stock and as of October 25, 1999 to
purchase an additional 150,000 shares of Crane Common Stock. The exercise price
per share of each Option will be equal to the fair market value per share of the
Common Stock on the date of grant of the Option. Under the Option Plan, the
"fair market value" shall be determined by the average of the high and low
prices of the Common Stock on the New York Stock Exchange on the ten consecutive
trading days ending on the date of grant. Each Option will vest and become
exercisable 50% one year after the grant date, 75% two years after the grant
date and 100% three years after the grant date. All of the terms and conditions
of each Option will be governed by and set forth in a written stock option
agreement containing such terms and conditions, consistent with this letter and
the Option Plan, as Crane determines in its discretion. You will be eligible for
additional option grants in future years to the extent such grants are approved
by the Organization and Compensation Committee of Crane's Board of Directors.
As of September 27, 1999, you also will be granted 50,000 shares of Crane
Common Stock (the "Restricted Stock") under the Crane Co. Restricted Stock Award
Plan (the "Restricted Stock Plan"). The Restricted Stock will be subject to
transfer and forfeiture restrictions that will lapse with respect to 10,000
shares on each of the first five anniversaries of the date of grant. All of the
other terms and conditions of the Restricted Stock will be governed by the
Restricted Stock Plan and set forth in a written restricted stock agreement
containing such terms and conditions, consistent with this letter and the
Restricted Stock Plan, as Crane determines in its discretion.
As a further inducement for you to join Crane, in the event of a
termination of your employment under the circumstances described below, (i) you
will be entitled to receive as severance a lump sum payment equal to the sum of
(A) two times your base salary at the time of termination plus (B) the greater
of (x) two times the highest annual bonus paid to you by Crane or (y) the
balance of your EVA bank account and (ii) the unvested portion of the Options
will immediately vest and become exercisable and all restrictions on the
Restricted Stock will immediately lapse. You will be entitled to the foregoing
if (a) you remain in Crane's employ under the terms outlined above through March
31, 2001 and at any time during the 60 day period commencing April 1, 2001 you
elect in your discretion to terminate your employment with Crane for any reason
or for no reason, provided only that you agree to serve Crane for at least 90
days after your notice of termination, or (b) your employment is terminated by
Crane at any time without "cause." Crane will have "cause" to terminate your
employment upon the occurrence of any of the following that is demonstrably and
materially injurious to the interest, property, operations, business or
reputation of Crane or any of its subsidiaries: (i) you commit any intentional
act or acts of disloyalty, misconduct, or moral turpitude or are convicted of a
crime, (ii) you commit an intentional act of fraud, embezzlement or theft in
connection with your duties or in the course of your employment with Crane or
(iii) you intentionally
-20-
<PAGE>
Exhibit 10(b)
Employment Agreement with Eric C. Fast (Cont'd)
and wrongfully disclose trade secrets or other confidential information of Crane
or its subsidiaries.
You will be entitled to enter into the change in control severance
agreement that Crane provides to its senior executive officers.
Finally, if you accept this offer I will recommend to the Board of
Directors that you be elected a director at the next meeting of the Board of
Directors.
I hope that this offer is acceptable to you. If you agree with the terms
and conditions set forth above, please execute and return to me one copy of this
letter. You may wish also to execute the second copy of this letter and keep it
for your files. I look forward to your response.
Sincerely,
Crane Co.
By: /s/ R. S. Evans
R. S. Evans
Chairman and
Chief Executive Officer
Accepted and agreed to:
/s/ Eric C. Fast
Eric Fast
September 9, 1999
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-1999
<CASH> 2,023
<SECURITIES> 0
<RECEIVABLES> 223,986
<ALLOWANCES> 5,877
<INVENTORY> 254,722
<CURRENT-ASSETS> 513,674
<PP&E> 581,534
<DEPRECIATION> 329,457
<TOTAL-ASSETS> 1,187,305
<CURRENT-LIABILITIES> 228,955
<BONDS> 322,097
<COMMON> 72,426
0
0
<OTHER-SE> 472,259
<TOTAL-LIABILITY-AND-EQUITY> 1,187,305
<SALES> 383,807
<TOTAL-REVENUES> 383,807
<CGS> 252,777
<TOTAL-COSTS> 335,763
<OTHER-EXPENSES> 532
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,025
<INCOME-PRETAX> 42,551
<INCOME-TAX> 14,889
<INCOME-CONTINUING> 27,662
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,662
<EPS-BASIC> .45
<EPS-DILUTED> .45
</TABLE>
